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 Management System (ESMS): Neolpharma has implemented a corporate ESMS, detailed in an ESMS Manual, which includes an E&S policy, as well as standardized operational procedures (PNOs in Spanish) covering key E&S topics such as risk assessment, pollution prevention, emergency response, hazardous work permits, audits, labor conditions, and non-discrimination. Each plant implements the PNOs in a site-specific manner. Once the construction of the CMO Plant and the refurbishment/reactivation of the API Plant are concluded, the PNOs will be adapted to the operations of each plant. Overall, the Company’s ESMS is considered aligned with IFC PS1.
Identification of Risks and Impacts: For the CMO plant, an Environmental Impact Assessment (MIA) was prepared by a specialized consulting firm in accordance with local legislation. Prior to the acquisition of the API Plant, Neolpharma conducted an E&S due diligence exercise that identified soil contamination, (which has since been remediated). A MIA is also in place for the API Plant, but it remains under the name of the previous operator and is in the process of being transferred into Neolpharma’s name. Both MIAs are approved by the relevant authorities and disclosed together with this ESRS. The assessments consider E&S risks and impacts related to each plants construction and operations, and include the identification of emergency scenarios, requiring the development of an emergency preparedness and response plan (EPRP). Both MIAs include a suite of E&S management plans to be developed for construction and operations, which mostly align with IFC PS, (identified gaps are addressed by ESAPs # 5, 6 and 9).
For the general technological upgrades at Neolpharma’s existing plants, as per ESAP #1, the Company will develop and implement an E&S Screening Procedure to identify, assess, and manage potential risks and impacts. Management measures will be aligned with the requirements of the IFC PS, World Bank Group (WBG) Environmental, Health, and Safety (EHS) Guidelines for Pharmaceuticals and Biotechnology Manufacturing (2007), and WBG General EHS Guidelines (2007), (“relevant WBG EHS Guidelines”).
Organizational Capacity and Competency: E&S oversight is provided by a corporate Sustainability Committee, which meets monthly with senior management and the board, and publishes an annual Sustainability Report (https://tinyurl.com/y3pwz5tr). Each plant has a dedicated EHS team, reporting locally to the Plant Manager and to the corporate EHS Manager. EHS training is provided across all sites. The construction of the CMO Plant is being supervised by EHS teams from the Company and the construction contractor. In line with ESAP #2, Neolpharma will designate a qualified EHS team for each of the two plants (with knowledge of the national regulatory requirements and applicable requirements of IFC PS), responsible for the site-specific development, implementation and maintenance of the ESMS and related E&S programs, plans and procedures.
Emergency Preparedness and Response: Neolpharma has developed corporate EPRPs aligned with national regulations and the IFC PSs and supported by trained emergency brigades. These include training and drills for fire, earthquakes, spills, personal accidents, and first aid. At the CMO plant, an EPRP is in place for the construction site. As per ESAP #3, Neolpharma will establish an EPRP for the API Plant and will update the EPRP for the CMO Plant to reflect the operational phase. The EPRPs will inform the design and implementation of safety systems, including fire detection and suppression systems, and emergency shutdown mechanisms. The EPRP plans will also establish specific measures to identify, assess, and manage explosion risks, as relevant.
Monitoring and Review: Neolpharma’s plants regularly monitor compliance with E&S permit conditions and the implementation of their ESMS, through internal and external audits, annual reviews, and IFC site visits. Facilities are also subject to periodic audits by third-party certification bodies. The same monitoring and review structure is planned to be implemented for the CMO Plant and the API Plant.
PS2: Labor and Working Conditions
As of 2025, Neolpharma employs approximately 2,300 people, with women representing 45% of the workforce. Construction of the CMO Plant is managed by a single contractor with 336 workers under standard 8-hour shifts, in line with local labor laws. Once operational, the CMO Plant and the API Plant are expected to employ approximately 200 and 300 workers, respectively. Labor-related matters are managed by the corporate HR department.
HR Policies and Procedures: Neolpharma has established corporate-level HR policies covering key aspects of employment, including working conditions, recruitment, performance evaluation, promotion, disciplinary procedures, and training. New employees receive a copy of their contract and onboarding includes training on the Code of Conduct and access to relevant HR policies. These policies are implemented across all facilities. Employment terms are transparent and include roles, responsibilities, and disciplinary procedures. Compensation practices comply with local labor laws, including wage levels and overtime. Sales staff receive a mix of fixed salary and commission, with guaranteed minimum income. Neolpharma maintains two collective bargaining agreements with national unions, ensuring structured labor dialogue. The company prohibits child and forced labor and has formal policies aligned with international labor standards to regulate the employment of young workers. Currently, no retrenchment is anticipated, but as part of ESAP item #4, Neolpharma will develop and implement a Retrenchment Policy aligned with IFC PS2 requirements.
Workers Engaged by Third Parties: At operating sites, contractors are generally limited to non-core services such as catering, housekeeping, minor renovations, and external security. The contractor responsible for the construction of the CMO Plant has HR and OHS management systems in place, but to manage construction contractors systematically, Neolpharma will, as per ESAP #5, develop and implement a Contractor E&S Management Procedure consistent with the IFC PS, and relevant WBG EHS Guidelines. This procedure will include E&S screening for contractor selection, establishing minimum E&S management measures (including labor and working conditions) and reporting requirements (including KPIs), and defining roles and responsibilities at Neolpharma to oversee performance. These E&S requirements will be included in the contractors' contracts, and training sessions for third party employees will be conducted to ensure compliance. The procedure will be applicable to the CMO Plant and the New API plant, and updates to existing contracts will be carried out as relevant.
Workers Grievance Mechanism: Neolpharma has implemented a formal grievance mechanism available to employees and workers engaged by third parties. Managed by a dedicated internal unit, the system ensures confidentiality, non-retaliation, and accessibility through physical and digital channels. It allows anonymous submissions, classifies complaints by severity, and applies investigation timelines and sanctions accordingly. The process includes structured documentation, executive-level approval, and corrective and preventive actions. In addition, the grievance mechanism addresses sexual harassment complaints and is based on a survivor-centered approach, prioritizing the rights, needs and wishes of the survivor.
OHS: Neolpharma has established OHS management systems aligned with Mexican regulations and IFC PSs. These include workplace risk prevention programs, OHS controls, and accident prevention committees. Key OHS risks have been identified, with corresponding procedures and monitoring in place. Employees receive periodic medical exams based on exposure, and appropriate controls and personal protective equipment are provided. A centralized system is used to report, investigate, and track incidents. As part of ESAP #6 and ESAP #7 Neolpharma will develop site-specific OHS management plans for both plants prior the start of refurbishment and reactivation activities at the API plant, and prior to operations at the CMO Plant, consistent with the requirements of the IFC PS and relevant WBG EHS Guidelines.
PS3: Resource Efficiency and Pollution Prevention
Resource Efficiency: While API manufacturing is resource-intensive, particularly in energy and water use for synthesis, distillation, and cleaning, the Company will implement an Energy and Water Efficiency Plan (EWEP) for the API Plant (ESAP#6), including process optimization, high-efficiency equipment, and recovery systems. Similarly, for the CMO Plant, which will have moderate but continuous resource demands, a EWEP will be implemented as per ESAP#7 to monitor sources and apply efficient technologies. Both plants will track energy and water consumption and benchmark performance in line with the relevant WBG EHS Guidelines. Neolpharma quantifies greenhouse gases (GHG) Scope 1 and 2 emissions, which are published in the annual Sustainability Report. Once the two new plants are operational, the Company in all their plants, will generate an estimated 31,600 metric tons of carbon dioxide equivalent, per year. In compliance with the IFC PSs, the client will continue to quantify direct and indirect emissions annually and in accordance with internationally recognized methodologies and good practice.
Wastewater: Wastewater from the API plant and the CMO plant is expected to contain complex pharmaceutical compounds and elevated levels of chemical oxygen demand, biochemical oxygen demand, nitrogen, suspended solids, and other pollutants. Wastewater from the API Plant will be directed to the industrial park’s wastewater treatment system and treated water will be discharged to the local surface drainage network, connected to the Puente Blanco River. The CMO Plant will have its own wastewater treatment system, and treated water will be released into the local drainage network. As per ESAP #5 and ESAP #7, Neolpharma will develop and implement a Wastewater Management Plan for each plant, detailing treatment processes, operational controls, and monitoring protocols. In addition, in line with ESAP #8, Neolpharma will demonstrate whether the wastewater discharges will comply with the effluent limits established in Table 2 of the WBG EHS Guidelines for Pharmaceuticals. If the discharges will not meet these standards, Neolpharma will implement the necessary corrective measures, including, as applicable, the installation of wastewater pre-treatment systems that apply good international industry practice (GIIP).
Air emissions: Air emissions from the API plant may include pollutants associated with the use of volatile organic solvents, hazardous chemicals, boilers, and thermal processes. To mitigate potential impacts, Neolpharma will apply GIIP, including the installation of filters, scrubbers, activated carbon systems, safe recirculation systems, and good operational practices for boiler use. All management and monitoring measures will be documented in an Air Emissions Management Plan (AEMP) for the API Plant, as required under ESAP #6. Air emissions from the CMO Plant are expected to be less significant due to the nature of its operations, but a tailored AEMP will also be developed for this facility in line with ESAP #7. The AEMPs will ensure compliance with the air emission thresholds specified in Table 1 of the WBG EHS Guidelines for Pharmaceuticals, and as applicable, Table 1.1.2 of the WBG EHS Guidelines.
Wastes: Neolpharma will implement Solid and Liquid Waste Management Plans for both the API Plant and the CMO Plant, as per ESAP #6 and ESAP #7. These plans will outline procedures for the safe handling, segregation, storage, and disposal of hazardous and non-hazardous waste, consistent with local regulations, the IFC PS and the relevant WBG EHS Guidelines. All waste will be managed through authorized providers and disposed of at licensed facilities.
Hazardous Materials: Neolpharma will implement Hazardous Materials Management Plans for both the API Plant and the CMO Plant, as required under ESAP #6 and ESAP #7. These plans will address the safe handling, storage, and disposal of flammable, reactive, toxic, and biologically active substances, consistent with local regulations, the IFC PS and the relevant WBG EHS Guidelines. For the CMO Plant, GIIP controls will be established to manage the specific risks associated with cytotoxic compounds. Emergency spill, fire and explosion response protocols will be clearly defined and integrated into the site-specific EPRPs described under ESAP #3.
PS4: Community Health, Safety and Security
Community Health and Safety: During the construction, refurbishment and reactivation phases, activities follow a Construction Management Plan that includes community health and safety measures. To align with the IFC PS and relevant WBG EHS Guidelines, as per ESAP #5, the Contractor E&S Management Procedure will incorporate community health and safety practices, including a Transportation Safety Plan. These measures will address potential risks such as increased traffic, hazardous material handling, and emergency events. During operations, Neolpharma will maintain communication protocols with local authorities and neighbors as per ESAP #9, and coordinate EPRPs with municipal services as per ESAP#3.
Security Personnel: Neolpharma manages its security through a subcontracted firm and the Mexican Federal Police for Banks and Industries (PBI). The subcontracted firm provides unarmed personnel, while PBI officers, authorized to carry firearms, handle perimeter patrols, access control, and intelligence support. Both entities undergo regular audits by Neolpharma, local, and federal authorities. Aligned with IFC PS4, Neolpharma has implemented a comprehensive security management framework across all its sites. This framework includes a detailed manual outlining the roles, responsibilities, and expected conduct for security personnel.
