The project sponsor is Schwarz. Headquartered in Germany, Schwarz ranks among the top five food retail groups globally. Its network of approximately 13 thousand stores, operated under Lidl and Kaufland brands, spans 30 countries, mostly in Europe. The Group is a privately-held company. The Project company is Lidl, which is wholly owned by Schwarz.

 Total project cost is estimated at over €1 billion. The proposed IFC investment is an up to €85 million A loan for IFC’s own account to partially finance the Project (“RSE Loan”).

 Investments under the Project are planned to be made in small and large cities throughout Romania.

 E&S Category Rationale / Risks and Mitigation

Environmental & Social Categorization Rationale

Lidl is a subsidiary of a long-standing IFC client, the German retailer Schwarz Group, and has been IFC client since 2011. This follow up investment is a category B project according to IFC’s Policy on Environmental and Social Sustainability. The key E&S aspects of the project include the company’s labor and OHS practices in the context of COVID-19 pandemic.

Main Environmental & Social Risks and Impacts of the Project

UPDATE RELATED TO ADDITIONAL INVESTMENT UNDER COVID-19 RESPONSE FACILITY:

E&S Performance and COVID-19 related Impacts:

The company’s E&S performance continues to be satisfactory aligned with IFC PS’s and is materially compliant with applicable at-approval requirements under the active investment. This follow up investment, under the COVID-19 response facility, is to support Lidl’s increased working capital needs as well as investments into additional logistical capabilities and new stores to meet a COVID-19-driven increase in basic, affordable food and grocery product demand in Romania. The project does not result in any new material E&S risks and impacts. The company’s management of existing E&S risks and impacts continues as described in the previously disclosed ESRS (https://disclosures.ifc.org/project-detail/ESRS/31466/lidl-romania). No further corrective measures in the form of the Environmental and Social Action Plan (ESAP) has been developed for this specific project.

Scope of IFC’s Appraisal:

Due to the COVID-19 related travel restrictions, IFC’s E&S due diligence for this follow-on investment was conducted virtually through video conferencing with Lidl’s E&S management team (HR Manager, Communication and SCR Manager and OHS Managers) to understand the impact of COVID-19 pandemic on the company’s operations - particularly on its workforce. IFC also reviewed related information and documents shared by the company and its own records of the company’s E&S performance since commitment. Implementation of the company’s E&S management systems was noted to be robust based on virtual appraisal. After COVID-19 related travel restrictions are removed, IFC will visit the client, as part of the regular portfolio monitoring activities.

Response to COVID-19 Pandemic

Impact on Employment.

The company’s current workforce is ~9500 employees. During the pandemic, the company has not and does not have any plans to lay off any workers, and there have been no salary cuts or no-pay-leave arrangements. Lidl has supported employees and contract workers going beyond legislative requirement and is also making payments to the suppliers and contractors as agreed.

Health Impact of COVID

The company has formulated and implemented COVID-19 response strategies and measures, consistent with the provisions under PS2 and PS4, including health declaration, temperature checks, provision of personal protective equipment, regular cleaning and disinfection, etc.

Moreover, the company will ensure ongoing compliance with IFC Performance Standards – especially provisions under PS2: Labor and Working Conditions and PS4: Community Health Safety and Security.

Mitigation Measures/ESAP

No specific environmental and social action plan was developed for the follow up investment.