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 System: CFE’s ESHS commitment is embedded in its Quality and ESHS policies, which are communicated during onboarding and reinforced through training and awareness programs. CFE also has a CFE’s Social Responsibility and Cultural Promotion Policy that emphasizes sustainability, ethical governance, and stakeholder engagement and promotes transparency through public disclosure and accountability, while fostering community well-being. These policies form the foundation of its Integrated Management System (IMS) and apply to all subsidiaries and contractors. Governance is further reinforced by the Social Responsibility Policy and the Sustainability Committee’s institutional framework.
CFE’s IMS is certified per ISO 9001 (Quality), 14001 (Environmental Management), and 45001 (OHS management) standards, as well as Mexican standards for Environmental Management Systems (NMX-SAA-14001-IMNC-2004) and OHS (NMX-SAST-001-IMNC-2008). The IMS seeks to ensure consistent ESHS management across all business units and is operationalized through layered documentation and digital platforms like VIGIA (environmental and social - E&S- aspects) and SISST (OHS aspects), enabling real-time monitoring and continuous improvement. The IMS is implemented throughout design and planning, construction, transmission, and distribution business lines, with designated representatives overseeing compliance in each area. Contractors are also required to meet the requirements of the IMS and maintain EHS-related certified systems. The IMS Manual and ESHS procedures and operational checklists details ESHS risks assessments and management, stakeholder engagement, and standardized procedures for operational control, audits, and emergency preparedness, among others. Many CFE assets have received the “Industria Limpia” certificate from Mexico’s Federal Attorney for Environmental Protection (PROFEPA in Spanish), which certifies that the facilities comply with ESHS regulations and implements best practices in pollution prevention and resource efficiency.
Identification and Management of Risks and Impacts: As per IMS, CFE’s process for identifying and managing ESHS risks in eligible subprojects—each with limited ESHS risks—comply with national law and aligns with IFC PS, ensuring risk identification process are proportionate to each subproject’s type, scale, and location.
CFE maintains a structured process for identifying and managing ESHS risks and impacts through its IMS, which complies with Mexico’s General Law of Ecological Balance and Environmental Protection (LGEEPA, 2015) and the Electrical Industry Law (LIE, 2014) and incorporates Good International Industry Practice (GIIP)—which CFE has voluntarily adopted through internal procedures. The IMS includes lifecycle considerations and applies to all contractors and third parties. The company also uses a Geographic Information System (GIS) to integrate environmental, social, and archaeological data for early-stage screening, complemented by feasibility studies, aimed at avoiding and minimizing risks.
Subprojects eligible for IFC financing, as part of the proposed project—primarily involving the modernization and replacement of electrical infrastructure within long-established substations and underground transmission corridors—do not require new Environmental and/or Social Impact Assessments (EIA/SIA) under national law. These assessments were conducted when the infrastructure was originally built, and no new impacts are anticipated as part of the project implementation. For such subprojects, CFE prepares Technical and ESHS Pre-Assessment Booklets (“Cuadernillos”) and manages EHS risks through its Integrated Management System (IMS), specific ESHS procedures and manuals relevant to the eligible subprojects (e.g. waste management; emissions control; water management; OHS; EMF; contractor management; and monitoring and reporting, among others); and site-specific ESHS Management Plans (ESHS-MPs) that are aligned with the corresponding IFC PS. ESHS performance requirements and conditions resulting from the process described above are included in legal agreements with contractors.
Given that CAPEX subprojects requiring new footprints are excluded from IFC financing, and none are near major cultural heritage or archaeological sites, no impacts to Cultural Heritage are expected. CFE follows national chance finds procedures, requiring immediate suspension of modernization and replacement works and notification to INAH (National Institute of Anthropology and History) upon discovery—aligned with IFC PS8.
Replacement of Underground Cables: One of the eligible subprojects involves the replacement of 115?kV underground cables in short urban segments (10–100 meters), which typically results in minimal ESHS impacts due to the use of pre-installed, oversized ducts (20?cm diameter) that allow trenchless cable pulling without disturbing roads, sidewalks, or underground water tables. When minor excavation is needed—for example, for jointing or pulling pits—the footprint is small (6–12?m²) and the work is short-term (2–4 days). Tree removal is rarely required, and the overall approach aligns with local permitting requirements aimed at ensuring minimal disruption.
Organizational Capacity and Competency: The Dirección de Sustentabilidad at CFE leads the company’s ESHS policies, climate action, and sustainability reporting. It ensures compliance with national regulations and international commitments. CFE has a clearly defined ESHS structure that integrates corporate oversight with regional implementation. Each business line is supported by centralized functions for complex ESHS aspects, while local offices (“residencias”) are staffed with specialized ESHS personnel, including E&S officers. The company’s IMS ensures clear roles and responsibilities, with designated IMS coordinators and ESHS specialists assigned to each business activity, working in coordination with contractors. CFE’s training framework includes mandatory onboarding, role-specific development, and certification for high-risk roles, ensuring staff competency. During modernization and replacement works, both CFE’s and contractors ESHS personnel will be on-site.
Emergency Preparedness and Response: CFE has in place comprehensive Emergency Preparedness and Response Procedures (ERPs) per national law, integrated into its IMS, to effectively manage emergencies impacting infrastructure, personnel, surrounding communities, or the environment. Its ERPs include risk identification, manuals, site-specific protocols, and civil protection measures embedded across construction and operations. Internal preparedness involves trained brigades, regular drills, and a hierarchical response structure governing containment, control, protection, and evaluation actions. CFE also ensures coordination with authorities, public communication through notices and signage, and community engagement mechanisms such as early warning systems and evacuation routes in high-risk areas. These protocols are regularly tested and updated to align with national civil protection standards and ensure rapid, effective response.
Monitoring and Review: CFE implements a structured ESHS monitoring framework embedded within its IMS. This includes corporate-level monitoring policies and procedures that ensure adherence to legal and regulatory obligations. CFE utilizes a suite of Key Performance Indicators (KPIs) covering ESHS performance, tracked through integrated platforms like AVEVA and SAP for real-time oversight. Monitoring tools such as VIGIA and SISST support ESHS compliance verification and trend analysis, while internal audits and bi-annual reports ensure systematic performance reviews. ESHS monitoring is conducted during both construction and operational phases, with oversight extending from site-level staff to corporate leadership, ensuring that corrective and preventive actions are implemented and followed up effectively.
Contractor Management: CFE has in place robust procedures to ensure that contractors abide by its ESHS management standards and penalties are imposed for non-compliances. ESHS expectations are clearly embedded in procurement processes, with prequalification, bid evaluation, and contract award procedures incorporating ESHS compliance and risk-based criteria. Contractual documents define detailed ESHS obligations while referencing national laws and standards like ISO 14001 and NOM-052. Contractor capacity is assessed through mandatory designation of qualified ESHS staff, training requirements, and compliance monitoring, as reinforced by CFE’s IMS. Oversight mechanisms include monthly reporting, corrective actions, and digital monitoring platforms.
As per ESAP #1, CFE will submit to IFC copies of Environmental, Health and Safety (EHS) Audits conducted for each one of eligible subprojects funded as part of the project , covering aspects such as: OHS; management, storage and disposal of hazardous materials and wastes; and monitoring of EMF. The EHS Audit reports must identify time-bound corrective measures, if any are deemed necessary, to ensure alignment with CFE ESHS procedures, IFC PS2 (OHS) and IFC PS3, and relevant World Bank Group (WBG) EHS Guidelines: General and Power Transmission.
PS2: Labor and Working Conditions
Human Resources Policies and Working Conditions: CFE has in place a comprehensive institutional framework that governs labor practices across its divisions and subsidiaries. It maintains a corporate-level Human Resources Policy, Code of Conduct, and Code of Ethics that are aligned with national labor law and IFC PS2 and apply to both employees and contractors. These instruments define employment terms—including wages, benefits, working hours, leave entitlements, and health insurance—and prohibit child and forced labor while promoting non-discrimination and equal opportunity. Employment conditions are clearly outlined and shared during induction. An on-site CFE representative is responsible for supervising and documenting adherence to these regulations at the sites of the eligible subprojects.
Workers’ Organizations: CFE respects its workers’ freedom of organization in line with Mexican legislation and IFC PS2. CFE has a long-standing, formalized relationship with the union SUTERM, which represents approximately 85% of its workforce through collective bargaining agreements that define employment conditions, benefits, and grievance mechanisms.
Non-Discrimination: CFE upholds non-discrimination through its HR Policy and a set of internal instruments, including the following: Labor Equality and Non-Discrimination Policy, and the Code of Ethics. These instruments prohibit discrimination based on gender, ethnicity, age, disability, and other factors, and promote dignity and inclusion across the workforce. CFE’s alignment with the Mexican Standard on Labor Equality and Non-Discrimination (NMX-R-025-SCFI-2015) reinforces its commitment to equal pay, inclusive hiring, and workplace safety, supported by its Corporate Ethics, Equality, and Accountability Unit.
Sexual Harassment: To address sexual harassment, CFE has implemented a “Manual for the Prevention, Attention, and Sanction of Sexual Harassment and Sexual Assault” and formal protocols with clear definitions, confidential reporting channels, victim support, and non-retaliation guarantees. Since 2020, these measures have been reinforced by a Gender and Inclusion Unit and workplace liaisons. A public “zero tolerance” stance and internal awareness campaigns further promote a respectful environment.
Grievance Mechanism: CFE has in place formal workers’ grievance mechanisms such as the Línea Ética, internal ethics units, and the Integrated Citizen Complaint System (SIDEC in Spanish). These platforms allow employees to report issues related to labor and working conditions, misconduct, harassment, or ethical violations confidentially and anonymously, with protections against retaliation and guarantees of due process. Unionized workers also have access to grievance procedures through their collective agreements.
Protecting the Workforce: CFE has in place policies and procedures that prohibit any form of child or forced labor. These are aligned with IFC PS2 and national legislation, including Article 22 of the Mexican Federal Labor Law and Article 123 of the Constitution, which ban hazardous work for minors. CFE enforces these standards not only within its direct operations but also across its contractor network through a formal supervision protocol. This includes verification mechanisms to ensure subcontractor compliance with labor laws, particularly in remote or outsourced settings.
Occupational Health and Safety: CFE manages OHS risks through an OHS Management System aligned with ISO 45001 standards. This system includes structured processes for risk assessment, hazard identification, incident reporting, and pre-work risk analysis. High-risk activities, such as live-line work, are supervised and governed by strict protocols. The system mandates the use of personal protective equipment (PPE), regular training, and contractor compliance. Roles and responsibilities are clearly defined and supported by a governance structure that includes specialized units for risk prevention, emergency preparedness, and regulatory compliance. Continuous improvement is promoted through audits, performance monitoring, and reporting to civil protection authorities, fostering a zero-harm safety culture.
CFE ensures the practical implementation of its OHS policies through daily on-site practices. Electronic records of incidents and accidents are maintained, and a physical safety board is displayed in areas where morning inductions and training sessions are held. These sessions include OHS briefings, PPE checks, and readiness reviews. CFE OHS protocols provide detailed specifications for live-line work, including mandatory PPE, grounding procedures, and minimum approach distances. The protocols also outline pre-climbing inspections, required PPE, and rescue training. Training in climbing and rescue procedures is mandatory, ensuring preparedness and risk mitigation in high-risk environments.
Workers Engaged by Third Parties: CFE regularly engages third-party contractors for services related to eligible subprojects and extends its human resources and occupational health and safety (OHS) requirements to these workers through formal instruments that also mandate compliance with Mexican labor regulations. These instruments include the Contractor & External Provider Safety and Hygiene Regulations, which outline safety and hygiene obligations on CFE premises, and the Ethical Commitment, which sets expectations for legal compliance, integrity, and respect for workers’ rights. Contractors are required to inform their workers about workplace rules, safety standards, and grievance mechanisms (also see Contractor Management under the PS1 section).
PS3: Resource Efficiency and Pollution Prevention
The eligible subprojects are designed to improve energy efficiency without increasing greenhouse gas (GHG) emissions or water consumption. Given that the projects are confined to existing operational footprints, the likelihood of additional pollution risk is minimized.
Resource Efficiency: CFE has a systematic approach to energy management, led by the Electric Sector Energy Saving Program (PAESE in Spanish). This program operates across CFE’s transmission, distribution, and generation divisions, each tasked with identifying and implementing energy-saving technologies and practices. These include the adoption of modular and prefabricated construction methods and the use of recycled materials. Even though the eligible subprojects do not involve water consumption, CFE has taken steps toward water resource management, referencing practices such as rainwater harvesting.
Greenhouse Gas Emissions and Climate Change: The project supports greenhouse gas (GHG) emissions reduction by minimizing technical losses in the electricity transmission network and expanding its capacity to better integrate intermittent renewable energy sources. Emissions from eligible subprojects are negligible, with backup generators at substations seldom used. CFE employs a comprehensive climate strategy that combines mitigation, adaptation, and regulatory compliance, embedding resilience into infrastructure through features like natural drainage preservation and protective vegetation buffers.
Pollution Prevention: CFE integrates as part of its IMS pollution prevention monitoring and management measures across all of its subproject lifecycle, particularly during construction. Environmental specifications and requirements embedded in tender and contract documents address key risks and related monitoring and management measures including aspects such as erosion control, hydrocarbon spills, and air emissions from heavy equipment.
Soil Contamination: In Mexico this issue is governed by NOM-147-SEMARNAT/SSA1-2004, which requires the detection, evaluation, and remediation of contaminated sites. Accordingly, CFE as part of its IMS has in place procedures to assess by conducting phased environmental site assessments and remediate any soil contamination of over one square meter, as needed. Based on initial screening, there is no evidence of soil contamination at the sites of eligible subprojects.
Electromagnetic Fields: CFE implements a comprehensive EMF management framework aligned with international good practices and Mexico’s NOM-085-ENER/SCFI-2019, which sets exposure thresholds—2 µT (magnetic) and 5 kV/m (electric) for the public, and 500 µT and 20 kV/m in controlled zones. CFE conducts quarterly in-service EMF measurements (50 Hz–100 kHz), integrates shielding, optimized conductor spacing, and counter-phase currents into design, and documents all mitigation and monitoring actions. These measures are embedded in environmental and technical protocols contractors and CFE staff follow.
Hazardous Materials Management: CFE has established protocols for the management of hazardous materials, detailing procedures for the identification, registration, handling, storage, transportation, and final disposal of hazardous substances. These protocols are designed to ensure both environmental protection and OHS. None of the eligible subprojects will involve equipment containing polychlorinated biphenyls (PCBs), a class of hazardous chemicals formerly used in electrical equipment. CFE phased out the use of PCBs in the early 1990s and complies with NOM-133-SEMARNAT-2015, which mandates the identification, labeling, inventory, and environmentally sound disposal of PCB-containing equipment. These procedures are aligned with Mexico’s commitments under the Stockholm Convention.
CFE, as per its IMS, maintains detailed inventories and disposal records for hazardous materials. Its internal protocols ensure the proper handling, storage, and disposal of hazardous substances, including the use of Material Safety Data Sheets (MSDS) and certified disposal companies. The company also ensures traceability and regulatory compliance through documentation such as manifests and labels, in accordance with SEMARNAT regulations.
Hazardous Waste Management: As per IMS waste management procedure, hazardous waste, such as oils and other materials, is managed through certified contractors, and temporary on-site storage is used prior to final disposal. These practices are organized, implemented and monitored by internal IMS procedures and are compliant with national regulations.
PS4: Community Health, Safety and Security
Community Health and Safety: One hazard to community health and safety directly related to CFE’s operation is the risk of electrocution from direct contact with high-voltage electricity or from contact with tools, vehicles, ladders, or other devices that are in contact with high-voltage electricity. In addition, the use of signs and barriers, education and public outreach to prevent public contact with potentially dangerous equipment are key preventive measures. CFE follows national engineering and building codes and standards that incorporate safety features. Substations and underground transmission infrastructure, which will be part of modernization and replacement subprojects include fencing, buffer zones, and public safety notices to minimize exposure to hazards.
CFE follows robust practices to manage traffic and pedestrian safety risks, particularly in high-density or high-traffic areas. Its internal protocols mandate clearly demarcated work zones, high-visibility gear, reflective barriers, warning signage, and designated flaggers. Site-specific safety planning includes controlled access points, impact mitigation, and emergency access routes. Contractors must observe strict speed limits and prioritize pedestrian safety through barricades and signaling. CFE also coordinates with local authorities for permits, notifications, and community engagement, while offering road safety training to staff and contractors. These combined measures ensure that projects are executed safely, with minimal disruption to surrounding communities.
For aspects related to Emergency Preparedness and Response see PS1 and for EMFs see PS3 sections above.
Security Personnel: The type of facilities included in the eligible subprojects do not require armed guards.
