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.
Project Basic Information
Country
Latin America Region Region
Latin America and the Caribbean and Europe
Project Number
48697 Project Legal Name
Habi VentureDebt
Client Legal Name
MCN Investments, Ltd. Project Business Sector
D-CC - Housing - Services [Project only]
Owning Department/Division
CDFDT - Disruptive Technologies and Funds/Disruptive Technologies Environment Category
B - Limited
Project Description
Founded in 2019 in Colombia, Habi is a leading PropTech platform in Latin America. Habi is building the digital infrastructure to support an efficient residential real estate market in Latin America. Habi's market revolutionizing products provide home pricing, unparalleled access to liquidity and improved transaction capabilities to low and middle-class families.
Habi's Market Maker platform purchases, rehabs, and resells (flips) residential homes in Colombia & Mexico in the low and middle income segments. Habi first launched in Colombia in 2019, expanded to Mexico in 2021 and has purchased and resold over 7k homes in the two countries since then. Habi is today present in 15 cities across Mexico and Colombia, including Ciudad de Mexico, Guadalajara Monterrey, Bogotá, Cali, and Medellin, among others. These properties are mainly apartments in existing residential buildings. Properties purchased usually undergo light renovations (painting, changing of electrical fixtures and switches, updating of appliances, and other minor renovation work). Habi relies on a pool of third-party contractors to undertake renovations, usually for 3-7 days on each property, leaving them ready to sell to new owners.
Habi's extensive proprietary database, AI-based pricing algorithms and streamlined, tech-enabled operations have positioned it at the center of the real estate ecosystem providing information and tools that allow market players - brokers, banks, appraisers, insurance companies, policy makers and more - to make faster, more informed decisions and most importantly, that give families freedom and control over their lives and the wealth they store in homes.
IFC is proposing a venture debt loan of up to US$20 MM. Use of proceeds will be used as working capital for its operations.
Overview of IFC's Scope of Review
IFC E&S team visited the corporate offices and selected properties of Habi in Bogotá, Colombia on January 17th, 2024 and in Mexico DF on November 7-8th, 2023. The visits included a review of environmental, social and health and safety (ESHS) documents and information and meetings and presentations with Habi's staff, including: Habi Senior Management, Remodelling Team, Human Resources and Sustainability and interviews with workers and contractors.
Identified Applicable Performance Standards
PS1: Assessment and Management of Environmental and Social Risks and Impacts
PS2: Labor and Working Conditions
PS3: Resource Efficiency and Pollution Prevention
PS4: Community Health, Safety and Security
PS5: Land Acquisition and Involuntary Resettlement
PS6: Biodiversity Conservation and Sustainable Management of Living Natural Resources
PS7: Indigenous Peoples
PS8: Cultural Heritage
Environmental Social Categorization and Rationale
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).
Key environmental and social (E&S) risks and issues include: (i) Effective implementation of IFC PS requirements/ESHS standards; (ii) company's organizational capacity to assess and manage ESHS risks; (iii) labor and working conditions, including grievance mechanism and child labor (iv) contractor ESHS management; (v) occupational health and safety (OHS) management, life and fire safety (LFS) and emergency preparedness and response; (vi) pollution prevention and waste management; (vii) community health and safety; and (viii), company's stakeholder engagement activities related to management of E&S aspects and its grievance mechanism.
Environmental and Social Mitigation Measures
PS1: Assessment and Management of Environmental and Social Risks and Impacts
Habi has an Environmental, Social, Health, and Occupational Safety Policy in which the company declares its commitments to comply with applicable laws and regulations, to sustainable development by aligning their ESHS strategies with responsible investment principles and incorporating best practices of sustainable management in all their activities. Additionally, the Code of Ethics dictates and regulates their commitment to the community and the environment.
For Habi operations, environmental & social impact assessment are not required legally, as the company undertakes its remodelling activities in properties within existing buildings. Habi has developed an implementation manual for its integrated ESMS (Manual de Implementación del ESHS), that lays out the footprint of all elements (e.g., roles and responsibilities, training, and capacity, legal register). The manual contains the management programs developed so far, namely for: solid waste management, accident investigations, road, safety, among others).
The company is on the early stage ESMS implementation, under the leadership of the head of compliance, tasked with ESMS development and implementation, with one compliance officer in charge of day-to-day activities overseeing both countries, with plans to have two coordinators, one for environment and one for OHS coordinator, in each country. Additionally, each remodelling team will have an ESHS coordinator, tasked with ESMS implementation of contractor-facing activities. As part of the ESAP #1, Habi will incorporate additional E&S capacity with adequate qualifications and experience, to continue driving the operationalization of the ESMS, including support for ESMS improvements. As part of the ESMS implementation (ESAP # 2), Habi will develop its ESMS in line with PS1 requirements, including (i) identification of risks and impacts; (ii)organizational capacity and competency; (iii) E&S objectives and key performance indicators (KPIs), (iv) training plan; (v) emergency preparedness and response; (vi) stakeholder engagement and community grievance mechanism; (vii) periodic monitoring and review.
An E&S risk assessments for company activities was developed and incorporated into management programs. The remodelling team, in tandem with the OHS coordinator, are in charge contractor activities are undertaken in line with Habi's ESHS policy. An Emergency Response Plan (ERP) and Risk Management is in place for each country. The Plan provides and assessment for potential risks situations faced and lays out responses for each. There are emergency brigades and fire detection system and response at all Habi offices. As part of the ESAP #3, the ERP will be enhanced to ensure it is periodically updated, that emergency brigades are periodically trained, and that emergency drills are performed regularly for adequate response. Moreover, it will include emergency response to workplace accidents during remodelling activities and road transit.
Habi's inherent activities (office operations and light remodelling of properties) are expected to have limited potential impacts to nearby communities. Habi developed and external grievance mechanism, originally to channel customer communications but has been enhanced to adequately receive and respond to external communications from people affected by Habi activities.
PS2: Labor and Working Conditions
Habi has Human resource Policy in place that establishes company commitments across a variety of labor related in line with local regulations. Some of the commitments include recognition employees' right to join unions, gender equality, no discrimination and equal opportunity, fair compensation, among others. Overall, the policy is largely in line with PS2 requirements.
In addition to the HR Policy, Habi developed a diversity and inclusion Policy (“Política de diversidad e inclusion”) and a manual to prevent and respond to sexual harassment (“Reglamento de Prevención y Sanción del Acoso Sexual Laboral”). These documents lay out Habi's commitment to a diverse workplace free of sexual harassment, violence, discrimination. It also clearly defines what instance constitute sexual harassment, describes efforts to provide training to employees on the topic and to provide adequate skills to the teams in charge of addressing cases reported. A procedure to provide medical and psychological attention measures to affected employees is also in place. The company has an internal grievance mechanism where employees can submit anonymous communications, confidentially, including instances of sexual harassment and discrimination.
The HR policy forbids any form of forced labor and ensures that employees under the age of 18 do not undertake any hazardous activities at Habi office activities. Moreover, contractors are strictly forbidden to hire minors, subject to contract termination, verified through employment records. Nevertheless, the policy will be updated to state that contractors will not employ workers under the age of 18 and establish measures to monitor compliance (ESAP #5).
Habi employs 699 employees in Colombia and 756 employees in Mexico, of which 623 are women. Additionally, there are approximately 65 contractors, who regularly undertake remodelling of properties, on demand. The key OHS risks are expected to relate to vehicle transportation and contractor's remodeling activities. The company's lost time injury frequency rate (LTIFR, number of lost time day injuries per million worked hour) for 2023 was 4.14 accidents per million man-hours worked, which is below the reference for the construction sector (7.5, www.bls.gov). Habi developed a procedure to identify and evaluate workplace risks, including a strategic plan for road safety (Plan Estratégico de Seguridad Vial). Nevertheless, Habi will update its ESMS so that adequate preventive and protective measures for workers (including contractors) are in place, and will develop mechanisms to ensure that they are trained, that monitoring of OHS conditions during remodelling activities takes place, and that accidents are adequately documented and reported (ESAP #6).
Contractors are given contracts on a rolling basis, moving from property to property every 3-7 days. Habi makes efforts to train and maintain contractors, for an efficient remodelling process. The remodelling team is responsible for these operations and, included on the ESAP #6, will enhance contractors procurement, on-boarding and monitoring procedures to ensure OHS risks are adequately managed, including: , Habi's ESMS and roles and responsibilities for contractors, among others.
PS3: Resource Efficiency and Pollution Prevention
The main sources of emissions include use of electricity at Habi's offices and during remodelling activities and vehicle transportation. Considering Habi's activities are mostly office-based and the limited extent of remodelling, GHG emissions are expected to be well below 25,000 Ton Co2 eq, and will be calculated and monitored as part of Habi's on-going sustainability strategy.
The company has documented a waste management plan (“Plan de Gestión de Residuos Sólidos”) and in the process of being implemented. It outlines general responsibilities and processes for waste disposal. Main hazardous materials used by Habi for its operations includes paint and solvents; due to light remodelling activities. As outlined under ESAP #6 Habi will ensure contractors adhere and implement Habi's waste management measures.
PS-4 Community Health, Safety and Security Personnel
Habi activities is expected to have potentially limited impact on nearby communities during vehicle transportation and remodelling activities. These risks are expected to be mitigated through adequate implementation of contractor management procedures related to waste disposal, road safety management plan and through the external grievance mechanism. Additionally, Habi does not employ security contractors. As Habi target properties are on existing buildings, the company will include on its property assessment checklist a verification of building's life and fire safety and structural integrity permits before entering into a transaction (ESAP #6
