IFC’s appraisal considered the environmental and social management planning process and documentation for the Project and gaps, if any, between these and IFC’s requirements. Where necessary, corrective measures, intended to close these gaps within a reasonable period of time, are summarized in the paragraphs that follow and (if applicable) in an agreed Environmental and Social Action Plan (ESAP). Through implementation of these measures, the Project is expected to be designed and operated in accordance with Performance Standards objectives.
PS1: Assessment and Management of Environmental and Social Risks and Impacts
Environmental and Social (E&S) Policy: OMG has adopted group specific EHS policies, which will be cascaded down and augmented to establish an overarching LHI EHS policy. LHI will develop an E&S Policy, a Human Resources (HR) Policy (covering aspects such as fair and safe labor working conditions, gender-based violence, sexual harassment, child/forced labor), and a Security Policy. LHI’s policies will be communicated to all levels of the organization (ESAP #1).
Environmental and Social Management System: The Company has established some elements of an environmental and social management system (ESMS). The ESMS consists of OMG Code of Ethics; Whistleblowing Policy; LHI Employee Handbook (covering ethics and conduct); Emergency Preparedness and Response Plans (including adequate L&FS protocols and measures implemented throughout and emergency drills conducted regularly); OHS risk management procedures; energy efficiency programs; waste management; wastewater and air emissions monitoring; monitoring of energy, water consumption and waste generated; among others. However, the established ESMS is only generally aligned with the requirements of PSs and partially commensurate with the scale and E&S impacts of its operations. Consequently, LHI will augment its corporate level ESMS in line with the requirements of the PSs and applicable national legal requirements (ESAP #1).
Identification of E&S Risks and Impacts and E&S Impact Assessment: LHI identifies the E&S risks and impacts associated with its operations through compliance with applicable legislation and regulatory permits and requirements. The statutory procedures for Environmental Impact Assessment (EIA) and obtaining a Building Permit are followed for all new assets. In addition, LHI identifies potential E&S risks and impacts through pre-acquisition Legal and Technical Due Diligence (TDD), conducted by qualified third-party consultants, as part of the process to ensure EHS and legal compliance. This includes E&S considerations, such as analysis of planning documentation, historical soils and groundwater contamination, archaeological history, among others. In relation to the new logistics developments, LHI will approach the Authorities in due time (after acquiring the land for logistics hubs) to confirm whether the proposed projects trigger the EIA regulatory procedure. If so, LHI will prepare an EIA study and follow this procedure (ESAP #8). Therefore, as part of the updated corporate level ESMS, LHI will develop procedure for identification of E&S risks and impacts, in line with the requirements of PSs and applicable national legislation (ESAP #1).
Management programs: As part of its ESMS, LHI will develop and implement management plans, programs, and associated procedures to adequately mitigate and manage the E&S risks and impacts associated with the Company’s operations (ESAP #1). In particular, LHI will require from contractors involved in construction of new assets to develop and implement a Construction Environmental and Social Management Plan (C-ESMP) (ESAP #2).
E&S Organizational Capacity and Competency: LHI established an organizational structure with E&S roles and responsibilities allocated to the Property Managers, who report to the Managing Director. In turn, the Property Managers have delegated functions to the Technical Managers responsible for the respective office assets. There is no dedicated ESG Manager. LHI outsources most EHS tasks (including all emergency- related and OHS- related matters, waste management, wastewater sampling and analysis, air emissions monitoring) to licensed contractors/ service providers. Hence, as per ESAP #3, LHI will appoint a suitably qualified and experienced EHS manager or officer at the corporate level, with demonstrated experience with the IFC-PSs. LHI will also develop and implement an E&S training program for staff to ensure they are aware of their E&S-related roles and responsibilities and are trained to perform them (ESAP #1).
Emergency Preparedness and Response: LHI has Emergency Preparedness and Response Plans for all assets, accounting for various emergency scenarios and communicated to all tenants. Evacuation Plans are seen throughout the buildings, identifying assembly points and evacuation routes. These plans have been produced by specialized and certified companies and approved by local government agencies. LHI office buildings have Fire Department approval (and/ or Fire Permits) and are fire safety compliant, with smoke detectors, fire alarm systems, a centralized dispatched room and fire extinguishing systems. LHI conducts regular checks and maintenance on its LFS systems, including four annual checks on the fire detection system and monthly checks on the fire extinguishing system (conducted by a Fire Consultant). Certification of the LFS systems is done by the national authorities, through their local offices. All systems were executed accordingly to the design specifications and permits. LHI conducts regular emergency drills, in compliance with the national legislation, including evacuation drill of the whole buildings. Further, contracted fire and security consultant prepares and monitors fire evacuation drills, measuring response and evacuation time, in the presence of the local Fire Department. Reports are issued after each drill, highlighting nonconformities, and providing recommendations, promptly addressed by the technical supplier. The Fire Consultant provides emergency training twice a year to the emergency team (technical maintenance, security team and tenant emergency coordinators).
Monitoring and Review: LHI conducts regular monitoring activities required by the national legislation but as part of the updated ESMS will develop a formal monitoring and reporting procedure, including procedures to oversee construction contractors during the construction of the two logistics assets funded under the project. (ESAP#1).
PS2: Labor and Working Conditions
Human Resources Policies and Procedures, Working Conditions and Terms of Employment: LHI currently has 29 direct workers (16 female – 55%), and 3 contracted workers. LHI apply the OMG Human Resources (HR) Policies, and have a Whistleblowing Policy and an Employee Handbook, covering general labor issues, such as minimum wage, holidays, working hours in line with the respective national legislation. However, HR policies do not cover issues such as Sexual Exploitation and Abuse (SEA)/ Sexual Harassment (SH), and child and forced labor. The workers’ employment agreements also contain information about their rights in relation to hours of work, wages, overtime, compensation, and benefits. As per ESAP #4, LHI will augment HR policies and procedures consistently with the requirement of PS2, and update and adopt a Code of Conduct/ Ethics. The Code of Conduct will be regularly reviewed and updated to ensure it remains relevant and effective.
Freedom of Association (Workers’ Organization): In line with HR policies and procedures, LHI allows workers to form and join workers organizations, without retaliation or discrimination.
Worker Grievance Redress Mechanism: LHI employees (including contractor’s) are encouraged to raise/ escalate any concerns to their line manager and/or to the CEO, but does not have in place a grievance mechanism for workers (GRM) compliant with PS2. As per ESAP #4, LHI will develop a formal GRM procedure, in alignment with IFC-PS2 requirements, to allow workers to raise workplace concerns, which will be accessible to all Company workers and contractors’ as well as third-parties’ workers. LHI will ensure that all workers are informed of the GRM and how to use it, and that they are protected from retaliation for raising concerns or filing complaints, and of the ability to raise anonymous grievances. Contractors shall also have their own workplace GRMs.
Occupational, Health and Safety (OHS): LHI’s business is entirely office/ desk work, so no specific safety measures or protective equipment are required for day-to-day activities. There is no formal OHS policy at the Company level, only general principles for providing a safe and healthy work environment, addressed in the Employee Handbook. LHI has contracted OHS specialized professional, who acts as OHS Officer, and is responsible for preparing and monitoring implementation of the OHS Policies and procedures, distributing handbooks, performing lighting tests and evaluations of the working environment/ conditions, planning and conducting training, and identifying areas for improvement. LHI’s work-related OHS statistics indicates zero “lost time occupational injuries” and “lost workdays due to injuries” over the past three years. As part of the ESMS, LHI will establish documented procedures to ensure that contractors and third parties have in place appropriate OHS policies and procedures (ESAP #4). In relation to the new logistics developments, LHI will require from contractors to develop and implement, as part of its C-ESMP, an OHS Management Plan (ESAP #2).
Workers Engaged by Third Parties: LHI outsources numerous services to third-party contractors, such as facility management, security, landscaping, cleaning, fit out building works, design, construction supervision, public relations, marketing, and OHS. LHI selects third-party contractors based on standard tender procedures and checks their reputation, experience, and approach to EHS/OHS (e.g., they check whether contractors have ISO 14001 (Environment management) and ISO 45001 (Occupational Health and Safety) certifications). However, the Company does not have a procedure for auditing their contractors for the labor and working conditions and OHS/EHS performance. LHI will develop and implement, as part of the updated ESMS (ESAP #4), a third-party/ contractor management procedure in line with the requirements of PS2 and national labor legislation.
PS3: Resource Efficiency and Pollution Prevention
Greenhouse Gases (GHG) Emissions: LHI implemented energy efficiency measures which led to a significant reduction of asset level energy consumption. LHI currently purchase 100% of its electricity from renewable sources. In relation to the logistics assets, a roof PV system is installed at one of the existing assets, with a total installed power of nearly 1GW. According to LHI’s asset expansion strategy, promoting the generation and use of renewable energy will be considered as part of design of new assets. The project is expected to produce less than 25,000 tons of carbon dioxide (CO2) equivalent per year.
Energy Supply, Use and Efficiency: All Company’s office buildings source electricity from the public grid. There are diesel back-up power generators installed at all assets. Natural gas is used exclusively at Oregon Park in gas-fired boilers for the heating system. LHI has implemented an Energy Efficiency Program at Polygraphia, which achieved savings between 22% and 30% (if accounting for the hybrid work mode). A similar program was implemented at Megapark, with the implementation of a new Building Management System (BMS), along with many other energy-saving measures. At Oregon Park, LHI have implemented modifications to the BMS software and running scenarios, which achieved savings of approximately 30% of natural gas consumption. LHI’s Office buildings have (or are in the process of obtaining) several types of “Green building” certification, such as LEED and BREEAM, which include requirements in terms of energy efficiency. According to LHI’s strategy for future logistics developments, provisions to improve energy efficiency will include integration of smart metering, power saving technology, optimization of HVAC running costs by using thermo-pump technology (when applicable), and use of LED illumination in the interior and exterior.
Water Consumption & Efficiency: Water for domestic use is sourced (at all office assets) from the local municipal water supply systems. LHI implemented measures to improve water use efficiency, including installation of sensors for detecting water leakages and of water/ air mixers in water taps. LHI monitors water consumption monthly. Water for domestic use at the logistics assets is (will be) abstracted from groundwater. On the two new logistics developments, LHI plans to recycle water in all feasible cycles, including the use of rainwater for irrigation of green areas and for the sprinkler tanks.
Pollution Prevention – Wastewater: Only domestic wastewater is generated, which – at all office buildings – is discharged into the municipal sewerage system, in line with the permits obtained from municipal utility company (in Bucharest) and as part of the “Construction Permit” in Sofia. LHI will design, build and operate on-site wastewater treatment plants at the two new logistic assets, so as to ensure compliance with national and WBG EHS guidelines in respect to effluent levels. LHI will also monitor and report on effluent quality, in line with the ESMS environmental monitoring procedure (ESAP # 1).
Pollution Prevention – Air Emissions: Natural gas-fired boilers are used for heating of Oregon Park. LHI monitors air emissions annually and results indicates compliance with national air emissions standards.
Pollution Prevention – Soils and groundwater: As part of the Technical Due Diligence (TDD) for sites for new logistics assets, LHI is commissioning soil and groundwater assessment study to characterize legacy soil and groundwater contamination (if any). If such legacy contamination sources are determined, the TDD study shall identify remedial actions to resolve liabilities in accordance with national law, as per ESAP #5.
Waste management: LHI manage waste in line with legal requirements and, in general, PS requirements. However, the Company lacks documented waste management procedures. As part of the ESMS, LHI will develop and implement a waste management plan and related management procedures, so as ensure full compliance with the requirements of the IFC-PSs (ESAP #6). According to LHI’s strategy for future logistics developments, provisions for waste management will include re-use of materials and waste during construction.
Hazardous Materials Management: LHI uses diesel, freon, and oil as hazardous materials in their assets. Diesel is used for emergency backup generators, and storage conditions are generally adequate. Diesel tanks have double walls, and leakage detection sensors between walls, with an external tank with full capacity in case of leaks. Freon (R410, R407C and R134A) is used in office buildings (in chillers, ground source heat pumps, cooling towers for TI room, and splits). However, the refrigerant gas in use for cold storage at one the existing logistics assets is R449?, which is subject to a reduction plan in the EU under the F-Gas Regulation. As part of the ESMS, LHI will assess alternative options for freon R449?, and present a timebound plan for equipment replacement to ensure compliance with its phase-down (ESAP #7).
PS4: Community Health, Safety and Security
Community Health and Safety: All LHI office buildings obtained approval from the Fire Department, as part of the process for obtaining the Use Permit (and/ or Fire Permits). See Section on Emergency Preparedness and Response under PS1 for all details on the L&FS design measures implemented at all offices. The structural elements/ components will be designed and built by competent professionals, and in strict observance of the regulatory framework in these countries.
Traffic Impacts and Transportation Safety: Even though the two new logistics assets will be associated with the circulation of heavy vehicles on public roads (operated by LHI’s tenants), they are located in existing industrial areas/ logistics parks (away from communities/ urban areas) and adjacent to major arteries/ highways. The project is not expected to induce significant increase in the traffic in such arteries.
Emergency Preparedness and Response: LHI has established and implemented adequate preventive and control LFS measures to eliminate or minimize potential H&S impacts to the affected communities. LHI also have in place Emergency Preparedness and Response Plans (see Section under PS1).
Security Personnel: All Office buildings have security personnel provided by external licensed security providers, holding the required licenses for the performance of security services. Some of the security personnel is armed (only mobile response team) but not permanent on-site security staff. As per the ESAP #1, the LHI will develop a security policy/code of conduct which will provide guidelines on the use of force, as well as processes on background checks of the guards. The policy will be contractually binding for the private security providers and communicated to the security guards as part of the induction and refresher training. The GRM will allow for complaints related to security forces.
