The proposed investment involves development and operation of renewable energy sub-projects, which are at different stages of development, with some already finishing construction and others yet to be designed and developed. The key E&S issue for this investment, therefore, is to assess the Company’s capacity, corporate systems and procedures to manage the E&S risks and impacts associated with the development of the renewable energy sub-projects in compliance with the applicable local regulatory requirements and those of the IFC Performance Standards / good international industry practices (GIIP).

EECL’s proposed pipeline of renewable energy projects includes solar PV and BESS sub-projects, none of which result in: a) significant involuntary resettlement, b) risk of adverse impacts on lands to which indigenous peoples maintain collective attachment, c) significant risks to, or impacts on, the environment including biodiversity, or d) significant occupational health and safety (OHS) risks. For these reasons, this investment is classified as ‘Category B’ according to IFC’s Policy on Environmental and Social Sustainability. The environmental and social risks and impacts associated with this Project are limited, site-specific and can be readily addressed through generally accepted mitigation measures as described in this document and the attached Environmental and Social Action Plan (ESAP). 

Policy

The Company applies Engie’s corporate policies and EECL’s dedicated E&S policies to all projects, activities and operations in Chile. These policies are followed by the Company and are applicable to contractors as well.  The policies form an important component of EECL’s E&S management framework, which includes: (i) Corporate Governance and Sustainability, (ii) Corporate Environmental Policy, which attains: Climate, Biodiversity, Water and Circular Economy policies, (iii) Occupational Health and Safety, (iii) Corporate Social Responsibility and protection of  Human Rights, (iv) Contractor and Supply Chain Due Diligence and Management, (v) Stakeholder Engagement and Social Investment, (vi) Grievance Management and (vii) Human Resources and Code of Ethics.

Environmental and Social Assessment and Management Systems

EECL implements an integrated environmental and social management system (IMS) that the Company refers to as “+Simple”, which transfers corporate policies into protocols aligned with the United Nations (UN) Sustainable Development Goals, UN Declaration on Human Rights, ILO conventions and Chilean regulatory framework as well as with the French Sapin 2 law requiring alignment with the Duty of Vigilance (on ethics and corruption) and the European CSR Directive.

EECL’s IMS is based on ISO 9001, ISO 14001, ISO 45001, ISO 55001 and ISO 37001 standards and is applicable to all the companies, projects and activities in Chile. The Company is ISO-certified for environment, OHS and quality for all the assets and projects in operation. The E&S appraisal from IFC confirmed that EECL’s IMS is mature, fully operational and properly aligned with the ‘plan-do-check-act’ cycle for continuous improvement, with indicators, targets and metrics that are reported to senior management who are also actively involved in the determination of improvements plans, annual E&S plans and targets.

Identification of Risk and Impacts

The Company has several instruments and tools to identify and assess E&S risks and impacts throughout the different phases of development, implementation and operations of projects. As part of the early development stage, EECL conducts a high-level early screening of risks and impacts as part of its business development project strategy. The Company undertakes through a third-party Consultant an early identification of risks and impacts to determine potential affectations to land, environment and communities/social of the prospective asset or project and identifies the main E&S requirements, permits and needs to develop the project from environmental, land & easement, engineering, communities, and sustainability perspectives. This process is described in Engie’s “BD Project Development Handbook”. With this information, and once the decision to move to the next stage in project development is made, EECL conducts environmental and social impact assessments (ESIAs) in line with Chilean legislation prior to the development of any infrastructure projects in their concession with the support of specialized environmental consulting firms.

To enhance the E&S risks and impacts identification process in line with IFC Performance Standards, EECL will complement its Project Development Handbook and ESIAs processes for application of the mitigation hierarchy during project development and for supplemental E&S assessment of risks and impacts conducted in line with IFC Performance Standards.  In this context, EECL will as part of ESAP item #1, supplement the “BD Project Development Handbook” to formally include: a) adherence to the mitigation hierarchy principles, b) require adequate alternative E&S analysis for the site selection process including any associated facilities (i.e. transmission lines, access roads, etc.), c) determination if the activity/project can be carried out (i.e. no  CAPEX items funded by IFC are undertaken in Alliance for Zero Extinction Sites or World Heritage Sites), d) identify if a rapid cumulative impact assessment as per IFC PS1 requirements might be needed, and e) in cases where Chilean regulations may not require an environmental impact assessment or RCA due to potential limited impacts (e.g. new projects in areas where pre-existing energy operations, small BESS projects, substations, etc.), carry out and document E&S impacts assessment for internal use, supported by stakeholder analysis commensurate to the E&S risks and impacts of the project.

Management Programs

The Company’s environmental, social, health and safety management programs and plans form the basis of  EECL’s E&S plans applied to all sites and projects from construction through operations and maintenance, include prior analysis of environmental licensing and permitting requirements, E&S risk assessment, emissions control, solid and hazardous waste management, environmental noise assessment, emergency preparedness and response, workforce management, equal opportunity, E&S trainings, EHS contractors management, community awareness, stakeholder engagement and grievance mechanisms.  These programs and plans are in line with Chilean legislation and mostly aligned with IFC requirements. They include details on monitoring actions, frequency of monitoring along with performance indicators and are reviewed and revised regularly.

The appraisal identified the need for EECL to develop the following management programs as part of ESAP item #2: (i) an “EHS construction decommissioning procedure” to ensure that EHS conditions and on-site controls of projects finishing construction and transitioning to operations are fully inspected, reported and maintained throughout the transitioning phase; and (ii) an “ancillary areas EHS inspection protocol”, to verify that Company standards and procedures are effectively implemented throughout all supporting and auxiliary areas of project sites (small warehouses, workshops, treatment water plants, waste storage areas, camps, etc.), and covering contractors and subcontractor’s facilities.

Organizational Capacity and Competency

EECL’s organizational charts demonstrates an adequate number of E&S positions to manage the ESHS affairs of the Company during construction and operations of renewable assets. All the interviewed E&S staff demonstrated the necessary expertise in the design and implementation of E&S plans as part of the E&S evaluation processes, and of managing risks and impacts of new and existing projects.

Emergency Preparedness and Response Plan (EPRP)

EECL has an Emergency Preparedness and Response protocol (“Protocolo para la elaboración de un Plan de Emergencias”) that outlines the Company requirements for the EPRP that each project or site needs to develop. The protocol requires the definition of controls plans, include potential emergency scenarios (generated by both internal and external risk factors, such as spills, fires, criminal activities, and natural disasters), emergency contacts and communication flows (internal and with community leaders and government authorities), protocols for the use of equipment, and drills. As per ESAP item #3, EECL needs to enhance the EPRP protocol to include specific training requirements, emergency response equipment, internal and external contacts for different level of emergencies, and flowcharts describing the sequence of actions and specific protocols for the likely emergency scenarios. The EPRP protocol should also expand the potential emergency scenarios to cover rescue of workers from confined spaces, from wind turbine towers and vehicles in highway accidents.

Monitoring and Review

EECL has procedures to monitor and evaluate the effectiveness of all E&S management programs as well as compliance with legal obligations and regulatory requirements. The Company’s IMS has a module to evaluate safety, administrative and quality performance and closely monitors contractor’s activities on site. Field inspection programs are in place to assess the integrity of safety procedures, quality of execution and compliance with labor legal requirements.  Where gaps are identified a seven-step process is followed to i) describe the gap, ii) identify immediate actions to avoid, contain or reduce harm or risk, iii) define actions and controls, iv) conduct a root cause analysis of the identified gap, v) identify potential inspection failures, vi) develop and implement corrective actions, and vii) conduct a final verification. 

E&S Contractor Management

EECL implements an extensive due diligence for contractors, service providers and suppliers as part of the tender process.  The due diligence is conducted in two stages, an initial process allowing for contracting the partner; if no red flags are identified the due diligence continues through the standard process. If additional support or due diligence is required, EECL contracts outside firms specializing in ethics and human rights due diligences, as well as support from the Paris corporate office.  The EECL due diligence aligns with global EECL’s standard that meets Frances’s strict SAPIN 2 regulations.  Through the due diligence process, the Company reviews OHS, Corporate Social Responsibility (CSR) which includes human rights (such as child and forced labor), corruption and governance of prospective contractors. E&S requirements and procedures are included in each contract. Contractors are required to adopt and implement the Company’s OHS policies, standards and procedures.

Supply Chain

IFC’s due diligence of EECL’s supply chain approach and methods meets PS2 requirements.  EECL implements a procurement policy that includes a supplier code of conduct to address and prohibit labor issues including child and forced labor. EECL has incorporated contractual clauses in agreements with its primary suppliers requiring that suppliers and its sub-suppliers to comply with its “Supplier Code of Conduct” which prohibits the use of child labor and forced labor and includes OHS requirements in suppliers’ own operations. If suppliers are found in breach, EECL holds the right to terminate the contract with the supplier.  EECL employs experts, including outside firms specializing in supply chain audits, to audit implementation and compliance with these requirements. EECL undertakes formal environmental and social screening for its primary suppliers prior to selection.  Where potential forced or child labor risks or significant safety issues are identified, further due diligence is conducted through the global offices in Paris. 

EECL is committed to ensuring that their projects stimulate the local economic. In order to promote hiring of local suppliers, EECL works closely with local municipalities to map out local suppliers to enable them to submit successful employment bids. EECL’s social investment program includes capacity building program for local Small and Medium Enterprises (SME’s) to strengthen business capacities and ensure they can meet EECL’s contractual requirements.                                                   

 As of January 2023, EECL includes 912 full-time employees at its corporate headquarters and projects and 910 workers from contractors. The EECL male and female workers distribution is 80%, and 20% respectively.

Human Resources Policies and Procedures

EECL’s Human Resources Policy and Code of Ethics are aligned with local regulations and consistent with PS2 requirements as well as relevant ILO conventions, covering labor and working conditions, non-discrimination, promoting equal opportunity, parity in pay between men and women, and respecting freedom of association, inclusion of disabled workers and including prohibition of child and forced labor. Employees are provided with written contracts describing labor and working conditions, and through the induction program are informed of the corporate policies and the Code of Ethics, which are also available in the Company’s website.  E&S contractual agreements with all contractors require compliance with the Company’s Human Resources policies and the Code of Ethics.

Future project construction may require construction of workers’ accommodation.  As part of ESAP item #4, EECL will develop a “Worker’s Accommodation Policy” to ensure that all worker housing aligns with PS2 with regards to quality and condition of accommodation.

Working Conditions and Terms of Employment

All employees receive a written contract that outlines their rights, responsibilities, benefits, and compensation. Through monthly desk audits and field inspections the Company verifies adequate working and occupational health, and safety conditions are provided by contractors and suppliers. Working conditions are adequately outlined in the HR Internal Regulations manual including hours, benefits, overtime, compensation, and others.

Worker’s Organizations

EECL has signed agreements with seven unions. Approximately 70% of EECL’s workers are unionized.  The benefits established in the collective agreement can apply to non-unionized workers if they participate in the ‘Beneflex’ initiative, which is a program which extends benefits established during collective bargaining to non-unionized workers, an option selected by 139 workers, roughly half of the non-unionized workers.  EECL respects the right of workers to unionize, and to collective bargaining.

Non-discrimination and Equal Opportunity

EECL implements its “Diversity and Inclusion Policy” which aligns with PS2, and which applies to direct and indirect workers.  The policy prohibits, among others, discrimination on the basis of age, gender, sexual orientation, race, ethnicity, colour, marital status and political orientation. In order to minimize discrimination, EECL also implements a “Recruitment and Selection Policy” that seeks to minimize unconscious biases in the processes.  In its effort to align with Engie’s corporate goal of gender parity by 2030, EECL implements through its “Program 50-50” a proactive recruitment and advancement of female workers, recruiting and training of women in management positions. The program is based on 6 pillars: training, understanding baseline conditions, clear planning, adapting policies, clear communication of the program, and its goals. Of the 912 full-time workers of the Company, 20% are female, while 26% of managers are female too. In addition to targeting gender parity, EECL has set a goal of reducing gender pay gap to 2% by 2030. 

Worker’s Grievance Mechanism

The Company has an online mechanism to address workers’ queries, concerns, and complaints. All communications are registered and addressed. The mechanism is broadly communicated through the induction program and allows for the submission of complaints online or by phone, through the unions, and through EECL’s intranet.

EECL implements a Sexual Harassment Procedure and provides training to all managers including those auditing contractors. Sexual harassment or assault cases are investigated and either addressed internally with support from outside counsel or managed by the government’s Labor Department for investigation and resolution. In 2022, EECL reported 2 cases of sexual harassments (one from a direct employee and one from a contracted worker). As part of ESAP item #5, EECL will review and enhance the existing procedure to ensure gender-based violence and harassment (GBVH) grievances are adequately addressed with a survivor-centered approach and to include specific procedures for the receipt of grievances, response and close out, allowance for anonymous grievances, follow up and reporting with appropriate KPIs.

Child and Forced Labor

EECL contractually prohibits child or forced labor in their workforce through contractual clauses applied to all contractors. Compliance with these provisions are assured through monthly internal labor audits to all contractors. Failure to comply with these stipulations allows EECL to terminate the contracts.

Occupational Health and Safety

EECL has a robust, well-structured and sophisticated occupational health and safety (OHS) management system which is ISO45001 certified. The system encompasses all the activities carried out by employees, contractors and subcontractors and is heavily centered in ensuring high quality OHS training and competency of all the workforce, particularly those involved in high risks activities. EECL follows Chilean OHS and technical regulatory standards and also implements a series of actions, programs and activities that go beyond legal compliance, foster safety culture and a continuous evolution.                                                  

Resource Efficiency and Green House Gases

In 2022 the Green House Gases estimation for Scope 1 & 2 of the EECL was 5.3 MtCO2eq. With regards to water use, Engie has a Water Policy as part of its Corporate Environmental Policy. EECL reported during the appraisal that the Company is starting to calculate the water footprint for its operations in Chile.

To further improve its resource efficiency EECL will, as part of ESAP item #6: (i) develop a “resource efficiency strategy” aligned with Performance Standard 3 requirements and tailored to its operations and renewables projects in Chile to gradually implement technically and financially feasible and cost-effective measures for improving efficiency in its consumption of energy, water, and material inputs throughout the project life-cycle and (ii) develop an “SF6 management plan” to provide framework guidance on SF6 mapping, management, monitoring and reporting according to industry best practices to prevent and minimize risks and impacts.

Water & Wastewater Management

EECL uses different water sources in the renewable energy projects, depending on the location of the assets and the available water supply alternatives. The projects located in the Antofagasta Region use water trucked from the desalinization plants from the Company’s thermal generation units, while projects located in other Regions truck water from permitted wells. Water-use related impacts are assessed in the corresponding RCAs. With regards to solar panel cleansing, EECL racks and reports the water use per panel in a Company KPI and is exploring technologies for making panel cleansing more efficient. As indicated above for ESAP item #6, the resource efficiency strategy that the Company will develop will properly identify and assess water use throughout the project cycle and define water use saving opportunities for existing and future renewable energy projects.

With regards to wastewater, projects have systems to collect effluents and liquid discharges from facilities, workshops, offices and camps, and properly treat them in activated sludge treatment plants, which are properly operated and maintained.

Pollution Prevention and Control

Pollution prevention is part of the Company’s environmental management system. EECL has developed and implemented different management and monitoring plans to ensure their activities are conducted to minimize adverse impacts on human health and the environment, including for areas under the direct control of the Company, and areas managed by contractors and subcontractors. Regulatory compliance and identification of environmental aspects and impacts is done in line with ISO14001. Requirements and obligations from the RCAs and regulations tracked and monitored though a digital platform (“ECOSAP”) that was designed and tailored for EECL operations in Chile. As mentioned above, the site supervision visit conducted as part of the E&S appraisal identified the need to enhance the overall pollution prevention approach through ESAP item #2 that requires the development of an “EHS construction decommissioning procedure” and an “ancillary areas EHS inspection protocol”. These two management tools will further enhance EECL’s assurance process in line with WBG General EHS Guidelines.  

Increased traffic from project activities is one of the primary concerns of stakeholders.  EECL incorporates traffic and speed restrictions along affected routes as well as traffic reduction and management during local religious celebrations.

Security Personnel

EECL uses a government sanctioned security contractor (“SOMACOR”) to provide protective services for its facilities.  All security guards undergo background checks as well as training.  No armed guards are currently employed at EECL’s Solar and BESS assets. In total, 40 guards (32 male and 8 female) are distributed through its operations.  EECL conducts a risk assessment for each project. In order to minimize risk to guards from intruders seeking to steal material particularly during construction, EECL is installing security systems including cameras and lighting that is managed remotely.  All guards receive training on Human Rights, use of force, the Code of Ethics, and Company specific security operations.  EECL conducts security risk assessments for every asset and develops appropriate security plans. As per ESAP item #7, EECL will develop a “Security Forces Management Plan” in line with PS4 requirements and based on existing security risk assessments to minimize and manage identified and potential risks to communities and individuals posed by EECL’s security arrangements and potential engagement or presence of public security forces due to EECL’s operations. The Security Forces Management Plan should include: (i) discussion on internal and external risks identified in the security risk assessment; (ii) mechanisms to screen private security firms and guards; (iii) required training for security forces including use of force, Human Rights, and prevention of GBVH; (iv) define engagement mechanisms and coordination with public security forces when needed, and (v) procedures for reporting, responding and documenting security incidents.                                                   

 Three of the four named PV solar/battery storage projects (Coya, Capricornio, Tamaya) are located in inland portions of the Atacama Desert region of northern Chile, and the project sites are characterized by an almost complete absence of rain and minimal plant and animal life, typical of non-riparian and non-coastal portions of the Atacama Desert.  None of the PV Solar/BESS projects financed by IFC overlap or affect legally protected areas (LPA) or internationally recognized Key Biodiversity Areas (KBA).  Under the terms of the proposed loan, any additional projects covered by the IFC financing may only include PV solar/BESS projects with similarly low biodiversity risk profiles.

Given the sparseness of the desert conditions at the three northern sites (Coya, Capricornio, Tamaya), PS6 Natural Habitat (NH) requirements are considered to be achieved as most of the projects have little or no potential for creating adverse impacts on biodiversity, and habitat loss is considered insignificant given the vastness and barrenness of the land area.  Priority biodiversity values include certain seabird species that use the virtually predator-free space Atacama Desert for nesting, such as the Gray Gull (Leucophaeus modestus, IUCN Least Concern, nationally Vulnerable), and Markham’s Storm-Petrel (Hydrobates markhami, IUCN Near-Threatened, nationally Endangered). At the Coya PV Solar/Battery project, several grounded individual Markham’s Storm-Petrel were discovered incidentally during construction, and brought to a nearby rehabilitation facility, following the project’s contingency plan. The potential for the Coya PV Solar/Battery project to impact Markham’s Storm-Petrels was not anticipated by the national regulatory authority, hence no requirements to monitor or mitigate potential impacts were included within the project’s national environmental permit.

To strengthen the management of potential impacts to this sensitive species, EECL will engage a qualified consultant to monitor for possible impacts to Markham’s Storm-Petrels at the Coya, Capricornio, and Tamaya PV Solar/Battery projects for a minimum of three years (ESAP item #9). Also, as part of this ESAP item, EECL will consult pertinent regulatory authorities and science/conservation stakeholders to solicit recommendations for mitigating impacts to this species specifically at any/all projects within the Atacama Desert Region, and implement the recommendations received, likely to include mitigation of nocturnal lighting, where applicable.

 Current EECL solar and BESS assets do not impact indigenous lands or communities or Indigenous Development Areas. Future EECL Solar and BESS assets could potentially impact indigenous lands and communities. Chilean legislation recognizes Indigenous Peoples (IPs), determines the rights and obligations of these groups and has requirements to address potential impacts and implement mitigation measures.

As part of ESAP item #10, EECL will develop an “Indigenous Peoples Framework” applicable when indigenous communities or land are affected by any EECL’s operations, to ensure principles aligned with PS7 are fully implemented. The framework will include clear principles and guidance to: (i) identify IP communities potentially affected by projects, (ii) identify potential impacts and mitigation measures with a gender perspective, through robust consultation of potentially affected communities, (iii) obtain Free Prior and Informed Consent (FPIC), when necessary, (iv) prepare and implement indigenous people plans, (v) establish mechanisms for monitoring and periodic reporting each agreement reached with affected communities, (vi) ensure accessibility to a culturally appropriate grievance mechanism for indigenous communities.   

EECL has a corporate Stakeholder Relations Policy that outlines the basic principles for identification, mapping and engagement of stakeholders. The Management of Project’s Stakeholders further details guidelines to develop a Stakeholder Engagement Plan for each project to including stakeholder mapping, ongoing consultation and dissemination of information. It also establishes responsibility for managing the relationships, channels, and frequency of contact. 

Stakeholder engagement commences at project design – prior to acquisition of land. At the early due diligence stage, EECL’s social team engages local government officials, community members and leaders, and local NGOs to identify local needs and concerns related to the potential project. Stakeholder engagement continues through project feasibility and environmental assessment with full disclosure of EIA’s (RCAs) at the local and regional level.  Meetings are held in public spaces with easy access and are supported through brochures, posters and the official website. Consultation of the project impact studies indicated that stakeholder’s primary concerns were potential impacts from increased traffic and protection of archaeological findings.

As indicated in ESAP item #11, as part of its E&S management system, EECL will implement its Management of Project’s Stakeholders Engagement Policy and will develop “Site-specific Stakeholder Engagement Plans” (SEPs) in line with PS1 and PS7, as applicable, for the projects under IFC use of proceeds to consult with potentially affected communities and relevant stakeholders to identify and address their concerns. The SEPs will include stakeholder mapping, type of engagement, frequency of consultation, commitment to disclosure of ESIAs and Action Plans (such as emergency management plans) monitoring KPIs and reporting as well as a Grievance Management Plan. When IP communities are potentially affected by EECL’s projects or operations, a process of informed consultation and participation will be implemented in accordance with the “Indigenous Peoples Framework” to be developed as per ESAP item #10.

External Communications and Grievance Mechanism

The Company has an online external communications mechanism to receive and address inquiries, requests and complaints from clients, suppliers, and the community in general. Inquiries, requests and complaints are collected through the online process, through WhatsApp, during meetings, by telephone or in suggestion boxes.  Complaints are registered, categorized and responded in a maximum of 15 days, while 2 weeks are allowed for complainants to respond to the proposed resolution. Grievances are reported to management monthly and analyzed by the EECL’s Performance Department to identify trends, adjust procedures accordingly and reduce recurrence.   As part of ESAP #12, EECL will further enhance and adjust its community Grievance Mechanism to better align it with PS1 requirements and include additional details on: (i) the receipt and handling of grievances including a flow chart; (ii) the categorization of complaints by risk level and topic; (iii) tracking, monitoring and internal and external reporting, including KPIs; (iv) establish mechanisms to allow for anonymous complaints; and (v) adequate dissemination mechanism of the updated grievance mechanism.   

 Contact Person: Alison Saffery, Corporate Finance and Investor Relations Manager

Company Name: Engie Energía Chile S.A

Address: Avenida Isidora Goyenechea 2800 Piso 16, Región Metropolitana, Santiago de Chile

Email: alison.saffery@engie.com

Phone: +56 223533200