This is a Category A project according to IFC’s 2012 Policy on Environmental and Social Sustainability. IFC’s review concluded that the E&S risk and impacts associated with the proposed investment (especially the farm, cattle feedlot, slaughterhouse/meat processing/packing facility) includes the introduction of concentrated livestock feeding operation and intensification of agricultural production with the potential to negatively impact the quality/quantity of local water resources which include an extensive network of shallow community water wells around the farms as well as surface water of the Murun river used by local settlements and nomadic herding communities as a source for human consumption and cattle herds. There are also potential E&S risks related to the calves’ supply chain due to sourcing from key biodiversity areas to the project. Another issue considered was the management of potential cumulative E&S impacts.

PS1: Assessment and Management of Environmental and Social Risks and Impacts

E&S Policies. Metagro’s E&S policy derives from its holding company MCS which adopted a sustainability framework in 2017. To implement such framework, MCS adopted an E&S policy which commits the company and its subsidiaries (e.g., Metagro) to comply with applicable Mongolia’s legal and regulatory requirements. In 2022, MCS introduced a Group-level policy for compliance management system through achieving ISO 37301 certification, which requires MCS, including Metagro, to monitor/report on E&S legal and regulatory compliance.

Metagro adopted its ESG Policy in August 2023 outlining its commitment to responsible and sustainable farming and livestock management practices. The policy aims to (i) minimize adverse impacts and enhance positive effects on the environment; (ii) achieve efficient use of natural resources and protection of the environment; and (iii) reduce greenhouse gas emissions (GHG). The onboarding process for new staff includes the acknowledgement of the provision of ESG Policy. Going forward, MCS and Metagro will upgrade their respective ESG policies to align the E&S requirements and performance of direct and sourcing operations with IFC PS requirements for all targeted operations by this IFC investment (ESAP#1). Metagro will supplement existing MCS Group procurement policy with a specific Supplier Code of Conduct and risk screening procedures and platform for the sourcing of grain, fodder, and calves for identification and management of PS2/PS6 supply chain related risks (ESAP#1).

Assessment of E&S Risks and Impacts. A regulatory environmental baseline study to comply with local laws has been conducted by Metagro in 2022 for the farm and cattle feedlot, and in 2023 for the 100ha irrigation scheme. A regulatory Environmental Impact Assessment (EIA) study was completed in 2022 for the 100-ha irrigated project, reviewed and approved by the local environmental authorities, and it is published together with this ESRS. As part of the studies carried out by Metagro in the context of this proposed investment, an E&S Impact Assessment (ESIA) for Metagro’s farming and livestock operations was finalized in May 2024, including a Critical Habitat Assessment (CHA) and a Stakeholder Engagement Plan (SEP). The ESIA identified potential impacts to local water resources due to the project, given the increased water needs for crops irrigation, cattle raising, and animal processing activities. Another potential impact on water resources was identified in relation to waste management from concentrated cattle feeding operations and wastewater management, as well as use of agrochemicals in cropping activities. The locally EIAs and the May 2024 ESIA will be supplemented by a specific assessment of potential impacts to the availability of water resources and biodiversity values in the project area of influence (refer to ESAP #10, #11, #12, #24, and #25). An EIA study for the 300ha irrigation expansion at Metagro was ongoing at the time of this appraisal.

Environmental and Social Management Plans (ESMPs) have been developed for the farm, cattle feedlot, and the 100ha irrigation scheme in 2023. The ESMPs cover key E&S issues, as per Environmental Licenses’ Terms and Conditions, such as water management, dead animal disposal, solid wastes. A Working Group consisting of Metagro’s agronomy and EHS teams has been assigned to implement the ESMPs. An E&S dashboard has been established for the monitoring/reporting of ESMP’s implementation progress and effectiveness, including annual reporting to local authorities. Metagro will review and update all ESMPs against IFC PSs and applicable sections of the WBG EHS Guidelines (General / Sector-Specific) and their implementation progress will be tracked and will be reviewed by management on annual basis (ESAP#2). The ESMPs will be updated based on results of aforementioned supplemental E&S assessment activities (refer to ESAP #10, #11, #12, #24 and #25).

MCS and Metagro established a consolidated legal/labor registry for applicable EHS and labor requirements for its operations (ref. ISO37301 certification mentioned above). Metagro E&S dashboard will be strengthened to allow tracking E&S monitoring programs and results at all targeted operations.

E&S Management System (ESMS). To implement its sustainability framework and E&S policies, MCS started developing/implementing elements of an ESMS at corporate and subsidiary level. Using the existing MCS ESMS framework, each subsidiary, including Metagro, is developing its own ESMS in compliance with Mongolian E&S legal and regulatory requirements. A mature EHS MS is already in place at MCS Group-level with dedicated E&S teams allocated to oversee EHS implementation. Metagro current progress on its ESMS includes an ESG policy, a risk management procedure aligned with ISO31000:2018, Disaster Recovery and Emergency Preparedness Plan. Others ESMS’s elements are being developed and will include the updated E&S management programs (ref. ESAP#2) and operating procedures, organization capacity/competency, monitoring and review, including Key Performance Indicators (KPIs), stakeholder engagement plan, and community grievance mechanism (ESAP#3). A fire safety report was prepared by a certified fire safety engineer at MCS subsidiaries in 2023 (including ICC Tower and Metagro) and a fire safety review will take place every year. Metagro will achieve management system certifications for food safety, Global G.A.P. for crops and for calf and young beef (ref. ESAP#1). Please refer to PS4 and PS6 section below for details.

E&S Organizational Capacity. MCS has approximately 50 staff engaged in the oversight of EHS function at Group-level and its subsidiaries, including seven EHS staff directly employed at Metagro. At MCS Group level, the EHS function is headed by an EHS Coordinator under the direct supervision of the CEO. Group-wide E&S meetings are held at least once a year to share best practices and lessons learned, and to discuss future E&S goals, objectives and workplan. Metagro will strengthen its E&S organizational capacity and will recruit a full-time E&S Manager and a Social Liaison Officer and will implement relevant training on E&S management for its management team (ESAP#4).

Emergency Preparedness and Response. MCS requires all its subsidiaries, including ICC Tower and Metagro, to develop emergency preparedness and response plans at their respective facilities. MCS Risk Management Department has overall responsibility for implementing these plans, including performing emergency risk audits of subsidiaries’ facilities annually. Each subsidiary, including ICC Tower and Metagro, has a safety committee responsible for planning and implementing emergency management related trainings and drills. The emergency plans consider all probable risk scenarios (e.g., fire, earthquake, flooding, etc.), training on emergency evacuation, use of fire equipment, and other applicable aspects identified in the planning process. The plans are in line with local regulations and requirements of the Mongolian’s National Emergency Management Agency (NEMA) for Metagro’s operations while being aligned with IFC PS requirements for the ICC Tower. Metagro has a Disaster Recovery and Emergency Preparedness Plan approved by the local Emergency Authority. As part of emergency preparedness and response planning, the buildings are designed and provided with adequate means of egress (exits), fire rated structure, fire detection and fire protection systems at each facility, in accordance with Mongolian standards for fire safety design and building works and aligned with internationally accepted fire codes. For the ICC Tower, the design of the fire detection and fire protection systems is meeting international standards for fire safety.

E&S Monitoring and Reporting. The E&S performance of MCS Group and its subsidiaries is reported against 15 KPIs that are recorded/monitored annually. 85% of the KPIs cut across all MCS businesses, including Scope 1 and 2 Greenhouse Gas (GHG) emissions, and are consolidated into the annual sustainability report, while 15% are industry specific KPIs. In 2023, Metagro started reporting against MCS cross-cutting KPIs. Metagro’s industry specific KPIs will be finalized in 2024, including alignment with IFC PS requirements and WBG General/Sector Specific EHS Guidelines (ref. ESAP#3). The Quality & Safety Department of Metagro, in coordination with the EHS function, is responsible for regular monitoring of both qualitative/quantitative data, including environmental parameters, safety related KPIs (leading /lagging indicators) and E&S trainings (e.g., safe use of agrochemicals) provided to employees. Information collected and compiled in reports are presented and reviewed by Metagro’s Managing Director and then incorporated into annual MCS sustainability report.

PS2: Labor and Working Conditions

As of May 2024, Metagro employed 151 staff. In terms of gender breakdown, 75% are men and 25% are women. Metagro employed 25 full-time staff on the crop and cattle production sites and 12 seasonal staff during the seeding and harvesting periods. Services such as security, housekeeping, catering are outsourced to licensed contractors. Metagro does not have a specific preferential recruitment policy for local hire. For the ICC Tower, an estimated 150 workers were at construction site at the time of this appraisal.

Human Resources Policies & Procedures, Working Conditions and Terms of Employment. MCS has Group-wide human resources (HR) policies and procedures that cover recruitment processes, employment practices (including explicit prohibition of child/forced labor), working conditions, worker health screening, performance evaluation career progression and professional development, ethics, and training needs (including occupational health and safety), grievance mechanism and collective bargaining. The subsidiaries, including Metagro, develop their own HR policies and procedures by adapting the Group-level HR policy. MCS’s HR policies are consistent with Mongolian labor law, aside from ESAP#5 below. The HR manager in Metagro is responsible for implementing HR policies and guidelines and report to MCS HR team.

In 2021, Metagro adopted MCS Employment and Labor Communication Policy, and Code of Ethics and Business Principles that include provisions for (i) compensation, and benefits; (ii) employment, appraisal, and labor relations, (iii) training; (iv) grievance; (v) special needs; (vi) gifts, and (vii), responsibilities; (viii) harassment, assault, and (ix) gender equality. Metagro’s Ethics Committee, established in April 2023 and composed of 5 members, is responsible to address ethic-related issues and reports to MCS’s Board of Directors. MCS and Metagro’s employee must completed an annual ethical training workshop, including verification of their knowledge through a test and certification. Working Conditions and Terms of Employment of MCS Group and its subsidiaries, including Metagro, are in line with IFC PS2 objectives.

Worker Accommodations. Metagro’s workers’ accommodations have a capacity of 112 persons at the farm. The accommodations are equipped with fire safety, ventilation, water and sanitation, and heating/cooling systems. There is a canteen and Metagro provides meals to its workers at the site. The Ministry of Health periodically reviews the hygiene status of the canteen. During the site visit, it was noted that workers’ accommodations were in good conditions and met the IFC/EBRD Workers’ Accommodation Guidelines. Regular checks are implemented by Metagro management and the EHS team to verify the facilities’ living conditions. Contractors live in Metagro’s workers accommodations or in traditional portable gers within Metagro’s operational footprint. For the latter, Metagro provides separate sanitation and kitchen facilities in equipped containers. Gers have electricity, no running water and are equipped with traditional heating systems using biomass as a source of energy. There were no workers accommodations at the ICC Tower as construction workers are from Ulaanbaatar areas.

Workers’ Organization. There is a strong tradition of organized labor and worker rights in Mongolia. According to the MCS’s Employment and Labor Relations Policy, it is the employees’ right to establish collective bargaining which should be initiated by employees themselves. At the time of the appraisal, no Metagro and/or ICC Tower employees have not triggered such initiation for a Collective Bargaining Agreement (CBA). In case of initiation by employees, MCS and/or Metagro will support and engage in that CBA process.

Grievance Mechanism. MCS and its subsidiaries have a documented grievance mechanism available for all employees, regardless of employment type, to raise all types of issues including unethical conducts and sexual harassment. Various channels are available including emails, intranet and suggestion box, whereby workers’ grievances can also be raised anonymously. No material grievances from employees or strikes have been reported in the past three years.

Non-discrimination and Equal Opportunity. MCS and Metagro’s Employment and Labor Relation Policy and internal work regulations stipulate the principle of non-discrimination, which is consistent with IFC PS2 requirements. The policy also includes relevant provisions on performing duties, working assignments, commuting to work, changing shifts, waiting for work, attending training, and public events organized by employers, enterprises, and organizations.

Protecting the Workforce. MCS and Metagro’s Employment and Labor Relation Policy and Code of Ethics and Business Conduct prohibit the use of child and forced labor.

Workers Engaged by Third Parties. The selection of contractors is done in line with MCS contractors’ procurement policy and principles when selecting third-party contractors, and suppliers. Key indicators used for selecting suppliers include the “United Nations Global Compact" principles https://unglobalcompact.org/what-is-gc/mission/principles. This information is available to existing and potential suppliers on MCS’s website - https://supplier.mcs.mn. Metagro conducts technical monitoring, performance evaluation and audit of third-party contractors. The HR team supports the due diligence before establishing a contractual arrangement with any contractor, including registration with relevant labor regulators, compliance with local labor and Occupational Health and Safety (OHS) provisions, namely payment of worker’s legal benefits, timely payment of wages, OHS training and provisions of Personal Protective Equipment (PPEs). Going forward, MCS and Metagro will formalize its procedure to prohibit, monitor and audit for compliance with the policy in terms of any child labor and/or migrant labor among contractors’ workforce at the ICC Tower construction site and at the farms’ operations (ESAP#5).

Life and Fire Safety. MCS Group has implemented corporate fire safety policy that must be adhered to by MCS Group and all subsidiaries, including Metagro and the ICC Tower. This policy is consistent with Mongolian fire safety legislation and aligned with international fire standards. Under the policy, all L&FS risks aspects are managed within the MCS Group, including assigning responsibilities, prevention programs, training plans, and Operation and Maintenance (O&M) of L&FS system. Metagro and the ICC Tower organize periodic fire and evacuation drills at least one time a year according to the Mongolian fire safety law. For Metagro, the Emergency Department of Khentii Province has concluded that the construction design of the facilities (e.g., greenhouses, canteen, workshops) complies with fire safety regulations. Following the construction of the slaughterhouse/meat processing facility, wastewater treatment plant, retention pond at the cattle feedlot, greenhouses and all ancillary facilities, Metagro has obtained the final post-construction fire safety certificate from the Emergency Department. For the ICC Tower in Ulaanbaatar, MCS will engage a qualified L&FS professional to conduct a review and certification of the building L&FS design followed by certification, as part of the building commissioning (before start operations) that the construction of the building and L&FS systems have been carried out in accordance with the approved design and the L&FS section of the WBG General EHS Guidelines (ESAP#6).

Occupational Health and Safety. Workplace health and safety standards are maintained by each operating unit at subsidiary level, such as housekeeping, safety training, daily safety briefings, safety signage, and employee health and accident records. For all construction, operations and maintenance activities, managers utilize the HSE management plans, perform hazard identification, risk assessments and screening, job hazard analysis (JHA) and define the required controls for activities with multiple tasks. These risk assessments are based on MCS HSE qualitative matrix for evaluation. Critical control field verifications are conducted by managers and engineers on a weekly basis and involve all employees. MCS enforces the use of PPE among its employees and contractors and conduct OHS audits annually. The implementation of these practices was reviewed at the ICC Tower construction site during this appraisal. Metagro’s activities require handling of hazardous materials (e.g., fuel, oil, fertilizers and pesticides, solid and liquid waste, animal waste). Safety procedures are implemented as per the HSE manual and the respective Material Safety Data Sheets (MSDS). For the construction site of the ICC Tower, safety management practices of MCS are followed in addition to meeting Mongolian workplace safety standards. Metagro’s OHS team assesses organization's occupational safety, hygiene, and environmental activities, determine the directions for further improvement, and ensure implementation. The criteria assessed include (i) management system; (ii) responsibilities; (iii) training and instruction; (iv) hazard and risk management; (v) internal control; (vi) accident monitoring and investigation; (vii) security of contractors and subcontractors; and (viii) emergency preparedness.

At corporate and site level, MCS monitors safety performance and reports on lost time injury frequency rates (LTIFR) and severity rate (SR). The 15 key EHS KPIs monitored by Metagro include accident (own staff/contractors), near miss (own staff/contractors); incidents (own staff/contractors), fatality (own staff/contractors); breaches of security; hazard reporting and closing, traffic/road related accident (not involving person), property damage incident, fire incident, OHS training completion rate and time to complete OHS training, safety audit and % of KPI reached. Metagro employs two OHS officers responsible for OHS daily briefs every morning, overseeing contractor’s workers, and enforcement of PPE use. One of the OHS officer is posted at the cattle feedlot. A workplace review was conducted in 2023 by the province’s inspection agency. In 2023, Metagro reached 95% of its KPI targets above its target of 70%. In addition to the subsidiaries’ effort of preventive measures and corrective actions against accidents or incidents, MCS EHS team regularly conducts assessments of the subsidiary companies’ EHS/OHS performance. A fatality occurred at Metagro’s site in January 2023 – a contractor’ worker falling from height. By June 2023, the 22 corrective actions identified in the root-cause analysis report have been implemented. There has been no Loss-Time Accident (LTA) at the ICC Tower since the start of the construction phase.

Metagro plans to achieve ISO45001 certification for its OHS MS in 2024. Metagro obtained a preliminary control review on construction site and a health review on construction designing from the Ministry of Health in 2023. For construction activities, Metagro’s Contractor Safety Management follows a five-step process: contractor prequalification; contracting; contract execution; contractor monitoring; contractor evaluation. Metagro maintains its procedures for construction work, including EHS management plan, hazardous job work permission and workplace inspection, incident investigation and recording, and hazard identification and risk control. Metagro complies with the Mongolian law that makes mandatory for all contractors to have a Health and Safety team on-site. Metagro conducts daily morning briefings with contractors. A Contractor Management Plan articulating how contractor’s OHS scope and policies need to align with MCS Group’ ESG policies and IFC PS will be established for the ICC Tower and Metagro’s operations (ESAP#7).

PS3: Resource Efficiency and Pollution Prevention

Greenhouse Gases (GHG). Metagro’s Scope 1 and 2 emissions originate from three main sources: (i) emissions from the arable farm and associated agrochemicals and fuel consumption; (ii) emissions from electricity and fuel consumption at the ICC Tower, as well as transporting materials and cattle to the domestic market by land; and (iii) emissions from cattle feedlot and meat processing unit. The estimated Scope 1 and 2 emissions amount to approximately 17,600 tCO2e/year. MCS Group’s GHG emission reporting system and emissions records will be integrated into the MCS Group’s ESG report. Metagro’s GHG emissions quantification methodology is under development and will include the definition of GHG emissions quantification methodology, sources, and total GHG emissions quantification (ESAP#8).

Resource Efficiency. Electricity for the production site and office in Ulaanbaatar are sourced from the national grid. Back-up diesel generators are used in case of power outage. MCS is expected to install energy and water meters to monitor its energy/water use in all subsidiaries and facilities. The design of the tower specified the use of LED lighting fixtures, power/water saving appliances, energy recovery systems, insulation of facades and roof, among other energy savings strategies. Metagro’s operations in Khentii source electric power from the national grid. The current power lines that connect the operations to the national grid were commissioned by Metagro and designed and built by a contractor. The current system is sufficient to power equipment at Metagro’s current operations, including the 100ha irrigation pivot system and proposed expansion to 400ha.

Water Supply. The success of Metagro’s proposed operations in this arid region of Mongolia will be dependent on the availability and quality of water to support the cattle feeding, meat processing, and agricultural irrigation operations. The Ulziit village, local nomadic herders and their livestock rely on groundwater via a network of community wells as well as surface water in the Murun River whose flow fluctuates seasonally and includes dry spells. There are 72 (thus far known) water wells used by the local community, a mixture of privately and community owned structures. There may be additional unrecorded community wells within the project areas. Metagro has evaluated the potential availability of groundwater and surface water to support its agricultural irrigation plans. The three trial production wells that were drilled by the company, with a total capacity of 57 liter per second (l/s), were sufficient for the irrigation of a trial 100ha water-efficient center-pivot irrigation system.

Metagro will assess potential impacts to groundwater and surface water resources in the project area through a pumping and modeling study to simulate the drawdown effects on nearby community wells from current and future plans to extract groundwater for all of Metagro’s uses. The assessment of potential impacts to surface water will include an evaluation of water users and uses and scientific determination of the ecological flow of the Murun River followed by an assessment of the impacts of current and future water extraction plans. The results of the assessment of impacts to surface and groundwater resource will be disclosed to potentially affected community and affected stakeholders (ESAP#9). Based on the results of these groundwater assessments, Metagro will develop and implement: i) water resource management plans and procedures, including water usage minimization options and monitoring and mitigation strategies; ii) irrigation and other water consumption technologies review with respect to water conservation; and iii) water recycling and reuse options (ESAP#10).

Metagro will further develop and implement an Irrigation and Water Management Strategy including: i) its irrigation design detailing a phased approach to expansion, and a detailed irrigation planning and cropping scheduling aimed at optimizing water use and reducing its peak demands; ii) its water abstraction strategy informed by final hydrology and hydrogeology recommendations and ongoing monitoring; iii) its monitoring strategy and protocols for both surface and groundwater; iv) its monitoring and analysis of water consumption on a monthly basis; v) an adaptive water conservation management plan with measurable goals and targets for water conservation; and vi) relevant regulatory and permitting requirements. (ESAP#11).

To monitor the effectiveness of the implementation of water management programs, Metagro will develop and implement a Groundwater Management Program to monitor: i) groundwater level changes in different pumping areas; ii) the amount of water pumped from each borehole; and iii) water usage from all activities. Metagro will install piezometers at crucial locations for monitoring of the impacts of groundwater use on groundwater levels in the area, aquifer recharge and negative impacts on other water stakeholders in the area, if any (risks due to the presence of multiple very shallow community water wells, ponds and springs for livestock watering and human consumption close to the farms). Metagro will also develop a Groundwater and Surface Water Quality Monitoring Program for representative water quality sampling locations, including the most at-risk community water wells, the Murun River, and other at-risk surface water bodies, to detect any harmful levels of pesticides as may occur due to the use of agrochemicals across large farm areas. Metagro will establish a dedicated team with defined positions, roles and responsibilities for implementation of the Irrigation and Water Management Strategy and the Groundwater Management Program. The water management/monitoring program will integrate all pollution management and monitoring actions relevant to the protection of the surface and ground water resources; iv) as per its Groundwater Management Program, Metagro will strengthen the analysis of its monitoring results by enlisting the services of an independent Hydrologist, train its own staff in relevant water related topics and communicate the results of monitoring to the neighboring communities of its operations. Metagro will cooperate with surrounding communities and stakeholders to minimize the impacts of water extraction on downstream communities and ecosystems. This approach will support the implementation of a participatory and adaptive water management and monitoring program which will cover water resources availability, effluent management and water quality (ESAP#12). In case the assessment of potential impacts to surface or groundwater resources predicts that such impacts could occur in the foreseeable future, of any negative impacts of groundwater and surface water abstractions for irrigation and other company uses on other stakeholders, Metagro will proactively mitigate such impacts by providing for example a network of medium-depth (dug) wells for the potentially affected communities and affected stakeholders (ESAP#13).

Waste and wastewater management. The main solid waste includes animal waste from the cattle feedlot and slaughterhouse/meat processing/packing plants. Metagro will design, construct, operate, and maintain waste management storage and treatment facilities to contain all manure, litter, and process wastewater from the cattle feedlot. Most of the solid waste (manure) will be composted and applied on the arable land as organic fertilizer. Metagro plans to channel liquid manure and urine waste from the feedlot to a line sedimentation basin(s) and flow to an effluent treatment biopond, which will be used to fertilize nearby crops. Solids from the ponds will be scooped periodically, tested, and if feasible incorporated into soils as an organic fertilizer. Metagro will sample and analyze the treated effluents for compliance with WBG EHS Guidelines for mammalian livestock production. Cattle feedlot’s waste management facility will be built, and effluents monitored (ESAP#14). The use of a biopond for treated effluent discharge presents potential risks to groundwater resources and soil contamination if not properly designed and managed. To mitigate these risks, Metagro will (i) conduct a hydrogeological assessment to evaluate potential impacts on groundwater and soil; (ii) establish a monitoring program for the biopond and surrounding areas; (iii) implement measures to prevent groundwater contamination including lining all of the biopond and wastewater retention basins with a geotextile layer; and (iv) ensure there is sufficient storage capacity to prevent storm overflow and related impacts to surface water or soil contamination (ESAP#15).

The meat processing/packing plant includes a rendering plant and a cud drying machine enabling to upcycle the waste from downstream operations. Yet both operations will generate liquid and solid waste. At the time of IFC’s review, the wastewater treatment plant (WWTP) was 100% completed for the slaughterhouse/meat processing/packing plant and planned to be commissioned in July 2024 before downstream operations start. The proposed WWTP design for the slaughterhouse and cattle feedlot incorporates several components and treatment processes necessary for effective treatment of the high-strength organic wastewater generated from these operations. The treatment process, including primary physical treatment, chemical treatment, secondary biological treatment (anaerobic and aerobic processes for nutrient removal), disinfection, and sludge dewatering, is in line with GIIP, including WBG EHS Guidelines for Mammalian Livestock Production. The treated effluent will be discharged into a biopond, where it will undergo further treatment through evaporation and percolation processes. This will minimize the risks of surface water contamination.

For effluent quality and nutrient removal, while the effluent limit for total phosphorus meets the WBG EHS Guidelines’ value, the company will ensure the treatment processes consistently achieve the more stringent WBG limit for total nitrogen removal (ref. ESAP#14). The current design includes pretreatment and odor control measures, and the company will implement specific odor control measures for high-odor areas may be necessary to comply with WBG General EHS Guidelines - Air Emissions and Ambient Air Quality and EHS Guidelines for Mammalian Livestock Production - Ammonia and Odors (ESAP#16). For sludge management, Metagro will design and implement assessment, treatment, and management practices, including exploring beneficial reuse options for the dewatered sludge, such as land application as a fertilizer or soil amendment, and will align with GIIP per WBG EHS Guidelines (ESAP#17). Thick sludge separated from water will be collected in a reserve tank and the bottom area of reserve tank will be pressed and dewatered again. The remaining pressed sludge will be then delivered to the compost area and will be used as organic fertilizer to arable farm once it is naturally composted (after storing it 6-12 months).

Hazardous Materials Management. Hazardous materials used in Metagro operations are mainly fuel for generators, oil and lubrications, and agrochemical materials stored in large quantities, especially glyphosates. Fuel and hazardous materials are stored in locked areas with spill control. All agrochemical and fertilizers must be purchased by suppliers currently licensed by relevant Mongolian regulatory agencies. Pesticides will be handled stored, applied, and disposed of in accordance with the FAO International Code of Conduct on the Distribution and Use of Pesticide. Metagro temporarily stores hazardous waste from veterinary services in designated hazardous waste bins until it is picked up by a licensed hazardous waste transportation and disposal company. Metagro has recently started the renovation of warehouse for fertilizer and pesticides in line with relevant standard. Fuel is stored separately. The company will install double containment systems for fuel storage.

Integrated Pest Management. As per Metagro commitment to implement regenerative practices at its farm, while seeking Global Gap certification for crop, the company will develop and implement an Integrated Pest Management (IPM) plan (ESAP#18). Metagro will adopt an international recognized certification (e.g., Global G.A.P) for its crop production and continue to ensure no prohibited pesticides are applied, such as WHO Class Ia and Ib products (ref. ESAP#1). Metagro will develop and implement specialized agrochemical training and application techniques to its personnel on the use of WHO Class II products. Agrochemicals spraying equipment will be maintained regularly, with a log of maintenance. Health check-up for workers involved in operations involving handling and spraying of agrochemicals, including cholinesterase, will be included as part of the annual health check-ups. The company will monitor surface water quality to prevent any contamination from agrochemical use (ref. ESAP#13).

PS4: Community Health, Safety, and Security

Metagro projects to transport up to 12,000 cattle to the feedlot per year and packed meat to cold storage and retail points in Ulaanbaatar. The scale of transported volumes might present potential issues in dealing with traffic and transport issues, such as workers, community and nomadic livestock safety, truck repairs and emergency services responsiveness. Metagro relies on transport service providers for delivery of calves from suppliers to the abattoir. Access to/from the production site to the Eastern Highway sealed road is through unsealed roads. Grains may also be transported from the production site if Metagro opts to sell its yield instead of utilizing it as feed. There are potential risks associated with growing traffic include noise, dust, traffic disruptions, and traffic safety due to operations. Other potential impacts to community health and safety identified in the ESIA include risks to local water resources used by local herders due to the use of fertilizers and pesticides and management of animal wastes. Metagro will conduct a periodic and specific engagement on these matters with the nearby community and neighbors by establishing communication channels to raise any concerns with the company’s activities and mitigate risks identified by communities as per its stakeholder engagement (ref. ESAP#25 below).

For road traffic safety, Metagro will establish and roll out a Traffic Management Plan, including a Road Safety Policy and Procedures consistent with WBG EHS Guidelines (ESAP#19). All transport providers and contractors are expected to meet minimum requirements for vehicle quality and drivers experience, licenses, and insurances. Drivers must complete a technical readiness assessment of vehicles before commencing their journey. Drivers must also conduct a technical inspection with stops during the trip. All vehicles undergo a state technical inspection once a year. As per ESAP#19, Metagro will stipulate that vehicles operated by their contractors adhere to strict driving time regulations. Transportation of cattle requires specific procedures that need to be followed by trained drivers and meet internationally recognized standard as per the IFC Good Practice Note, Improving Animal Welfare in Livestock Operations, and the Livestock Transport Standard as part of the Global G.A.P. for calf and young beef certification scheduled for 2024 (ref. ESAP#1).

Food Safety. Metagro will implement a food safety system, (e.g., ISO22000) at the slaughterhouse/meat processing /packing plant, when commissioned. The international recognized standard will certify that finished products placed into commerce are of high quality and unadulterated. Metagro will integrate these programs to the cattle feedlot operations (ESAP#20). The meat processing/packing plant will incorporate SOPs to institutionalize sanitation, good manufacturing practices, staff hygiene and training. Metagro will also establish a robust mechanism for receipt and analysis of customer complaints, traceability, etc. These procedures and, as needed, work instructions will be employed for employee training.

Security Personnel. MCS (ICC tower) and Metagro employs a security company to provide access control to construction site and/or worker’s accommodations and related facilities. The security company provides equipment to its personnel, including protection and intervention, pistols, deterrent spray, and handcuffs. The company will continue to use the services of a private security firm for the project. Selection of the security contractor or extension of the current contractor will be in line with MCS Group procurement policies and be confirmed by a due diligence process. In addition, Metagro will assess security related risks and develop a Security Management Plan, consistent with PS4. It will include training modules for Metagro management and security personnel and provide a grievance mechanism for affected communities to express concerns about security arrangements and acts of security personnel (ESAP#21).

PS5: Land Acquisition and Involuntary Resettlement

According to the ESIA, the Metagro farm operations are established on the former Chandgana collective farm of about 20,000ha that was set-up by the Government of Mongolia in 1976 in the Chandgana Valley of Khentii province. After 1992, collective farms were reportedly dissolved and the arable lands of Chandgana farm were acquired by 12 private entities. Thereafter, the lands were not in regular annual cultivation, reportedly mainly due to capital costs and financial problems. In December 2021, Metagro acquired 30-year possession rights for 8,000ha of Chandgana land followed by an additional 2,200ha of arable land.  In addition, Metagro acquired two additional land plots (of 50ha and 20ha) through the provincial local auction process for its key operations. Much of the arable land was previously fenced by prior farming operations.  Due to the irregular annual cultivation, it is reported that the Metagro land has been used by herders for nomadic grazing, as is commonly done throughout Mongolia. Therefore, the fences were upgraded by Metagro around the entire 88.5km perimeter primarily to avoid intrusion from neighboring nomadic livestock. Metagro is establishing a buffer strip inside the fence to grow grass for bailing and sharing with local herders potentially impacted by restrictions of access. Nevertheless, there is   limited information available to Metagro about the extent of use of the agricultural land by nomadic herders by prior lessees of the land, and therefore, Metagro will map current grazing activities in the vicinity of their farming operations to document herder activities and if needed develop a plan to avoid disruption to grazing activities and access to community water wells. (ESAP#22). In addition, Metagro will develop and implement a grievance mechanism available to all persons affected by the restriction of access to natural resources, such as grazing land and water wells (if applicable) and who might benefit from mitigation measures defined on a case by case/eligibility basis according to the current residual risk and vulnerabilities. (ESAP#26).

PS6: Biodiversity Conservation and Sustainable Management of Living Natural Resources

Protection and Conservation of Biodiversity. The project is located in the Mongolian-Manchurian grassland Ecoregion which consists mainly of grasslands steppe habitats. These habitats are characterized by extreme winters and predominately summer rainfalls that drive migratory patterns of gazelles and other hoofed animals and birds including Steppe Eagles Aquila nipalensis IUCN EN. Resident species include the Mongolian Marmot Marmota sibirica IUCN EN. Over grazing and agriculture are the main threats to the ecoregion. Within a radius of 50km of the project area, there is one (1) protected area Undurkhaan uul National Park, consisting of an elevated area of natural grassland habitats. The project itself is located in an area of modified grassland habitat around 10km to the east of the protected area. Species values of the surrounding grassland habitats were surveyed, and several species of conservation interest were identified. These include Mongolian gazelle Procapra gutturosa IUCN LC, Steppe Eagle A. nipalensis IUCN EN, Mongolian Marmot M. sibirica IUCN EN with the latter species identified as triggering critical habitat on a precautionary basis. Five individual marmots were identified during field surveys in the surrounding grasslands which indicate a resident population within the area. To manage risks from the project on biodiversity values, an impact assessment of potential groundwater drawdown on the vegetation in the project area, on marmot’s habitat and broadly on the steppe ecosystem will be conducted as well as an impact assessment of intensive agricultural activities in the project sites, especially the potential impacts caused by animal wastes storage, disposal and wastewater discharge from the feedlot and slaughterhouse (ESAP#23). An impact assessment of the Overhead Transmission Line (OHTL) which is already built, especially its impact on Steppe Eagle (EN) will also be conducted. Based on the impact assessments, Metagro will develop corrective actions for achieving Net Gain for CH which will be detailed in a BAP and other mitigations to address other impacts (e.g., for the OHTL) (ESAP#24). The BAP will include measures to reduce risks of collision risks for soaring birds associated with the transmission line, management of carcasses and disease transmission, animal waste and wastewater management to reduce impacts on aquatic habitat. While direct impacts to critical habitat values for the Mongolian Marmot are not anticipated, the company will implement an additional conservation action for that species, which will consist of contributions to the management of the Undurkhaan Mountain National Park and monitoring of the population.

Supply chain. Information from Metagro indicates that the cattle supply chain will be provided from eastern provinces of Mongolia, being Khentii, Dornod and Sukhbaatar. Key Biodiversity Areas (KBAs) and protected areas within this region include several Important Bird Areas, designated for important concentrations of migratory birds and coincide with lakes. These include Turgen Tsagaan, Zegst, Tuulaitiin Burd Lakes; Mongol Daguur and Tsengeleg Lakes. Protected areas designated are more represented by steppe grasslands, including Yakhi lake Nature Reserve; Toson-Khulstai Nature Reserve and Bayantsagaanii steppe Nature Reserve, all of which are designated as IUCN management category IV which recognizes multiple use, including agriculture. The cattle supply estimated will be approximately 10,000 head per annum from a total estimated herd of 1,176,000 head. Metagro have advised that 85% of the cattle supply is from individual herders, with the source of the supply able to be tracked to individual producers as is required by Mongolian law. Further analysis and monitoring will be required to determine if there has been significant conversion or degradation of grassland habitats, change in the herd structure, animal genetics and other changes in the calves supply chain. Monitoring and verification practices will be adopted as part of the client’s ESMS. Metagro will develop and implement a Herder Procurement Management System (HPMS) which will include a Supplier Code of Conduct (CoC) to address applicable PS2/PS6 supply chain risks. The HPMS will include mapping of the supply chain, risk assessment, traceability (including creation of a georeferenced database of primary suppliers), and verification via auditing by Metagro and/or a third party to evaluate and manage its supply chain, including but not limited to, primary suppliers. Metagro’s CoC will need be updated to include prohibition of supply of livestock from areas within KBAs and Protected areas. This update will include prohibition of any grazing from the birth of the calf through to procurement in those areas (ESAP#25).

Achieving Global G.A.P certification for crop and livestock (calf and young beef) is included in Metagro’s 2024 Action Plan. Certification or independent verification for livestock transport and the feedlot will be required. Metagro also procure seeds and grains from domestic and international suppliers. An assessment of potential land conversion in the seed (e.g., wheat and rapeseeds) and grain supply chain (e.g., wheat and barley) will need to be undertaken and specific procurement rules (ref. ESAP#23) will supplement MCS Group policies and processes.

 A framework for a Stakeholder Engagement Plan (SEP) has been developed as part of the ESIA studies. The framework includes stakeholder identification and analysis and a community Grievance Mechanism (GM). Based on the framework, Metagro will develop and implement a SEP and GM for the project and the affected communities (ESAP#26). The GM will be maintained, implemented and staffed by Metagro (ref. Social Liaison Officer, ref. ESAP#4). As for the ICC tower, MCS’s Community Grievance Mechanism will apply.

 The ESRS/ESAP will be made available via IFC Project Information Portal and at MCS and Metagro offices in Mongolia. The local EIA and the May 2024 ESIA study commissioned for the Metagro operations in 2023, including the Critical Habitat Assessment and Stakeholder Engagement Plan will be disclosed at Metagro operations.

Solongo Batbekh

CEO

Metagro LLC

E-mail: solongo.b@metagro.mn

Address:

Mongolia, Ulaanbaatar city 14200, Sukhbaatar district-1, Central Park, 8th floor

Phone: 7777-9070; E-mail: info@metagro.mn