While all Performance Standards are applicable to this investment, IFC’s environmental and social due diligence indicates that the investment will have impacts which must be managed in a manner consistent with the following Performance Standards

PS 1 - Assessment and Management of Environmental and Social Risks and Impacts
PS 2 - Labor and Working Conditions
PS 3 - Resource Efficiency and Pollution Prevention
PS 4 - Community Health, Safety and Security

This is a Category B project according to IFC's Policy on Environment and Social Sustainability (2012). Based on information reviewed by IFC, the Project will have limited adverse E&S impacts that are few, site specific, largely reversible and readily addressed through existing mitigation measures and good international industry practices (GIIP). Key E&S issues associated with the Project include: i) effectiveness of the ESMS to assess and manage E&S risks and impacts from the project as well as those related to management of contractors ii) management of labor and working conditions and occupational health and safety (OHS) policies and practices; iii) effectiveness of the stakeholder engagement process and grievance mechanisms; and iv) community health & safety including potential sexual exploitation, abuse and harassment (SEAH) risks.

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 Assessment and Management Systems
SABESP has established a corporate ESMS based on the ‘plan-do-check-act’ continuous improvement cycle focusing on environmental compliance and promoting positive changes in the corporation’s E&S culture. All the water and wastewater treatment plants in operations adopt the ISO 14001 standard (Environmental Management), which sets out the requirements for an effective ESMS. SABESP's ESMS is commensurate with E&S risks and impacts associated with its operations. Adequate mitigation and performance measures are established to ensure alignment with applicable laws and PS requirements.
As part of SABESP’s corporate ESMS, the Company has procedures for the identification of hazards and risks, for the standardization of E&S management practices, procedures and requirements for water and sanitation subprojects, for E&S management commensurate to the risks and impacts of each subproject, workforce management, equal opportunity, E&S trainings, stakeholder engagement, grievances mechanisms, pollution prevention, management of greenhouse gases (GHG), environmental education, environmental permitting, E&S assurance, and E&S management of contractors. It includes emergency preparedness and response, investigation of accidents and incidents and E&S reporting with leading and lagging key performance indicators (KPI) that are closely monitored and reported to management. E&S management programs at the subproject level are site specific, with clear definitions of roles and responsibilities, management, controls and monitoring actions, indicators and reporting requirements which are reviewed on a regular basis by SABESP, and by the E&S auditing and assurance companies that are hired for selected subprojects (see the ‘monitoring and review’ section below).
There are two key E&S management tools within SABESP’s ESMS that define the E&S requirements for all the water and sanitation subprojects the Company implements. These are the bidding package (established either through ‘Edital’ or Request for Proposals - “RFP”) and the E&S Management Guidance Framework for Projects (‘Plano Orientador de Gestão de Obras’ or ‘PGO’), which define the rules and E&S-specific requirements and expectations to manage E&S risks and impacts, in line with PS requirements. The PGO requires that for each subproject, several project-specific E&S management programs (see Management Program section below) are developed and implemented by Contractors. Under IFC's Project, SABESP will be required to apply the same ESMS procedures, requirements and tools.

Identification of Risk and Impacts
On top of the regulatory environmental licensing process that requires the Company to conduct environmental and social impact assessments for certain projects, SABESP’s ESMS has several procedures for systematic E&S risk identification, management, review and monitoring of E&S risks and impacts related to occupational health, safety, operational safety, environmental and social aspects, including labor-related matters in line with PS requirements. These include: i) E&S impacts and aspects matrices, which include a description of the nature of impact or risk, the receptor being affected, the probability of occurrence, magnitude and scale, as well as corresponding preventive and mitigation measures; ii) E&S risk management program (‘PGR’ for its Portuguese acronym) with the assessment of project’s risks to the wellbeing and general OHS conditions of workers and communities, as well as environmental risks during subproject’s implementation, iii) risk and impacts identification tools implemented prior to be beginning of the works (e.g. job safety analysis, environmental diagnosis of work fronts, field E&S risks matrices).
In the case of the Project, the E&S risk and impacts identification process is being developed by the Company and will be completed before the Project is rolled out. Given the nature of the activities considered for the water meters replacement process, it is expected that E&S risks and impacts will be limited and readily addressed through mitigation measures. As a result, and as part of the ESAP (ESAP #1), SABESP will be required to complete before commitment the ongoing E&S Risks and Impacts Identification process as per its ESMS procedure, ensuring that OHS risks during the installation of the meters and SEAH related risks resulting from the interaction with clients and stakeholders during this process are properly identified and addressed in line with local regulations, Company E&S procedures and IFC Performance Standards.

Management programs
The Company’s E&S management programs and plans form the basis of the E&S requirements applied to all projects from construction through operations and maintenance (O&M). As described in the ESMS section above, these management programs and plans, which form part of the RFP and the E&S Management Guidance Framework, are in line with Brazilian legislation and mostly aligned with IFC requirements. As part of the Project, SABESP will incorporate the results of the project related E&S Risks and Impacts Identification process in the contracts with the project service providers and ensure these include necessary provisions to: i) address potential risks of SEAH, ii) reinforce the implementation of SABESP's Code of Conduct and Integrity; and iii) develop an Emergency Preparedness and Response Plan commensurate to the risks of the Project (ESAP #2).

Organizational Capacity and Competency
At the corporate level, SABESP has an adequate number of qualified E&S staff managing the E&S risks of the different subprojects’ implementation and operation. For the Project, SABESP is establishing a formal structure, with professionals experienced in the telemetry and Advanced Metering Infrastructure projects deployment, as well as in managing the daily routine of the Metering Center and customer care. Once the Project is fully staffed, SABESP estimates that approximately 10 people will be directly involved in this activity.
Additionally, to install the meters, SABESP will rely on a limited number of service providers (“Contractors”). Those are required by SABESP to allocate technicians, that receive E&S training and have oversight and monitor E&S related functions.

Contractor Management and Training
SABESP launched a bid to contract a Telecommunication Company responsible for all deployments of telecommunication, metering systems platform and field meter commissioning of the Project. These provider must develop E&S management and training programs, adhering to SABESP's ‘Code of Conduct and Integrity,’ which prohibits SEAH. Since much of the work will occur in customer properties, the programs will enforce contractor´s knowledge and commitment to this code, with SABESP providing oversight.

Emergency Preparedness and Response
At the corporate level, SABESP's ESMS includes the identification and analysis of risks and development of emergency preparedness and response plans as well as protocols for the investigation of near misses and accidents at the workplace. For this Project, as per ESAP #2, the Contractors will be required to develop an Emergency Preparedness and Response Plan (EPRP), following the identification and analysis of emergency scenarios specific to the Project, including those derived from working on the streets and communities with high urban violence rates, as well as from accidents and incidents during the meters replacement process commensurate to the risks of the Project.

Monitoring and review
To ensure that Contractors are following the Company’s E&S requirements, SABESP relies on field inspection programs to assess the efficacy of E&S procedures, the quality of the works and overall E&S compliance, including labor. Where gaps are identified, these are recorded in the Company’s action tracking system and monitored to resolution.

PS2- Labor and working conditions

Human Resources Policies and Procedures
As of December 2024, SABESP had a total of 10.552 employees out of which 19,1% are women. Employees are hired full-time, under permanent employment contracts. The Company’s human resources (HR) policies and procedures are aligned with the local regulations and PS2 requirements. These are communicated to employees through induction and training programs. For third-party contractors, SABESP's HR policies and workforce management requirements are cascaded through legally binding requirements. The Company’s HR policies and internal regulations cover recruitment, terms of employment, compensation and benefits, OHS, workers’ grievance mechanism, training, professional development, SEAH, non-discrimination and equal opportunity, freedom of association, and prohibition of child or forced labor. The employment contracts define working hours, working days, holidays, duties, job title, payment (including overtime), insurance, grievance procedures, and termination of employment. All the smart meters will be installed by the selected Contractor and SABESP estimates that approximately 250 people will be directly involved in this activity.

Workers’ Organizations
Brazilian labor law protects collective bargaining and the right for workers to associate. As of 2023, approximately 65% of SABESP’s employees are unionized, but all workers are covered by the collective agreements. The Company negotiates Collective Bargaining Agreements (CBAs) on an annual basis. CBAs include workers’ rights and benefits including minimum wage, overtime, additional bonus for hazardous activities, transportation vouchers, meal vouchers, vacation, and health care, among others.

Workers’ Grievance Mechanism (GM)
The Company has an adequate grievance mechanism for its own staff and third-party workers, available through anonymous channels (e.g., telephone and website) and disseminated during onboarding and other training programs. The GM does not prevent complainants from accessing judicial remedies set by Brazilian regulations. SABESP has developed formal and confidential grievance handling protocols, including one specialized procedure for investigating SEAH reports. These procedures explicitly forbid retaliation and provide guidance for fair investigation and decision-making, by institutionalized commissions. For the Project, SABESP will cascade down these procedures for the selected Contractors.

Occupational Health and Safety (OHS)
The Company has an OHS Management System following the Corporate OHS Manual and the OHS Manual for Construction and Contracted Services, which includes the identification and analysis of risks and procedures for construction and maintenance. SABESP’s OHS procedures and internal technical norms are based on the national OHS standards and regulations (known as ‘Normas Regulatórias’ or ‘NRs’) and cover many safety topics including works at heights, safety excavation procedures, power and electrical safety, rigging and lifting equipment, confined space entry, civil works & construction safety, hazardous materials management, permit to work procedures, accidents, incidents and near-misses recording, OHS training requirements and personal protective equipment, among others. All OHS requirements are included in the bidding or RFP documents.

Workers engaged by Third Parties
Contractors linked to the Project will be required to meet SABESP’s E&S standards and procedures, which are included in contractual documents. Contractors must ensure compliance with: i) periodic internal and external OHS and labor audits, ii) performing job safety analysis prior to work, iii) verify the adequate use of PPE, iv) implement an OHS plan (including hygiene aspects), iv) provide first aid and emergency response training (and practice drills) in line with the approved EPRP, v) establish a permit-to-work system in all Project fronts, vi) investigate all OHS-related incidents (including near misses), vii) establish procedures to ensure compliance with labor laws and Company’s labor & HR policies, including non-discrimination, working conditions, payment of salaries, benefits and insurance.

PS3-Resource Efficiency and Pollution Prevention

For the meters’ replacement activities, solid residues and waste production are limited as most of the existing obsolete meters are recycled and utilized for other water related components. For the Project, SABESP will require from Contractors to implement a waste management procedure with standardized recycling disposal routine that entails selling old meters by weight or bartering for new equipment. The Project is not expected to generate wastewater or hazardous waste. As for air emissions, those will be limited and mostly associated with Contractor's car fleet emissions within Sao Paulo and Sao Jose dos Campos municipalities.
With regards to Green House Gases (GHG), in 2023 SABESP improved the methodology for estimating GHG emissions and received a ‘Gold Seal Certification’ by the Brazilian GHG protocol program. The 2023 GHG inventory reported a total of 2,2MMtCO2eq for the entire corporation (77.5% for Scope 1, 4.6% for Scope 2, and 17.9% for Scope 3). To reduce GHG emissions, the Company continuously invests in improving the treatment efficiency of WWTPs, adopt practices and technologies to optimize energy efficiency, promote cogeneration opportunities and foster the use of energy from renewable sources.

PS4-Community Health, Safety and Security

The Project is expected to have limited risks and impacts on stakeholders, ultimately reducing leakages and preventing water loss, positively impacting the final cost of the utility bill. Effective communication with clients will be crucial to delivering the most appropriate messages to various client groups, including low-income families who benefit from special tariffs. Likewise, SEAH risks emerging from the interaction of contractors and families have been acknowledged and will be treated through an effective stakeholder engagement strategy, with reiterated messages about SEAH prevention and the wider dissemination of available complaints channels (ESAP # 3).

Security Personnel
The Project will not involve the use of security personnel.

SABESP is drafting a specific Communications Plan as part of its corporate Stakeholder Engagement Plan (SEP) with a component directing relevant customers and addressing their specific concerns about replacement of obsolete water meters. It integrates key messages about the water meter replacement process and relies on various channels to disseminate information, including TV ads and social media campaigns. To effectively engage with customers and communities on Project issues directly affecting them, SABESP will need to build upon the Communications Plan to develop a Stakeholder Engagement Plan tailormade for this Project (ESAP #3), in line with IFC Performance Standards.

Company Companhia de Saneamento Básico do Estado de São Paulo
Point of contact Thiago de Lima Carvalho Teixeira Levy
Title Head of Capital Markets
Telephone number +55 11 33888679
E-mail sabesp.ri@sabesp.com.br
Mailing Address Rua Costa Carvalho, 300, São Paulo, Brazil
Website http://site.sabesp.com.br

Broad Community Support is not applicable for this project.

S.no	Description	Anticipated Completion Date
1	SABESP will complete the ongoing E&S Risks and Impacts Identification process as per its ESMS, ensuring that OHS risks during the installation of the meters and SEAH risks emerging from the interaction with clients are properly identified and addressed through documented safety and security procedures, in line with local regulations, Company E&S procedures and IFC’s Performance Standards.	08/07/2025
2	SABESP will update the contractors’ management and training programs, through binding legal requirements to: i) address potential risks of SEAH, by bolstering enforcement of SABESP's Code of Conduct and Integrity. This involves requiring all third-party workers to sign a commitment to the Code of Conduct and Integrity; mandating that Contractors deliver annual anti-SEAH training for all installers working on the Project and monitoring the effectiveness of these training sessions; and ii) develop an Emergency Preparedness and Response Plan for potential emergencies commensurate to the risks of the Project.	07/31/2025
3	SABESP will enhance the Stakeholder Engagement Plan (SEP), per PS1 requirements and tailored to effectively communicate Project features and raise awareness of the complaints channels among clients and community members. The enhanced SEP will include (i) methods of consultation and engagement with communities, neighbors, and stakeholders; (ii) frequency of reporting on E&S risks and impacts; (iii) monitoring of community engagement activities; (iv) a community grievance mechanism protocol with a survivor-centered approach, designed to handle cases by avoiding revictimization, supporting survivors, and referring them to specialized services; and (v) a map of services specialized in gender-based violence and child protection in the Project area. The enhanced SEP will establish clear roles and responsibilities for the different parties involved in the Project (e.g.: SABESP, Contractor, Municipalities, regulators and Clients)	07/31/2025