This is a Category B project 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).

Use of IFC proceeds will be used for the improvement of the reliability of the electrical system including substations, renovations and upgrades and will not include new distribution or high voltage transmission lines. Neoenergia Elektro has established an effective IMS and dedicated E&S teams to manage and monitor the Company’s E&S performance. Thus, the key E&S issues associated with this project as identified during IFC’s review are related to (i) Neoenergia Elektro’s capacity and competence on the implementation of the corporate environmental and social management system to manage E&S risks in its expansion and operations, (ii) fair and safe working conditions and management of occupational health and safety (OHS) aspects; (iii) contractor management in terms of all relevant E&S issues, including working conditions and OHS; (iv) emergency response and preparedness; (v) gender, sexual harassment and gender-based violence (GBV) issues at the workplace; (vi) resource and energy efficiency, and management of waste and emissions; (vii) land acquisition; (viii) biodiversity screening and management; (ix) impacts on Indigenous Peoples and ethnic traditional communities; (x) protection and management of cultural heritage sites, and (xi) stakeholder engagement.                      

 Policy

Neoenergia Elektro has adopted and follows Neoenergia’s Environmental and Sustainable Development Policies (2019) which are extended to all the companies belonging to the Neoenergia group. These policies are followed by the Company and its contractors and form an important component of Neoenergia Elektro’s E&S management framework. The Board of Directors recognizes the environment as one of the three pillars of the sustainable energy model, together with competitiveness and safety. 

Neoenergia Elektro is bound by Neoenergia’s corporate policies which are generally aligned to Good International Industry Practice (GIIP) and include: (i) corporate governance and sustainability, (ii) sustainable development, (iii) sustainable management, (iv) environment, (v) climate change, (vi) biodiversity, (vii) occupational health and safety, (viii) risk management, (ix) corporate security, (x) human rights, (xi) stakeholder relations, and (xii) human resources as well as by the code of ethics. These policies are applicable to contractors, joint ventures and other associations where the Company assumes management functions.

Environmental and Social Assessment and Management Systems

Neoenergia has an environmental management system that transfers corporate environmental policies to environmental guidelines, aligned with the United Nations Sustainable Development Goals.  Neoenergia Elektro has quality, occupational health & safety and environmental programs and procedures based on ISO management systems standards, that are part of the Company’s corporate IMS. Neoenergia Elektro’s management system is certified under ISO9001 & 14001 since 2008. The 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. The latest ISO 14001:2015 certification is from November 2022, covering all the activities and services involved in the construction, operation and maintenance of the power distribution grid and the distribution of energy within the concession.  On the social side, Neoenergia is in the process of conducting a gap analysis of its integrated management system to ensure social aspects of their operations are integrated in the management system.   As part of ESAP item #1, Neoenergia Elektro will complete the gap analysis of its integrated management system and, as needed, incorporate all the necessary plans, procedures and controls to ensure it includes all the required elements as per IFC Performance Standards to manage and continuously improve social aspects of its operations. The analysis will be aimed at incorporating Neoenergia Elektro’s social policies, management plans, procedures and stakeholder engagement features, including clear procedures to consult with potentially affected communities and relevant stakeholders as an integral part of the management system.

Identification of Risk and Impacts

Neoenergia Elektro follows Neoenergia’s Risk Control and Management Policy which considers regulatory, reputational and operational, technological, environmental and social risks. At the corporate level, the Board of Directors is committed to develop all its capabilities to adequately identify, measure, manage and control risks.  Neoenergia’s Investment Policy, which is also followed by Neoenergia Elektro, provides the guidelines to carry out risk analyses associated with climate change and physical change in the environment, and requires systemic follow-up of environmental and land requirements to minimize environmental and socio-economic risks. Based on the directives derived from these policies, Neoenergia Elektro defines environmental and social objectives and action plans to properly manage the identified risks.

Neoenergia Elektro has an “Environmental Aspects and Impact Assessment” procedure to assess, measure and mitigate the Environmental impacts arising from its activities.  Identified environmental and social risks from all the processes, activities and facilities are registered in an “Environmental Aspects and Impacts Identification and Assessment Matrix”, which details the type of risk or impact for each activity and an assessment of importance, magnitude and probability of occurrence.  In addition, Neoenergia Elektro has a system to identify and manage all environmental regulatory requirements, keep track of legal obligations and monitor compliance. 

During the environmental permitting process of new transmission and distribution lines and substations, Neoenergia Elektro secures the services of qualified and certified cultural resources specialists to conduct studies to identify and manage cultural resources in accordance with the requirements of the National Institute of Historic and Artistic Heritage (Instituto de Patrimônio Histórico e Artístico Nacional – IPHAN). The qualified cultural resources specialists coordinate with IPHAN field surveys and potential rescue and restoration of archaeological, paleontological and historical resources, as deemed necessary by IPHAN.

In addition to these E&S impacts identification tools and procedures, Neoenergia Elektro conducts environmental and social impact assessments in line with Brazilian and Sao Paulo State legislation prior to the development of any infrastructure projects in their concession with the support of specialized environmental consulting firms. To enhance the process of identifying E&S risks and impacts aligned with IFC standards, Neoenergia Elektro will expand its E&S impact assessment process and develop a “Social Impact Assessment Procedure” (ESAP item #2) aimed at identifying and managing social impacts following IFC Performance Standards, including the assessment of impacts to Indigenous Peoples and provisions to consult with potentially affected communities and relevant stakeholders to identify and address their concerns; and (ii) a “Biodiversity Screening & Assessment Procedure” (ESAP item #3) in line with Performance Standard 6 to properly assess biodiversity impacts, including baseline requirements, risk assessment in line with PS6, and management and monitoring aspects of any future activity or projects to understand: a) that all projects comply with Brazilian regulatory requirements; b) if the activity/project can be carried out under IFC proceeds (i.e. no  CAPEX items funded by IFC are undertaken in Alliance for Zero Extinction Sites or World Heritage Sites), and c) what the needed management and monitoring requirements aligned with PS6 will be applicable depending on the type of habitat where these will be developed (Modified, Natural or Critical Habitat).

The Company not only assesses the E&S risks for future or upcoming developments and projects but performs the technical monitoring and assessment of risks for existing operations with regards to potential biodiversity risks and birds’ electrocution. Neoenergia Elektro has developed a system to generate ‘heat maps’ where fauna-related service interruptions (i.e. wildlife-related outages) are recorded, indicators generated and reported, and new areas of biodiversity risk properly identified. Technical teams review and assess the heat maps and propose measures to improve the features and characteristics of the power distribution systems to remove and/or minimize the risk of electrocution to birds (and fauna in general) which in turn result in an improvement of the service continuity and grid reliability indicators. The system is also supplemented through the environmental data and field monitoring conducted by the Company technicians as part of their regular grid maintenance and supervision activities.

Management Programs

Neoenergia Elektro’s E&S plans and programs include prior analysis of environmental licensing and permitting requirements, ESHS risk assessments, emissions control and GHG reporting and minimization, solid and hazardous waste management, environmental noise, vegetation management, resource efficiency programs, management of fauna, emergency preparedness and response, workforce management, equal opportunity, vocational and E&S trainings, security, land acquisition, customer relations, community awareness and stakeholder engagement, and grievance mechanisms. 

These programs and plans are in line with Brazilian 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 Neoenergia Elektro to develop, as part of ESAP item #4, a “Projects Biodiversity Management Procedure” to ensure that any new project carried out by the company related to CAPEX funded by IFC includes provisions to mitigate impacts to biodiversity and achieve No Net Loss or Net Gain, as applicable, depending on the classification of habitat in line with PS6.

In addition to the ‘heat maps’ mentioned above, the Company implements other birds, bats and fauna protection measures and minimize impacts to vegetation as well. These measures include: (i) the prioritization of the use of insulated cables; (ii) the use of drones to lay out cables to minimize vegetation clearance and footprint; (iii) framing structures so that there is adequate separation between phases or phases and grounds; (iii) the use of modular fiber poles that allow the introduction of supplemental sections of the pole to raise them above the vegetation cover and reduce the need for tree clearing and pruning; (iv) installation of insulating covers on all equipment bushings in new substations and; (v) micro-routing and carefully placement of poles to avoid or reduce interferences with trees and vegetation. To build on the Company’s efforts to protect fauna and promote a systematic approach for the design of new structures in line with IFC’s mitigation hierarchy, the Company will, as part of ESAP item #5, secure the services of an avian safety consultant to review the existing standard designs of poles, framing structures, spacing considerations, jumper loops, and energized parts and hardware of distributions systems and propose recommendations, as applicable, to enhance these standard designs to further reduce the risk of avian (and fauna in general) electrocution.

Organizational Capacity and Competency

At the corporate level, responsibility for E&S management resides with the innovation and sustainability superintendent, who reports directly to the vice-president.  The superintendent oversees the departments of innovation and quality, sustainability, and climate change, ESG, and social responsibility. Neoenergia Elektro has assigned qualified personnel, including management representatives, with clear lines of responsibility and authority for managing E&S issues. The Company has dedicated managers and personnel for occupational health and safety, for environment and biodiversity, for HR and labor conditions, for social and communities’ engagement, for land and easement acquisition and a supervisor for security. The director of institutional relations reports directly to the adjunct general director.  In addition to three institutional relations staff, Neoenergia Elektro engages with clients and community members through the client service department, which has representatives throughout the five regions and in every city of their concession area, covering all its operations.

The competency of the organization is adequate in all the ESHS areas, with a robust safety culture and supported by good management systems. To build on Neoenergia Elektro’s aim to continue building capacity, and in order to foster the alignment of the Company’s operations to IFC Performance Standards, Neoenergia Elektro will as part of ESAP item #6: (i) define a Company employee (a biologist versed in PS6) to manage all the biodiversity requirements and activities resulting from the implementation of the procedures previously described, which are necessary to align its operations to IFC standards, (ii) develop a PS6 training program with the support of a specialized consultant to properly cover not only the key concepts of PS6, the criteria, considerations and thresholds for habitat classification and corresponding controls, but focusing also on fauna at risk of collision and electrocution, and on how to minimize impacts with grid design solutions, and effective avian safety devices. 

Emergency Preparedness and Response

Neoenergia Elektro has an overarching ‘Emergency Preparedness and Response Plan’ (EPRP) and has in place emergency response plans for each of its operational bases. These 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.  The Company discloses the EPRPs to employees and contractors’ workers, communities, and local authorities.

Monitoring and Review

Neoenergia Elektro 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 evaluates the safety, environmental, and quality performance of all the work crews (employees and contractors) and has a thorough process to monitor ESHS compliance on site. Field inspection programs are in place to assess the integrity of safety procedures, quality of execution and compliance with labor legal requirements.  Camaras are used to video record all the works and activities being conducted by crews within the concession. Recordings are subsequently reviewed to identify gaps, opportunities for improvement and compliance with Company procedures. 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.  The process is systematized, and any resulting corrective or improvement actions are monitored to completion.

The Neoenergia group has a strong governance structure for the oversight of E&S matters. Environmental teams from all the companies, including Neoenergia Elektro, must report environmental and social issues to senior management, through meetings of the Board, Power Grid Committee and Sustainable Working Group. The Board of Directors and Power Grid Committee take place weekly. Based on the E&S performance, the Company's Board of Directors analyses and reviews the need to adapt and improve policies, objectives, procedures, key performance indicators and E&S practices in general.

Neoenergia has adopted the standards of the Global Reporting Initiative (GRI) and publishes annual sustainability reports. The documents state the investments, actions, indicators, and E&S performance by each of the group's subsidiaries, including Neoenergia Elektro.

E&S Contractor Management

Neoenergia Elektro assesses contractors, service providers and suppliers as part of the tender process.  Through the due diligence process, the Company reviews OHS and E&S performance and practices of prospective contractors, including labor conditions and quality control. 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.

Audits to contractors and key suppliers are conducted regularly. The audits assess compliance with E&S requirements and with Brazilian legislation, identifying non-compliances, observations and improvement opportunities, reducing risks and mitigating impacts. After the auditing process, the contract managers monitor and track to completion the implementation of any identified non-conformities and corrective actions with suppliers and contractors.

In addition, since 2020 the Company conducts workshops with contractors and main suppliers to re-emphasize contractual obligations and share experiences on compliance and improvement of aspects related to environment, health and safety, labor and operational aspects or their operations as they relate to Neoenergia Elektro.                                                  

 As of December 2022, Neoenergia Elektro had 3,615 direct employees and 684 contractor workers directly in distribution. The number of direct workers has been increasing and is expected to grow approximately 10% in 2023, due in part to an internalization process by which the Company is creating internally positions for jobs carried out by contractors.  Approximately 84% of the direct workers are male and 16% female, slightly less than in other companies of the Neoenergia group.

Prior to engagement new service providers and suppliers, Neoenergia Elektro conducts a due diligence process that includes assessing the adequacy their systems to ensure working and labor conditions are aligned with Brazilian legislation and the Company policies.  Documental and field audits of contractors and main suppliers are conducted regularly covering aspects of health and safety and working conditions.

Human Resources Policies and Procedures

Neoenergia’s Human Resources Policy and Code of Ethics, which are duly followed by Neoenergia Elektro, are aligned with local regulations and consistent with PS2 requirements, covering labor and working conditions, including prohibition of child and forced labor, non-discrimination, promoting equal opportunity and respecting freedom of association. Employees are provided with 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.

Working Conditions and Terms of Employment

Contracts with direct employees specify labor conditions and through an induction process employees are made aware of the Company’s Human Resources policies, the Code of Ethics, and their rights and responsibilities. Neoenergia Elektro verifies that all contractors’ workers are registered in the Brazilian National Institute of Social Security (Instituto Nacional do Seguro Social - INSS) and that all taxes and fees related to workers’ benefits required by law are covered by contractors.  Through periodic audits and monthly field inspections the Company verifies adequate working and occupational health, and safety conditions are provided by contractors and suppliers.

The Company has a talent management program which includes personal development plans and provides performance awards and recognitions to employments. In 2022, 535 people were promoted and 956 employees throughout the organization received performance recognitions. In the same period, Neoenergia Elektro provided 194,406 hours of online (26%) and in person (74%) training to employees in technical aspects, occupational health and safety, corporate culture and values and other topics.  In 2022, employees had been in the Company an average of close to 9 years.

Worker’s Organizations

As of December 2022, 1,622 workers were associated in four unions of the state of Sao Paulo (STIEEC, STIEESP, SINDERGEL and SEESP).  Neoenergia Elektro works collaboratively with these unions and has in place collective agreements outlining labor conditions that apply to all workers.  Collective agreements are generally negotiated every two years with the current ones valid through May 2023. In addition, Neoenergia Elektro has profit-sharing agreements that are negotiated with the union on an annual basis.

Non-discrimination and Equal Opportunity

Through the Neoenergia model of “Electrician Schools”, Neoenergia Elektro conducted 40 courses to train and certify 933 electricians from local communities across the State of Sao Paulo, 528 of which were hired by the company after completing the 4-month full-time or 9-month part-time program.

Neoenergia Elektro’s Human Resources and Human Rights Policies, as well as the Code of Ethics and the Recruitment and Selection procedure have provisions for equal opportunity and non-discrimination.  Approximately 16% of Neoenergia Elektro’s employees are women, with under 2% of electricians and 29% of management and supervisory positions being occupied by women.  Neoenergia has recently (December 2022) developed and is in the process of rolling out a Gender Strategy to foster more women participation in the Company, ensuring there is no unintended discrimination in the recruitment, selection and promotion processes and removing any barriers for women to be hired, retained and promoted in the organization, including risk of experiencing gender-based violence and harassment (GBVH). By 2025, Neoenergia Elektro expects to have at least 30% of management and supervisory positions, and 9% of its electrician positions occupied by women.  In the last half of 2022, the Company surpassed its goal of 30% female participation in the Electrician Schools.

Through the implementation Neoenergia’s “Juntos” Program (or “Together”), Neoenergia Elektro implements diversity and inclusion initiatives to increase the participation of women and of people with disabilities throughout the organization.  The program includes campaigns for the empowerment of women and training and education to address GBV, racism LGBTQ+ issues within the organization and in the communities where it operates. 

Worker’s Grievance Mechanism

The Company has an online mechanism to address workers’ queries, concerns and complaints. All communications are registered and addressed. In addition, Neoenergia Elektro has in place a grievance mechanism managed by a third party to ensure transparency and avoid any form of retaliation. Grievances are registered and channeled to the relevant department within 3 days of reception, classified by level of risk, analyzed and investigated for their final resolution. The mechanism allows for anonymous complaints to be issued and is available to all employees and contractors’ workers through 24/7 telephone, email, or the intranet. The mechanism is broadly communicated through the induction program and routinely reinforced through safety talks conducted daily at the start of the working day. Neoenergia Elektro has technical guidance and procedures for receiving and investigating different types of grievances, including specifically actions for handling cases of labor abuse and sexual harassment with a survivor centered approach.  In 2022, 279 grievances were received and resolved in an average of 34 days for specific cases and 7 days for compliance cases.

In addition, to the compliance grievance mechanism, Elektro has parallel mechanism to receive grievances, suggestions and concerns for specific topics through the Internal Commission for Accident Prevention (CIPA) for health and safety related issues, the Collaborator Service Centre (CAC) for payroll and labor conditions, Business Partners program for general human resources aspects and the daily Dialogues on Strategy, Safety and Behavior (DESC) which addresses a wide range of organizational aspects.  As part of ESAP #7, Neoenergia Elektro will develop a procedure to register and consolidate all workers grievances into one data base to consistently monitor grievances management and to analyze trends in order to facilitate the implementation of improvements to minimize the possibility of recurrence and the potential escalation of conflicts.

Occupational Health and Safety

Neoenergia Elektro has a robust, well-structured and sophisticated OHS management system based on Neoenergia’s corporate guidelines and policies and aligned with ISO 45001 standards. The system encompasses all the activities carried out by Neoenergia Elektro 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, such as working with energized equipment and live lines, working at heights and electrical safety. Overall OHS performance is very good with no fatalities or serious incidents recorded in the past few years.

Neoenergia Elektro follows Brazilian OHS and technical regulatory standards (known as “Brazilian NR”), but also implements a series of actions, programs and activities that go beyond legal compliance and foster a strong safety culture and a continuous evolution, improvements, and maturity of its OHS management system. Examples of these are: (i) 360 safety program with quarterly audits to all the bases of operations (UTDs) within the concession; (ii) ‘CIPA’ efficacy program, where all the internal company H&S committees participate to discuss and review OHS risks and management procedures; (iii) Safety video recordings of all the work fronts and activities to asses compliance and promote behavioral safety; (iv) induction of newly hired employees from own teams and third parties and specialized training programs of the workforce in OHS practices and procedures; (vi) regular updates to the accidents and incidents investigation process, enabling new failure analysis methods to identify systemic root cause; (vii) safety inspections and procedures with visible participation of supervisors and managers, operational inspectors, technicians and occupational safety engineers.

With regards to occupational health, Neoenergia Elektro has a Medical Control and Occupational Health Program (‘PCMSO’ as per its Portuguese acronym) aligned with Regulatory Standard No. 7 (NR7). The PCMSO is based on identified hazards and factors of risk in the work environment and integrates a set of initiatives to promote the health and wellbeing of workers. With regards to COVID19, the Company has implemented controls and monitoring processes to address risks and exposure to COVID in line with government regulations and good international practices. Although the severity of the pandemic has significantly decreased over the last year, the Company monitors the situation in close coordination with Brazilian health authorities.                                                  

 Resource Efficiency and Greenhouse Gas (GHG)

Neoenergia Elektro, as part of the Neoenergia, follows the group’s climate change policy which is aimed at promoting a culture of awareness with regards to the threat of global warming and at identifying actions in the areas of mitigation and adaptation, resources efficiency and Greenhouse Gas (GHG) estimation and reduction. Neoenergia has a company-wide commitment to gradually reduce the intensity of GHG to 20 grams of CO2 per kWh by 2030, towards its commitment to achieve climate neutrality before 2040. Neoenergia Elektro is implementing a program to gradually replace the Company fleet of vehicles and service trucks with an electric fleet and is carrying out pilot programs in Limeira and Mairiporã (Sao Paulo State) to test electric service trucks fully equipped to perform electrical maintenance activities in close coordination with the manufacturer. The Company is aiming at replacing up to 50% of the light vehicles with electric cars prior to 2030.

The Company estimates Scope 1, 2 & 3 of GHG emissions and discloses the obtained results in the annual Greenhouse Gases inventory, which exposes the emissions from all activities for CO2, SF6, CH4, and N2O.  The annual GHG report is prepared in line with the requirements established in the NBR-ISO 14064-1:2012 Standard: “GHG effect. Part 1: Specification and guidance to organizations for quantification and reporting of emissions and GHG reductions”, and in the guidelines of the Brazilian GHG Protocol Program.

The 2021 report indicates that Neoenergia Elektro produced 16,297 tCO2e for Scope 1, which includes fugitive emissions of SF6 and other refrigerant gases, emissions from the fleet of vehicles, and GHG resulting from changes in the use of soil because of the vegetation clearance and pruning, 120,693 tCO2e for Scope 2, which includes energy consumption and losses in the transmission and distribution grid, and 418,886 tCO2e for Scope 3, which encompasses emissions that are not produced by the Company itself, but by those that it's indirectly responsible for, up and down its value chain, like purchased goods and services, transportation and business & operational trips. The 2022 report is under preparation and will be publicly disclosed in Neoenergia’s webpage as soon as it becomes available.

To further enhance the GHG management, the Company will develop as part of ESAP item #8 an “SF6 Management Plan” to provide framework guidance on SF6 management, monitoring and reporting according to industry best practices to prevent and minimize risks and impacts.

Water & Wastewater Management

According to the information provided by the Company, the main source of water supply is from the potable water municipal grid. The Company tracks and reports water consumption figures in the annual sustainability report. According to the 2021 report, the potable water consumption reached 8,487 liters per employee. All the effluents and liquid discharges from the Company storage and distribution centers, workshops, office buildings and facilities are discharged to the local sewers operated by the local sewage company.

Pollution Prevention and Control

Pollution prevention is fully embedded within the Company’s environmental management system. Neoenergia Elektro 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. There is a culture of pollution prevention, and in all the areas and work fronts that were inspected during the appraisal the implementation of environmental mitigations is evident, with good housekeeping, adequate segregation of residues and with the required pollution prevention measures commensurate to the nature of the activity and the corresponding risks and impacts.

Solid Waste Management

Neoenergia Elektro has a solid waste management program (“PGRS” for its Brazilian acronym) aligned with the waste management hierarchy, good industry practices and Brazilian regulations. Waste is segregated at source, collected and classified in hazardous, non-hazardous, recyclable and non-recyclable waste streams, temporarily stored in dedicated storage facilities, and disposed-of following local regulations and procedures. The PGRS establishes roles and responsibilities, waste management practices, and cradle-to-grave recording, monitoring and reporting requirements. All the waste management process is documented in manifests, logbooks and waste management databases which are kept up to date and are regularly monitored and audited. Contractor environmental requirements include provisions they need to follow to comply with the Company’s waste management program.

Hazardous Materials & Waste Oil

Hazardous materials and chemicals (e.g., solvents, paints, cleaning agents, oils) are handled through Neoenergia Elektro’s hazardous materials procedures and management plans. These define OHS and environmental provisions for the safe transportation, handling, storage and use of hazardous materials, including emergency response.  Compliance with the provisions of these plans is verified through Neoenergia Elektro’s assurance process, and if any deviation is observed, corrective actions are defined and monitored to completion.

Polychlorinated biphenyls (PCBs) are typically present in oil-cooled electrical equipment such as transformers or condensers. The use of PCBs in new electrical equipment is prohibited in Brazil and PCBs are regulated to ensure that power distribution companies develop a detailed inventory program for identifying PCB levels in transformer oils to ensure the protection of the environment and human health. In accordance with this regulation, PCB containing materials and equipment should be out of operation until 2025, and after that they need to be disposed until 2028, in line with the Stockholm convention. Neoenergia Elektro has an inventory of transformers and voltage regulators containing PCBs in the distribution network. The Company has a contract with specialized companies for the management, disposal and reclassification of PCB containing equipment. The reclassification takes place according to Brazilian environmental standards and the grid removed equipment is managed and disposed of in an environmentally appropriate manner by a licensed contractor.

Any equipment removed from the electrical grid goes through a screening process, where technical analyses are performed and if contamination is identified the equipment goes through the process of decontamination or removal in line with environmental standards and regulations. These activities are carried out by specialized contractors that are duly licensed by Brazilian environmental agencies.

To further align Neoenergia Elektro’s environmental practices to IFC’s General EHS Guidelines and the Guidelines for Electric Power Transmission and Distribution, the Company will undertake as part of ESAP item #9 a Technical Review of all facilities storing grid removed transformers and develop an improvement plan in those areas or facilities where gaps with these standards are identified.                             

 Neoenergia Elektro has programs to educate communities about the hazards associated with accidental contact and manipulating electrical equipment. The Company provides instructive information to communities in presentations at schools at home and other venues, via brochures, posters, the internet, radio, television and through influencers on social media. Issues addressed include safe use of electricity at home, staying away from damaged transmission and distribution cables, avoiding illegal access into the Company’s lines, warning children about the dangers of playing near lines, and other safety precautions around electric installations. The “Lives Saved” program encourages all employees to identify unsafe acts related to manipulation or use of electric devices being conducted by community members and provide advice to stay safe.  

All Company employees that operate vehicles are trained on defensive driving and conduct vehicle inspections prior to starting a journey.  Neoenergia Elektro favour recruitment and hiring of local employees in each of the five regions where it operates in the State of Sao Paulo to reducing the transportation requirements, and the need for migrant workers. 

Security Personnel

The Company’s facilities such as substations and operation bases are fenced and monitored through a CCTV system which is monitored from a central monitoring center.  Operations’ employees such as electricians and other field personnel are equipped with telecommunications devices with capacity to track their location and report emergencies. Procedures are in place to report and act on different level of security risk situations, including protocols to engage public security forces if necessary.  In addition, Neoenergia Elektro uses a government sanctioned security contractor to provide protective services within its facilities.  In total, 69 guards are distributed through its operations, of which 28 are armed.  Armed security guards are stationed at the headquarters, construction sites and main operation facilities during the night shift only.  All guards receive training on Human Rights, use of force, the Code of Ethics, and Company specific security operations.  The Company conducts regular Security Risk Assessment to identify the risks posed to its facilities and operations and risks to the community from its security arrangements. Based on the assessment, the Company develops and updates Security Management Plans for each of its facilities and operations. The company monitors risks to human rights in its organization, operations, and the context where it operates, including those related to working conditions, environmental impacts, property rights, indigenous peoples’ rights, use of force and abuse by security forces, among others.  The grievance mechanism, available through email, telephone, and internet applications includes procedures to investigate and address grievances related to human rights abuse.                    

Throughout the state of Sao Paulo there are indigenous and quilombola communities that are served and affected by Neoenergia Elektro. The Brazilian legislation recognizes Indigenous Peoples (IPs), determines the rights and obligations of these groups and has requirements to address potential impacts and implement mitigation measures. When IPs are affected, Neoenergia Elektro engages with the National Foundation of Indigenous Peoples (Fundação Nacional do Indio – FUNAI), the federal entity responsible for the establishment and implementation of policies related to IPs and the entity responsible for defining, in consultation with IP communities, the mitigation and compensation measures to be implemented when power projects are developed within or near their territories.

The rights of the quilombola communities are also recognized in the Brazilian constitution and are managed by the Palmares Cultural Foundation (Fundação Cultural Palmares).  When quilombos may be affected by a project, a study specifically focused on the potential social and environmental impacts on quilombola communities is required to be conducted as part of the environmental licensing process.

As part of ESAP item #10, Neoenergia Elektro will develop an Indigenous Peoples Framework applicable when indigenous and quilombola communities are affected by any Neoenergia Elektro’s operations, to ensure principles aligned with PS7 are fully implemented. The framework will include clear principles and guidance to (i) identify IP and quilombola 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 and quilombola communities.                                                   

 Neoenergia has a corporate Stakeholder Relations Policy that outlines the basic principles for identification and engagement of stakeholder. The Stakeholder Engagement Model further details guidelines to develop engagement procedures considering the nature and uniqueness of each region and favoring the segmentation and prioritization of stakeholder groups based on impacts and their ability to influence the Company.  The model defines process to identify and map stakeholders that are grouped and prioritized based on their level of influence in Elektro’s operations and how those operations impact them.  The stakeholder mapping exercise is then used to establish the level of interaction required with each group and the most appropriate channels, frequency and methods to inform and consult them.  This is organized in annual stakeholder engagement action plan.

Neoenergia Elektro engages directly with a network of community leaders throughout their area of operations and makes use of a wide variety of tools and means to communicate and engage with its stakeholders on regular basis, including the corporate web page, social media, telephone, email, and community meetings.  For the development of new projects, prior to initiation of an investment, Neoenergia Elektro representatives conduct informative meetings on-site to inform and consult on land requirements and environmental and social impacts.  Meetings are held in public spaces with easy access and are supported through brochures, posters and the official website.

Neoenergia Elektro also engages with communities through the implementation of social investment projects aligned with its business objectives.  In addition to supporting and promoting the use of electricity subsidies provided by the Brazilian government for low-income families and participating in the government-led energy efficiency program, Neoenergia Elektro invests in social development by providing food, water and clothing to families affected by natural disasters in their area of influence, and with the donation of 25,000 trees for the regeneration of forests, in an effort to improve ecosystem services for local populations.

As indicated in ESAP item #1, as part of its E&S management system, Neoenergia Elektro will establish clear procedures to consult with potentially affected communities and relevant stakeholders to identify and address their concerns.  Community concerns will be considered for project design and in the development of mitigation measures. When IPs or quilombola communities are potentially affected by Neoenergia Elektro’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 external communications mechanism to receive and address inquiries, requests and complaints from clients and the community in general. Inquiries, requests and complaints are collected through telephone, the corporate website, WhatsApp or in person in the Neoenergia Elektro customer attention centers distributed in the 5 operation regions in the state. The procedure establishes that queries must be responded within 10 days.  In addition, Neoenergia Elektro has a formal and robust grievance tool through which complaints are registered, categorized, and responded. In 2022, the grievances were responded in an average of 20 days. Grievances are reported to management monthly and analysed by the Performance Department to identify trends, adjust procedures accordingly and reduce recurrence.                                                    

  Contact Person: Fabiana Nakazono

Company Name: Neoenergia Elektro

Address: Ary Antenor de Souza, 321 –Jd Nova América – Campinas –SP

Email: fabiana.nakazono@neoenergia.com; projetosfinanceiros@neoenergia.com

Phone: + 55 (19) 2122-1735