GEEREF - Akiira Geothermal Power Plant

Complaint

On 3 June 2020, the EIB-CM received a complaint alleging the failure of the Akiira One geothermal power plant (the project) to prevent a forced eviction and to address loss of livelihoods of the project affected persons (PAPs) in the project area. The project is partly financed by DI Frontier Market Energy and Carbon Fund (hereinafter “the Fund”). The Global Energy Efficiency and Renewable Energy Fund (GEEREF), a compartment of the European Initiative on Clean, Renewable Energy, Energy Efficiency and Climate Change related to Development SICAV-SIF, invested in the Fund. GEEREF is advised by the EIB Group: the EIF in its role of Advisor and the EIB in its role of Sub-Advisor. Furthermore, the EIB is an investor in GEEREF and the EIF represents the European Union’s shareholding in GEEREF as Trustee for the European Commission.

EIB-CM action

As part of its initial assessment phase, the EIB-CM identified the following allegations as constituting the scope of the inquiry:

·       The EIB Group’s failure to adequately assess and monitor the Fund’s capability to assess and monitor the effectiveness of the social management systems of its underlying investments, and ultimately the social impacts on the ground.

·       The EIB Group’s failure to take appropriate actions vis-à-vis GEEREF in order to ensure that the Fund prevents and/or mitigates alleged negative impacts of eviction, such as:

o   Deterioration of livelihoods.

o   Displacement and destruction of private property.

o   Declining access to health and education.

The present inquiry featured a certain degree of complexity due to a number of factors:

-          the EIB-CM had to assess the peculiarities of the GEEREF fund-of-funds financial structure and the EIB Group’s role advisory and sub-advisory roles when monitoring whether funds and underlying projects develop their own Environmental and Social Management System (ESMS) in compliance with GEEREF investment objectives and policies and the contractual arrangements between GEEREF and the investee funds.

-          The EIB-CM had to operate in the context of the COVID 19-related restrictions on travel and social gatherings; as such, it could not engage in a field mission and was therefore not in a position to arrange in-person meetings with the relevant stakeholders involved in this case.

Conclusion

The EIB-CM reached the following conclusions:

Alleged failure to adequately assess the Fund’s capability to assess and monitor the effectiveness of the social management systems of its underlying investments, and ultimately the social impacts on the ground

Bearing in mind the EIB Group’s advisory and sub-advisory roles, the EIB-CM noted that the EIB Group on behalf of GEEREF performed an assessment of the Fund’s environmental and social (E&S) capacity. From the information gathered during the inquiry, the EIB-CM acknowledged that the EIB Group adequately identified gaps in the Fund’s E&S policies and requested the Fund to (i) develop a comprehensive E&S policy in line with the EIB Standards, and (ii) hire an E&S manager. Furthermore, the EIB-CM noted that the EIB Group ensured that the contractual documentation between GEEREF and the Fund included several conditions, such as:

·       Development and implementation of E&S policies in line with limited partners’ requirements, including the EIB Standards;

·       Development of an ESIA for all geothermal projects with capacity higher than 10 MW.

The EIB-CM considered that the EIB Group’s due diligence of the Fund adequately (i) assessed the Fund’s E&S capacity and policy and (ii) ensured that any gaps with the EIB E&S Standards would be addressed as part of the contractual agreement between GEEREF and the Fund. Based on the above, the EIB-CM concluded that this allegation was not grounded. 

Alleged failure to adequately monitor the Fund’s capability to assess and monitor the effectiveness of the social management systems of its underlying investments, and ultimately the social impacts on the ground

The EIB-CM noted that since 2013, the Fund had provided the EIB Group with yearly updates on the E&S performance of the underlying investments. From the Fund’s reporting to GEEREF, it results that, in regard to the main gaps identified during the EIB Group’s due diligence, the Fund had hired an E&S manager in 2014 and had updated its E&S policies to ensure compliance with the  standards of the limited partners (LP).

The EIB-CM also noted that since 2013, the Fund listed the IFC PS5 – land acquisition and resettlement – among the standards triggered in the Akiira project. When a project triggers IFC PS5, and also in line with the requirements of EIB Standard 6, the promoter shall carry out a socio-economic census and develop a Resettlement Policy/Livelihood Restoration Framework (RPF/LRF) or a Resettlement Action/Livelihood Restoration Plan (RAP/LRAP) depending on the status of the project development and whether the project entails physical or economic displacement. Furthermore, a cut-off date shall be well documented, disseminated and reinforced throughout the project area with the intent, among others, to discourage opportunistic settlers to install and claim benefits.

When reviewing the information gathered as part of its inquiry, the EIB-CM was not provided with evidence to support that the Fund had developed or communicated to the EIB Group a RPF/RAP or an LRF/LRAP for the Akiira project. Whereas the above mentioned land planning documents are a necessary condition for the mitigation of social risks resulting from land-related impacts, the EIB-CM concluded that failure to draft a land-related planning documents for the Akiira project was not in line with the EIB Standards and the Fund’s contractual requirements with GEEREF.

Under the working arrangement between the EIB Group and GEEREF, the EIB as sub-advisor shall allocate sufficient resources to perform the same standard of due diligence as it usually applies to its own operations. Furthermore, it is the role of the EIB Group to take immediate action when identifying potential breaches of contracts, adverse events or deficiencies that could adversely impact the investee funds’ performance. In this regard, the EIB-CM noted that, while having received no information about the required RPF/LRPF for a project with land-related impacts, the EIB Group did not identify this deficiency and as a result did not request the Fund to address it during the course of the project development. Furthermore, the EIB-CM noted that, when informed by the Fund about a risk of eviction in the absence of the above mentioned land planning documents in Q2 2019, the EIB Group did not monitor the eviction’s compliance with the requirements of the EIB Standards.

Based on the above, the EIB-CM found that the EIB Group’s monitoring of the Fund’s social performance did not timely identify (and act vis-à-vis) the non-compliance of the envisaged eviction on the project site. As a result, the EIB-CM concluded that the allegation was grounded and issued a recommendation.

Alleged failure to take appropriate actions vis-à-vis GEEREF in order to ensure that the Fund prevents and/or mitigates alleged negative impacts of eviction

The EIB Group informed the Fund of the outcome of GEEREF’s enhanced monitoring in November 2020 and of a series of recommendations to be implemented by the Fund in order to restore compliance with EIB standards. From the information gathered as part of its inquiry, the EIB-CM found that, although due to the COVID-19 pandemic it took more than one year since the eviction to complete the enhanced monitoring and communicate its outcome to the Fund, the recommendations to the Fund adequately addressed the project’s social impacts. If timely and correctly implemented, the recommendations would mitigate the Fund’s non-compliance with the EIB Standards and the contractual arrangements between GEEREF and the Fund.

During the last phase of the inquiry, GEEREF approved the Fund’s request to increase its participation in AGL. The request included a budget covering, among others, the implementation of the social actions resulting from the enhanced monitoring and an implementation calendar to be fulfilled by the end of 2021.

Based on the above information, the EIB-CM concluded that the allegation was not grounded. However, given the delay accumulated in tackling the non-compliance identified in the present inquiry, the EIB-CM considered appropriate to issue a suggestion for improvement to the EIB Group’s concerned services concerning further enhanced monitoring of the Fund’s social performance.

Outcome

Based on its findings and conclusions, the EIB-CM:

- recommended that the EIB Group ensure the timely involvement of E&S specialists in the performance of monitoring activities delegated by GEEREF to the EIB Group in its role of advisor/sub-advisor. This was found to be crucial in order to ensure that non-compliances with GEEREF investment objectives and policy or the contractual arrangements between GEEREF and investee funds are promptly detected and addressed;

- suggested that the EIB Group services (i) engage in further enhanced monitoring of the implementation of the required actions within a reasonable timeframe and – based on such monitoring – (ii) report to GEEREF on the sustainability of the latter’s investment in the Fund.

Monitoring

Since the closing of its compliance review  and issuance of its conclusions report in August 2021, the EIB-CM has been following up on the recommendations made to the EIB in section 6 of its Conclusions report for the case SG/E/2020/08 and EIF/E/2020/01, namely:

1.     The involvement of an EIB E&S specialist to support the E&S monitoring delegated by GEREEF to the EIB Group in its role of advisor/subadvisor (to GEREEF).

2.     The EIB’s enhanced monitoring of the implementation of the (remedial) actions required by the Bank (see paragraphs 4.3.5-4.3.8 of EIB-CM conclusions report) and reports to GEEREF on the sustainability of the investments in Frontier Fund (the Fund investing in AGL).

The EIB-CM has verified and confirms that an EIB E&S specialist is supporting the EIB operational services in the enhanced monitoring of the Frontier Fund’s investment in AGL and, in particular, in the monitoring of the implementation of the Akiira One project (with the support of an international social consultancy firm), and of the implementation of the remediation plan for the evicted PAPs of the Akiira One project.

The EIB-CM has also received evidence that the EIB is reporting regularly to GEEREF on the sustainability of the investments in the Frontier Fund, as well as on the development and implementation of the social management plans and grievance mechanisms requested by the Bank (and made available on Frontier Fund website). According to the updated public remediation plan, as well as to information received from the EIB operational services, the EIB-CM understands that the implementation of the remediation plan is close to completion.

The EIB-CM understands that a final pre-closure audit by an independent social/resettlement specialist is foreseen as part of Frontier Fund’s closure of the remediation process. In addition, the EIB-CM understands that such audit’s recommendations will be followed up. The EIB operational services will continue to monitor the E&S performance of the Frontier Fund, the completion of the remediation plan’s implementation, and the implementation of any recommendations arising from the referred closure audit report.

On the basis of the above, and based on the lack of prima-facie evidence of any maladministration by the Bank as regards: i) the implementation of the EIB-CM’s recommendations and, ii) the monitoring of the implementation of the remedial actions it required by the Bank, the EIB-CM decided to formally close the monitoring process of this case as of Q2 2024, by considering that all its recommendations have been satisfactorily implemented.