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CAF and the Environm entCAF and the Environm ent



Title:CAF Environmental St rat egy

This document sets out the guiding axes, principles,lines of action, and strategic environment programsthat guide CAF’s environment al management.

Edited by:Vice-Presidency of Social and Environment alDevelopment (VDSA), Environment Off iceCorp oración An dina de Fomento (CAF)medioambient [email protected]

Published and produced by:Secret ariat and Business Communicatio ns Off iceCAF Publicationspubl [email protected]

Graphic Design: 72 dpi

Printed by: Gráf icas LaukiCaracas, Venezuela–November 2008

A dig it al version of this book is available at :www.caf.com/publicaciones

© 2008 All righ t s reserved. Corpo ración Andina d e Foment o.



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ForewordL. Enr iq ue Gar cíaPresident of CAF

This document seeks t o collect and make publ ic info rmat ion about t he long r oad oflearning, experience, and specialization CAF has followed in environmental matters.It also establishes the tactical lines of CAF’s environmental management in harmonywith its economic, financial, and social strategies. In this process, CAF has steeredsignificant effort and resources toward the area of the environment through variousf inancing schemes, in an att empt t o int egrate t he th ree cornerstones of sust ainabledevelopment: economic, social, and environmental.

These ef fort s are intended t o go on cont ribu t ing t o sust ainable development and toboost competi t iveness, reduce social gaps, check environmental det erioration, supporteconomic grow th, and improve living condi t ions for t he region’s inhabit ants.

The principles def ining t he conceptual framework of CAF environment al managementcontained in this document have enabled the environmental dimension to betransversely incorporated into CAF-designed strategies and operations, positivelyimpacting its support for its shareholder countries’ development processes.

In this process of building solidly designed environmental management, CAF hasdeveloped it s ow n inst rument s, syst emati zed it s processes, adapt ed it s inst it ut ionalschemes, and specialized its interdisciplinary teams in the framework of continualimprovement . This has cont ribu t ed t o t he environment al sust ainabilit y and socialresponsibil it y of it s operat ions and, at t he same time, has lent signi f icant support t othe shareholder count ries in t heir ef fort s and act ions t o conserve and sust ainably yieldtheir natural resources and ecosystems.

The CAF Environmental St rategy set f ort h in t his document i s a fur ther cont ribu t ion bythe Corporat ion t oward consolidat ing a regional environmental culture and fosteringcommit ment to conservat ion and t he sustainable use of the region’s natural herit ageamong national and internat ional organizat ions.



Contents

Foreword 3

Introduction 7

CAF Environmental Strategy 9

A. CAF’s conceptual f ramew ork in the environment 11A.1 Guiding axes 11A.2 Environmental principles 11

B. Scope 12

C. Object ives 13

D. Lines of action 13

E. Responsible inst itut ional management 13E.1 Operat ions Environmental and Social Management Syst em 16E.2 Institutional Environmental Management Plan 30

F. Support for the region’s environmental management 30F.1 Strategic environment programs 31F.2 Environmental sector financing 32

G. Implementation and follow-up of CAF Environmental Strategy 33

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Introduction

CAF has put its experience, knowledge, resources,and act ion st rategies at the service of an Agendafor Representative Development for the regionwi th a view to achieving high-qualit y, sustained,equit able, and inclusive growth that helps reducepoverty and unemployment, st rengthen democra-cy in a framework of governance, and involvesociety at large by creating social and human capi-tal, while t aking int o account the sustainabilit y ofits shareholder countries’ natural base.

The transverse approach to the issue of theenvironment is apparent in these momentousobjectives for the present and future of theregion, and CAF has therefore undertaken toconserve and sustainably use nat ural capit al andthe environment as a basic support and sourcefo r it s development in a permanent and coordi-nated eff ort wit h it s partner count ries.

CAF has made the environmental and social dimen-sion a fundament al aspect of it s administ ratio n.This Environment al St rategy document reassert sand st rengthens CAF’s express commit ment to theenvironmental sustainability of its shareholder

count ries and t he operat ions it f inances.The Environment al Strategy’s conception builds onthe experiences and lessons learned in t he environ-mental sphere over more than 35 years of CAFhistory and particularly t he progress made over thelast decade. It adop t s a prospect ive view t o drivethe environment al development challenges andopportunities of both CAF and its shareholder

countries.

It is wo rt h remembering in t his cont ext t hat, in1994, CAF created the Sustainable DevelopmentCoordin ati on Off ice (OCDS) respon sibl e f or t heenvironmental assessment and f ollow -up of it soperations. In 2000, the OCDS became theSust ainable Developm ent Of f ice und er theVice-Presidency of Development St rat egies. Later,in 2004, the area’s decision level was strength-ened with the creation of the Vice-Presidency ofSocial and Environment al Development (VDSA).Through the VDSA, environmental issues weregiven transverse status integral to the region’seconomic and social development on the onehand, while on t he other, the environmental owntechnical and methodological development wasrecognized, sett ing high levels of specialization inthe CAF environ ment al area.

Grou nd ing it self in t his view, th e VDSA set upnew of f ices of t he Environment and SocialDevelopment . In addit ion, in an effo rt t o boostpromot ion and specialization in t he social sphere,CAF created o ther part ies to r einf orce the areasof community and cultural development, andpromote governance and leadership in the

region.From this perspect ive, CAF’s inst it ut ional organi -zat ion has been adapting dynamically and f lexiblyto achieve the ob ject ives collected in this Environ-ment al St rategy d ocument. The VDSA and it sEnvironment Of f ice thus specialize in steering andsupport ing t he issue’s development wit h a highlyspecialized team and external consultants work-

ing at the Headquart ers and at each of the Coun-t ry Off ices.



Organized into mult idisciplinary teams, this groupof professionals works toget her wi th the businessareas and CAF support t o t ackle enviro nment al

and social management from an integratedperspect ive that guarant ees it s incorporation inthe CAF’s various consult ation, decision -making ,and execut ion autho rit ies.

This integrating transverse approach to environ-mental and social management has been growingstronger w it h it s coordination and inclusion in allCAF-fin anced operat ions in bo th t he pub lic and

private sectors, being those of infrastructure,social services, industry, corporations, financialinsti tu tions and promot ion of the microenterprisesector, among others.

Accordingl y, part of th e operations’ f inancing isallocated t o guarant ee t hat any environm entaland social impacts and risks identified are dealtwith in a timely and efficient fashion, whiledeveloping the participation of civil society asind ispensable t o t his process and in t he pu rsuitof opport unit ies fo r environmental and socialdevelopment associat ed w it h t hese operat ions.

CAF Environmental Strategy has progressedf rom t he init ial wo rk of assessment and f ollow -up t o br oad-based, decisive, commit t ed supp ort

for t he region and it s sharehold er coun t ries. The

Corpor ation contr ibut es t o th is eff ect w it h envi-ronment al policy-making and designin g regula-tory frameworks, strengthening environment-

focused government and non-governmentinstitutions, developing civil society as a keyact or in consolidat ing a h ealt hy environment,supporting and creating environmentallysust ainabl e market s, and d eveloping conserva-t ion pro ject s and rest oring ecosyst ems.

CAF has also incorporated act ion s geared t o t headministration and sustainable yield of natural

resources in order to guarantee, among otherthings, sustained product ivity, eff icient energy use,and the promot ion of renewable, clean, and alter-native energy sources, support for a sustainabilitycult ure in the financial sector, and the promot ionof responsible environmental and social manage-ment practices in t he various production and serv-ice sectors.

In summary, it is important to remember thatbot h t he Corpo rati on’s responsibil it y act ivit ies,and those to do with support for the region’scoun t ries have created t he need f or a suit ableinst it ut ional organizati on and for t he design ofmethodologies and instruments of its own tosupport int ernal management . This has enabledacross-the-board internalization of the environ-

mental and social aspects of CAF’s act ions.

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CAF Environmental StrategyCAF Environmental Strategy



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CAF also recogn izes t he environm ent al compo-nent as being d ecisive in t he t ransf ormat ion ofprod uct ion i n t he region. First ly, ful ly aware of

the importance of integration into the worldeconomy for the region, the Corporationpromot es and accompanies int ernati onal agree-ment s on t he environm ent sign ed by it s share-holder coun t ries.

Secondly, CAF promot es and support s the creationand growt h of the production value of naturalcapit al, as well as the development of emerging

environment al markets, and the st reamlining o fenterprise and product ion sectors environment almanagement so t hat, overall, str ength ening w illstreamline countries’ sustainable integration inint ernational markets in an ecoeff icient f ashion.

A.2 Environmental principles

In line w it h t he Environment al Strategy’s guid ingaxes, CAF has established a set of fundamentalprinciples as a conceptual framework for thesteering of it s environment al management . TheCorporat ion t herefore:

I. Views the environment as a transverse, coordi- nating component of social, economic, andcult ural development .

II. Recognizes the envi ronment al issue as a nexus integrating internati onal , regional, national,and local actors, and in which the interest,concern, the att ention of public, private, andcivil society sectors converge.

III.Respects, cooperates, and coordinates with the nat ional pol icies, st rat egies, and st andards

of its shareholder countries as decisiveelements steering its institutional environ-mental management .

A. CAF’s concept ual f ram ew orkin the environment

Sustainable development and regio nal in t egra-t ion are th e cornerst ones of CAF’s inst it ut ionalmission and are defined as the guiding axes ofthe Corpo rat ion’s Environment al St rategy.

A.1 Guiding axes

CAF believes that the main contribution of the

environment al dimension to sustainable develop-ment is directed toward recognition of theconservation and sustainable use of the region’snatu re and environment as a basis for improvingsocieties’ quali ty of lif e, overcoming po verty, andpromoting long-term economic developmentand spirit ual w ellbeing.

In the f ramewo rk of regional integration , CAFbrin gs t he environment al perspect ive into playand focuses it on:

The responsible management of ecosystemsand shared natural resources of regional andint ernational import ance, and th e harmoniza-t ion o f the region’s environment poli cies.

The capitalization of opportunities and themanagement of risks and impacts broughtabout by physical int egration.

The conservatio n of t he natu ral herit age andthe continued survival of the functional rela-t ion ships of the ecosystems that guarantee life.

The raising of environ ment al awareness in t he

region so as to encourage the strategicappreciatio n of it s natu ral capital.



IV. Prom ot es respect f or cultural diversity and gender equit y , and does not discriminateaccording to creed, ideology, or race,

considering full participation indispensablein achieving a health y environment.

V. Recognizes and supports the identity,culture, and interests of Native populations and other ethnic communit ies , and promot estheir participation in achieving sustainabledevelopment in t he view th at t hese commu-nit ies play a fundamental part in environmen-

t al sust ainabilit y by virtu e of th eir ancestr alknowledge and practices.

VI. Takes a cautious approach to its activities and, on foreseeing any danger of serious orirreversible damage, promotes the adoptionof cost-effective measures to prevent thedeterioration of the environment.

VII.Encourages the incorporation of environment al cost s in i ts act ivities for t he prevent ion,correction, and restoration of environmentaldeterioration, and for the conservation ofecosystems and renew able nat ural resources.

VIII.Promotes the exchange of scientific kno- wedge and environment -relat ed tr ansfer andtechnological innovation.

IX. Views the participation and informati on of public, private, and civil society actor s as deci-sive t o t he success of it s mission, and con se-quently promotes and facilitates extensivediscussion spaces and appropr iat e di ssemina-t ion mechanisms relatin g t o i t s act iviti es inview of the po licies and st rat egies est ablished

for CAF by its shareholder countries in thisarea.

X. Is committed in creating the spaces and providing the necessary technical, logistical,and human resources to continue consoli-

dating its position as a regionally, environ-mentally, and socially responsible institution.

XI.Support s, through the publ ic, privat e, and civilsociet y sectors, the st rengthening of environmental management, and the conservation and sust ainable use of nat ural resources and ecosystems by its shareholder countries.

B. Scope

CAF Environm ent al St rategy is in lin e wi t h t heconcept of sustainable development and there-fore places special emphasis on:

Operations financed by t he Corporat ion i n t hepubl ic and pri vat e sect ors includi ng indu st rialprojects, infrastructure projects, social andenvironmental development projects, andbusiness operations.

Programs and activities put forward by CAFto support member countries’ environmentaldevelopment.

Activities of institutional environmentalmanagement developed on CAF facilit ies, at i t sHeadquarters or Country Offices.

In t he f ramewor k of th is Str ategy, th e environ-ment is understood as the set of elementscomprised by geospheric, hydric, atmospheric,biotic, social, demographic, anthropological,ethnic, economic, cult ural, archeological, partici-

pative, and inst itut ional components.

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This St rategy also t akes in to account the ter rit o-rial natu re of t he environment, where diff erentforms of pressure on and use of ecosystems, nat u-

ral resources, and the environment are generat-ed, leading t o specialized environment al mana-gement for urban, rural, and natural areasdepending on the different levels of humanint ervention and sett lement .

It is important to highlight that, the socialcomponent mentioned in th is St rategy documentrelates exclusively to the identification of

impacts, risks, or opportunities associated withCAF-fi nanced operat ion s.

It should be stressed here that, through its fouroffices specializing in social issues, CAF hasundertaken a series of programs, projects, andactivities focused specifically on the region’ssocial development and not mentioned in th epresent Environment al St rategy document.

C. Object ives

The CAF Environmental Strategy seeks:

To permanently create and improve frame-works, spaces, and processes to guaranteeresponsible environmental and social manage-men t by CAF.

To support shareholder countries in theconservation and sustainable use of naturalresources and ecosystems, and the develop-ment of the environmental sector, incor-porating long-term sustainability criteria andprinciples.

D. Lines of action

This Environment al St rategy do cument sets outthe following courses of action in accordancewit h t he est ablished ob ject ives:

In line with the first objective, CAF hasdesigned an Operations Environmental andSocial M anagement Syst em t hat comp rises t heset of safeguard guid elines, meth odol ogicalapproaches, procedures, instruments, and

resources, in order to incorporate responsibleenvironmental and social management atevery ph ase of t he CAF credit process.

CAF has also drawn up an Inst it ut ional Environ-mental M anagement Plan to promo t e respon-sible environmental business action in regardt o admi nist rati ve act ivit ies and i t s f acilit ies atCAF Headquarters and the Country Offices.

To advance the second objective, CAF hasdesigned and implemented a series of pro-grams specializing in the environment thatpromote and support the national and re-gional initiatives for nature conservation andthe sustainable use of t he region’s natu ral capi-t al, as well as st rengt hening t he environmen-t al sect or i n each sharehol der count ry.

E. Responsible inst it ut ionalmanagement

With in t his fir st line of actio n, the insti tut ionalmanagement responsible for the environment,CAF has established two areas of work: the



Actions geared to improving t he quality of life f or present and f uture generations.



Operat ion s Environm ent al and Social Manage-ment Syst em and the Inst it ut ion al Environmen-tal Management Plan.

E.1 Operations Environmentaland Social M anagement System

An Environ ment al and Social M anagementSyst em has been design ed and implement ed t oensure responsible environmental and socialmanagement for CAF-financed operations. TheSystem consists of a set of environmental and

social safeguard s, met hodol og ical appro aches,procedures, instruments, and resources. These

coord inate and incorporate environment al andsocial management at every phase of the CAFcredit process.

Compliance with environmental and socialsafeguards in CAF operations

The set o f environmental and social safeguards isapplicable to all operations financed by theCorporation. These safeguards set basic bench-marks for the development of sustainable andresponsible environmental and social manage-

ment for operations (see Box Nº 1).

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Environmental and social safeguards applicableto CAF operations

I. Nat ional legislation. All CAF-fi nanced proj ect sare in line w it h t he environment al legislationof the country where the project is executed,and w it h any int ernat ional agreements andcommitments signed by the shareholdercountries.

CAF nevertheless calls for the application ofadditional precautions or selects interna-t ion ally accept ed t echni cal st andards w herenecessary.

II. Environmental and social impact, risk, and opportuni ty assessment . Right from the start ofit s cycle of operat ions, CAF carries out a reviewand complementation of the environmentaland social assessment, and ensures that themanagement measures and op port unit ies for

environmental and social developmentassociated with the operation are designed,identified, and implemented.

On the principle of precaution, when anymajor environment al and social impact s notforeseen in the assessment process occurduring operations, CAF seeks the incorpora-ti on o f th e management measures requiredfo r t he appropriat e administrat ion of th eseimpact s. Likew ise, wh en it sees a need, it callsfor furt her assessment s, studies, and environ-mental analysis to be presented. Theseinclude Strat egic Environment al Assessments,Watershed Management Planning, LandPlanning, and so on.

III. Environmental and social management and budget measures. As a result of the review ofthe environmental and social assessment foroperat ions, CAF is seeking t o int ernalize in it s

(Continued in the f ollowing page)

Box Nº 1



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operations’ budgets any environmental andsocial management costs needed to tackleenvironmental and social developmentimpacts and op port unit ies. It is down t o t heclient to adopt the necessary measures toavoid, control, mitigate, and offset anyenvironmental and social impact s and r isks.

IV. Institutional strengthening, human resources training, and inf ormation. CAF supports thestrengthening of governance through theoperat ions it f inances, as well as the creat ion

of capabilities among the institutions, esta-bli shment s, and social groups linked t o t heseoperat ions. It p laces special import ance on t heexchange and timely disseminat ion of relevantinf ormation for t he environmental and socialmanagement of government organizatio ns,the private sector, and communit ies, bearing inmind t he policies and st rategies defined in t hisrespect for CAF by its shareholder countriesthrough t he Corporation’s Board of Directors.

V. Water conservat ion. CAF stimulates projectsgeared t o t he conservat ion and sust ainableuse of hydric and other associated resources(soil s and vegetation), and promotes compre-hensive management of wat ersheds.

VI.Nature reserves and protected natural areas.It is CAF policy to sponsor the preservation ofnational parks and other protected naturalareas as pub lic assets through the operat ions itfinances. Therefore, in compliance with therelevant legislation of the count ry where theoperat ion is carried out , CAF f inances pro jectsin protected areas providing the operationcont ribut es to t he fulf illment of the objectives

for w hich t he prot ected area has been created.

VII. Disast er r isk prevent ion . When CAF sees aneed t o do so, it assesses operat ions in t ermsof th eir vulnerability t o nat ural dangers andof th e likelihood o f o perati ons to precipi-t ate t hem and so consider reducing the risksto t he pro ject s entailed by natu ral di sasters.Where appropriat e, it also considers inst it u-ti onal st rengt hening of disaster risk mana-gement and vuln erabilit y analysis manage-ment capabilities as part of the financing.

VIII.Pollution prevention. CAF operations pro-

mot e the int roduct ion of measures geared toprevent ing pollut ion. In indust rial operations,the Corporation makes reducing pollutionand t he consumpt ion of natu ral resources anintegral part of the production process,encourages the use of clean or renewableenergy, and contributes to cutt ing gree housegas (GHG) emissions in a framework ofcleaner production.

IX. The region’s cultural heritage. CAF sub ject sany projects in areas where there arearcheological or histor ic t reasures, or sacredNative sites, to the approval of the compe-tent scientific and/or cultural institutions,and t he coun t ry’s relevant legislat ion.

X. Ethnic groups and cultural diversity. CAFstrives to preserve and strengthen theregion’s cultural diversity. In this respect, itmakes sure op erati ons have complied w it hthe participation process demanded by thecount ry’s legal syst em and , w here i t sees aneed, calls for additional step of publicconsultation. It also calls for the executionof management plans in ord er to meet any

possible impacts on collective lands and

(Continues from the previous page)

(Continued in the f ollowing page)



Methodological approaches of operationsenvironmental and social management

In assessing inf rast ruct ure operat ions, and socialand environmental development operations,wh ich generally involve const ruction wo rk andthe use of sign if icant expanses of land, CAF takesa comprehensive and systemic approach as itsmethodological framework.

This approach draw s on some o f t he ecosyst emicprin ciples adopt ed by th e part ies of the Conven-t ion on Bio log ical Diversit y (CBD), and consult ssome of t he metho dolog ical development s andth e application of t his concept in diff erent coun-tries (see Box Nº 2).

For industrial operations and manufacturingprocesses, CAF adopts the met hodological approach

of clean production analysis, combined with tradi-t ional clean-up processes depending on individualprojects’ requirement s (see Box Nº 3, p . 20).

In operations that combine inf rast ructure projectsand industrial or manufacturing projects, themeth odo logy involves bot h approaches, as wit hmining operations.

In Corporate Loan operations, CAF takes theanalysis of end users’ envir onm ent al and socialmanagement capability as a focus in its assess-ment (see Box Nº 4, p. 20).

To gu arantee t he environment al and social qual-it y of t he operati ons as part of it s method ologi-cal approach, CAF undertakes the follow-up,monit oring, and cont inuous cont rol of compli-ance wi t h environ ment al pri nciples, safeguardguidelines, and especially any commitments

acquired by the operat ion f or environmental andsocial administration and management, andtheir corresponding budgetary execution.

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cult ures of Native peoples, and o ther ethnicgroups recogn ized in law.

XI. Community participation and development.It is a priorit y for CAF, through the operationsit f inances, to cont ribut e to t he st rengtheingof th e info rmed, act ive, and timely participa-tion of the inhabitants of the areas of influ-ence in the operations it supports. When itsees a need, CAF calls for public consultat ionin addit ion t o t hose required by the count ry’slaws.

XII. Involuntary resett lement and/or r elocation .In operations requiring resett lement and/orrelocation of human groups, CAF calls forplans to be drawn up to compensate the

groups affected or offer them similar orbetter living conditions to those they hadpreviously and for potential host communi-t ies to be t aken in to considerat ion. CAF alsoseeks the creation of local communitydevelopment capabilit ies and opt ions, espe-cially in the case of Native peoples or localcommunit ies who, due to t heir vulnerabilit y,may be directly affected by an operation’sexecution.

XIII. Child protection. CAF fin ances no projects

involving the direct or indirect exploit ationof minors.

XIV. Gender equi ty. CAF observes gender equityin t he operat ions it f inances.

(Continues from the previous page)



A comprehensive, systemic approach

This methodological approach is applied toinf rast ructure o perati ons, and social and envi-ronmental development operations involvingconst ruction work and/or t he signif icant expans-es of land. The main aspect s of the approach are:

Understanding and analyzing natural andhuman systems such as the way geospheric,hydric, atmospheric, biotic, demographic,

anthropological, ethnic, cultural, archeologi-cal, participati ve, econo mic, and in st it ut ionalelements interact .

Identifying levels of vulnerability and risk ineach of the components of the abovementioned systems with an analysis based onthe natural and/or social units that comprisethem, and specializing environment al manage-ment according t o urban, rural, or natural areas.

Considering mechanisms to f oster the inf orma-tion and participation of any communitiespresent i n t he areas of inf luence, taking i nt oconsideration their points of view in anycourses of act ion d ecided up on f or operations’social and environmental management. Inaddit ion, w hen it sees the need and dependingon how critical the project is and how

vulnerable the communities affected are, itconsiders carrying out addit ional pub lic consul-tation to that required by a country’s legalsystem.

Considerin g exist ing levels of deteriorat ion inecosystems before executing an operation, aswell as any risks and impacts that may be gene-rated later on. To this end, it identifies theecosystemic funct ions that could be disturbed asa result of the operation , as well as the eff ect s

of such a disturbance on the smooth running ofthe operation.

Identi fying the crit ical factors to be managed inorder to guarantee the functionality ofecosystems, human sett lement s, and the projectitself. Among other things, it identifies anyopportunit ies fo r conservat ion, environmentalmarket development, business developmentsuppo rt f or Small and Medium Ent erprises(SMEs), and social investment .

Identifying the administration and manage-ment measures needed t o p revent , mit igate,and/or o ff set any risks and imp act s ident if ied,and promot e opportunit ies, and estimating t hecost s and budget s needed fo r t heir implemen-tation.

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Box Nº 2



Environmental and social managementprocedures and instruments in the credit cycle

The objective of CAF’s Operat ions Environmentaland Social Management System is t o guarant eet he physical, environment al, and social sust ain-ability of projects that make provision for thevarious operat ions f inanced by the Corporat ion .To d o t his, t he System t ransversally int egrat es all

available t echnical, technolog ical, human, andf inancial resources at every phase of t he creditpr ocess as st ip ulat ed by CAF.

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The cleaner production approach

For i ndust rial or manufactu ring operations, t hisapproach envisages:

Ident if ying and assessing a project’s environ -mental management and industrial processes,and st eering it s recommendat ions to allow forthe fall in consumption of pollutant inputs,energy, and natural resources serving as rawmaterials, in order to sof t en the impact o n the

environment.

Identifying options for technology updating,process modification, recovery, recycling andreuse of raw materials and waste, and theint roduct ion of best p ract ices, among ot hers, toreduce the pollutants produced by industryliquid discharges, atmospheric emissions, orsolid or toxic waste disposal across all indust rialpro cesses. This approach is combined wit h theuse of traditional clean-up procedures andt echniqu es t ailo red t o business needs, currentstandards, and the economic viability of theprojects being f inanced.

Involving mechanisms to guarantee the parti-cipation of actors related with the project’senvironmental and social management , makingallowances for t he diff erent human sett lementsand communities involved, workers andsuppliers, and so on.

Considering the applicat ion of current standardsto shareholder countries’ clients in order toguarantee industrial safety conditions and

occupational health for w orkers.

Promot ing compliance wi t h stand ards on t heuse of prenarcotic and other substancesrestricted by international agreements.

Ident ifying the administration and managementmeasures needed to p revent , mit igate, and/oroffset any risks and impacts identified, andpromot e opport unit ies, and estimating the costsand budgets needed fo r their implementation.

The Corporate Loans environmentaland social management approach

The environmental and social managementapproach for Corporate Loans analyzes andpromotes the measures needed for clients toincorporat e pol icies, st rat egies, programs, andinst rument s, and t o supp ly t echnical and humanresources, and so pay due at t ent ion to t he envi-

ronmental aspects of their operations andcompliance with their countries’ legislation.

Box Nº 4

Box Nº 3



Actions geared to promoting sustainable markets and financing sectors such as carbon,clean and alternat ive energy, clean produ cti on, and urban enviro nment al management.



The System also incorporates a series of t echnicaland report procedures and inst rument s t ailoredt o t he needs of each p hase of t he credit cycle.These include orig inat ion, assessment , formal iza-t ion , and di sbursement s and administ rat ion , (seeFigure Nº 2 on this page and Figure Nº 3 on p. 26).

Origination CAF incorporat es the preliminary environ ment aland social ri sk assessment on the basis of ident i-ficatio n o f pot ential credit operatio ns (origina-tion). This assessment becomes a tool for deci-

sion-making regarding:The incorporat ion or o therwise of t he operationin t he CAF port fo lio.

The establishment of the major risks andcritical aspects in the event of incorporationwhich, from an environmental and socialperspective, will have to be examined more

closely at the assessment phase (due dil igence).

The preliminary identif ication of any environ-mental and social opportunities that can bebuilt on t hrough the operation.

Operat ion s Environment al and Social Manage-ment System has two instruments speciallydesigned for this assessment. The first is thePreliminary Enviro nment al and Social Risk Analy-sis Matrix, specialized for the different types ofop erat ions f inanced by CAF. The secon d is t heCondor Geographi c Info rmat ion System.

On t he basis of th e int eract ion of t he result s ofthe project type analysis and the sensitivi-ty/vulnerabilit y of t he environment, the Mat rixenables t he operat ion t o be categorized accord-ing t o t he scale of t he pot ential direct or ind irectenvironment al and social impacts.

The Condor Geographi c Inf ormat ion Syst em t ooenables sensit ive or vulnerable areas t o be id en-

t if ied, as well as pot ential environment al impact s

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Condor Geographic Information System

This data processing tool developed in a webenvironment belongs t o a Geographic Inf orma-tion System (SIG). This enables any sensitive orvulnerable areas to be established as a prelimi-nary step, as well as any pot ent ial environ ment aland social impact s of t he mainly linear proj ect s(roads, transmission l ines, pipelines, and so on) inmost o f Sout h America.

The syst em provid es a regi onal ly f ocused envi-ronmental and social analysis methodology,supported on a considerable wealth ofgeographic, environmental, social, economic,and political and administrative information,

centralized in a database georeferenced ondifferent scales.

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on t he g eospheric, hydric, at mospheric, biot ic,and social component s of mainly the linear proj -ects (see Box Nº 5).

The classif ications of “ high” and “ medium envi-ronmental and social risk” of necessit y imply f ullenvi ronment al and social assessment . This assess-ment includ es both t he review o f the assessmentby t he client and t he du e dil igence by CAF. Theoperat ion s classed as “ low ” or “ zero environ-ment al and social ri sk” require only cert ain basicreviews to guarantee the operation’s viability

and meet any Enviro nmen t al and Social Safe-guards applicable to t he operati ons.

From the environmental and social viewpoint,the risk def ini t ion phase culminates in t he classi-ficati on of operati ons int o high, medium, low, orzero r isk.

Assessment The review p rocess f or t he environm ent al andsocial assessment of operat ions classed as high ormedium risk seeks to identify any vulnerableareas, critical aspects, or environmental andsocial management measures needed t o p revent,cont rol, mit igate, and off set t he impacts identi -fied. It is thereby sought to incorporate thebudget s needed to implement t hese wit hin t heproject’s cost structure and, consequently, toanalyze any conditions or recommendationsbinding t he operat ion so as t o guarantee their

environmental, physical, and social viability. Inaccordance wit h t he meth odol ogical appro achesdescrib ed, Box Nº 6 (see p.24) hig hl igh t s some ofthe minimu m environment al aspect s at t he oper-ation’s assessment phase.

The assessment process also seeks to build onopportunities for social and environmentaldevelop ment f or t he communit ies and ecosys-

t ems present in t he areas of inf luence in o rder t oenhance the popu lations’ qualit y of lif e.

The environmental and social assessment ofoperations relies specifically on three purpose-built tools:

The Guid e to t he Enviro nmen t al and SocialAssessment of Infrastructure, Social andEnvironment al Development Operations.

The Guid e to t he Enviro nmen t al and SocialManagement Assessment of Industry andManuf actur ing Processes Operat ion s.

The Guid e to t he Enviro nmen t al and SocialManagement Assessment of Corp orat e Loans.

Box Nº 5



The results of the assessment, as well as theestablishment of the condit ions and environmen-tal and social recommendations binding theoperatio n, are recorded in an Environment al andSocial Repor t , wh ich is amon g t he document ssubmitted to the CAF Loans and InvestmentsComm it t ee (CPI). The environ ment al and socialassessment then b ecomes a decision-making t oolfo r th e viability or condit ions of fi nancing.

Formalization Rooted in the assessment process, this phase ofthe CAF credit cycle in corpo rates t he condit ionsand environ ment al, social, and l abor r ecommen-

dation s to wh ich t he operati on w ill be subject inthe relevant credit contract. The budgets toexecute these management measures are alsoincorporated. These may be part of the creditgranted by the Corporation, taken from thenation al coff ers, or f inanced wit h a combinat ionof these sources.

Disbursements and Administration At t he disbursement s and admin ist rat ion p hase,CAF st rives t o carry out any relevant cont rol andfollow-up, comprehensively monitoring theenvironmental and social condu ct of operatio nsby verifying compliance with safeguards and,

Environmental and social aspects in theoperations assessment process

In accordance wit h t he f eatures of t hese opera-ti ons and of t he environment in w hich t hey arecarried out, aspects of operations assessmentinclude:

Assessment and analysis of t he environment aland social studies advanced by the client incompliance with a country’s environmental

legislation.Any additional environmental impact studies,st rat egic environmental assessments or accumu-lative impact assessments, vulnerability anddisaster prevent ion analyses, or ot her studies oranalyses to deepen knowledge of any elementsof special int erest that may be aff ected by th eproject.

Prior review by specialist t eams of any det ailedinf ormati on and cart ography available, int er-

views with experts, researchers, and researchcenters, cont act wi th t he relevant environmen-tal and social auth orit ies at national, regional,local, and in ternational levels where applicable.

Analysis and interviews with the consultantsand companies carrying out the project’stechnical studies.

Field t rips to int ervention areas by t hese teams.

Consult atio n and int erviews wit h communit iespresent in t he pro ject ’s areas of inf luence andwit h local auth orit ies.

Any legislation and requirements by thecoun t ry’s environmental and social aut hor it iesapplicable to t he project .

The application of int ernational environmental

and social standards, or those def ined by ot hermult ilateral organizations, when the need arise.

Box Nº 6

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Actions geared to the generation and dissemination of environmentalinf ormat ion as an essenti al decision-makin g t ool.



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especially, with the social and environmentalcondit ions and recommendati ons laid out in t herespective credit contracts.

Generally speaking, the management of opera-tions –especially the most environmentally andsocially critical ones– is assessed annually. This isdone in tandem wit h rout ine environmental andsocial monit oring p rior t o approval of an opera-t ion’s disbursement s.

Environmental and social monitoring of opera-

tions enables CAF to identify aspects inadequate-ly complied w it h, imp act s and r isks unf oreseen inthe environment al studies or project assessment s,and t he physical and b udget ary execut ion levelsof the management conditions and measuresestablished, among ot her things, to duly incorpo-rat e any recommendations necessary.

The lessons learned in this follow-up can feed

back int o t he design and f ocus of new operationsas part of the continual improvement of CAF’senvironment al and social management .

For the environmental and social monitoring ofthe operations, the Corporation has designedtwo technical tools to support and steer theseactivities (see Figure 3): the Guide for Environ-ment al and Social Foll ow -Up on Operat ion s,appl icable t o t he periodic assessment s precedingdisbursement s or annu al assessment of crit icalproj ect s; and t he Guide for Final Environ ment aland Social Fol low -Up on Operat ions, wh ichassesses operations ex post at the close of theCAF credit cycle. Following the application ofthese instruments, technical memoranda aredraft ed that record t he conclusions of the follow-up and any recommendat ions necessary.

The task of follow-up is thus approached ast eamwo rk in conjunction w it h the environment,credit administ ration, and ot her areas of suppo rtin order to effectively ensure compliance withthe principles, safeguard guid elines, and appli ca-ble environment al and social legislation, and t heenvironment al and social condit ions or recom-mendations binding t he operat ion.

Other instruments The Operat ion s Environment al and SocialManagement Syst em also relies on t wo special-

ized i nst rument s (see Figure Nº 3):The Internal Manual of Environmental andSocial Assessment and Follow-Up for Operat ions,which sets out the guidelines, methodologies,procedures, guides, and other instrumentsappl icable to t he CAF operat ions cycle describ edabove.

The Environment al and Social Man agementInf ormati on System (SIGAS), an onl ine inf orma-tion system that stores and files: i) technical,legal, and financial documents; ii) designs,studies, assessments, and other informationprovided by the client; iii) the acts andpro nouncement s of t he variou s CAF consult a-t ion and decision-making autho rit ies and; iv) alldocuments relating to an operatio n’s environ-ment al and social management , includ ing anycommun ications by t he relevant environment aland social authorities, and any project, client,or communit y related public inf ormatio n.

This inst rument accord ingl y t ells us in real t imeabout t he prog ress of each operatio n’s environ-mental and social management from t he out set,linking all CAF personnel at Headquarters and in



Actions geared to the pro motionof conservation init iatives for species,

ecosystems, and natural and geneticresour ces, especially t hose crit ical in t he

provision o f environment al services.



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its Country Offices throughout the operation’senviron ment al and social management associat-ed t o the credi t cycle. The SIGAS thus becomes apermanent consult ation and decision-making t oolfor all authorit ies taking part in the operation.

These standardized instruments and proceduresgenerally enable highly efficient investment interms of time, human and technical resourcesmanagement , thu s cont ribut ing t o t he supple-ness that characteri zes CAF in i t s f inancing .

E.2 Inst itut ional EnvironmentalM anagement Plan

As part of it s responsibilit y to t he environment,CAF is current ly draw ing up a grou p o f measuresinvolving all its professionals, geared to reduc-ing and r ation alizing energy, wat er, and inputconsumption, and promoting practices thatreduce, reuse, and recycle waste and materials.

It t ends t o f avor d angerous wast e managementand f ost ers a healt hy wo rking atmosphere th atstimulates constant exchange and communica-t ion among it s collaborat ors.

F. Support f or t he reg ion’senvironment al management

CAF has, out o f p rinciple, made sign if icant eff ort sto support the conservat ion and sustainable useof natural resources and ecosystems, and tost rengt hen t he development of it s shareholdercoun t ries’ environment al sector, creating syner-gies and wor king in tandem w it h publ ic, privat e,and civil society act ors. The t acklin g o f this widearray of enviro nment al issues has result ed in t hedevelopment of t en str ategic lines of wo rk (seeBox Nº 7).

Strategic lines of work in the environment

Nat ure conservat ion .

The yield and sustainable use of natural andgenet ic resources, and biodiversit y.

St rength ening of natural capital and valuing ofservices furn ished by nat ure.

Promot ion o f th e use of clean and alternativeenergy, and energy efficiency.

Creat ion and suppor t fo r t he development o fenvironmental markets.

St reamlining of urban and industr ial environ-mental management .

Prevention and treatment of risk associatedwith adverse natural phenomena.

Support f or the incorporation and developmentof environmental and social management byfinancial inst itut ions.

Support f or t he inst itu t ional management andstrengthening of public, private, and civilsociet y environ ment al organization s.

Suppo rt and st rengt hening of civic part icipa-tion in environmental management anddispute settlement processes.

Box Nº 7

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In order t o encourage support f or t he conserva-t ion and sustainable use of nat ural r esources andecosystems, and t he development of the environ-mental sector CAF has, through these lines ofwork, created specific financing mechanisms, aswell as f ive st rategi c environment al programs.

The pro grams list ed below are dynamic and f lex-ible in the way they meet countries’ require-ments and t he individual dynamics of dif f erentissues.

F.1 Strat egic environment programs

Biodiversity Program (BioCAF)

This program is root ed in t he vast pot ential of theregion’s biodiversit y and genet ic resources for i t scountries’ sustainable development. Some ofthese count ries are classif ied as “ megad iverse” ,a status awarded at international level for the

number and variety of their species. In view ofthis, BioCAF support s signif icant eff ort s geared t oconservatio n of the ecosystems that are home t othis natural wealth, as well as various activitiesand init iatives to promote sustainable yield o f th ispotential and contribute to CAF members’ socialand economi c development .

Wit hin t he scope of it s work , BioCAF has est ab-lished t hree subpro grams, th rough wh ich it hasbeen making signif icant cont ribut ions to support :i) the promo tion of species and ecosystem conser-vatio n init iatives; ii) the development of promo-t ion mechanisms and t ools for b iod iversit y basedproducts and services, and other natural resources(e.g. green markets, biotrade, and biotechnolo-gy); and iii) act ivities promo t ing environm entalservices as a st rat egy to cont ribut e to t he conser-

vat ion of natu ral ecosystems and p romot e act iv-it ies that enhance the populat ions’ quality of lif e.

Latin American Carbon, Clean andAlternative Energies Program (PLAC +e )

Through t he PLAC+e, CAF cont ribut es to reducingglobal warming and promotes the use of cleanand alternat ive energy in Latin America by under-t aking and financing innovative project s.

Eff ort s have so f ar been directed at: i) promo t ingand acti vely participati ng in th e development o ft he GHG emissions reductio n market , wi t h t hepart icipation of t he publi c and private sectors; ii)supporting countries, production sectors, andprojects in securing buyers and generallycont ribut ing t o t he consolidat ion of a sustaineddemand for reductions in GHG emissions forLatin America and the Caribbean; iii) supplyingtechnical, int ermediation, and financing support

to projects with potential in GHG emissionsreductio n; iv) strengt hening nat ional insti tut ionsand mechanisms to st imulate and consolidate theGHG market; and v) supporting the region’scount ries in t he ident if ication and developmentof clean and alternat ive energy, and energy eff i-ciency projects wit h specialized lines of f inancing.

Cleaner Cities and Industries Program

The Cleaner Cit ies and Industries Program was setup in response to the growing environmentalpollution in urban areas and that caused bymanuf acturin g, min ing , and service indu st ries int he region, and in order to cont ribut e solut ionsthat lead to efficient energy use and lowerconsumption levels of inputs and naturalresources. The Prog ram’s act ivit ies f all i nt o t hree

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main lines of action: i) the environmental urbanmanagement, ii) the implementation of CleanProdu ct ion t echniq ues in Small, M edium, andLarge Ent erprises, and iii ) the promot ion of CleanProduction f inancing incentives and mechanisms.

In th e operatio ns it f inances under th is prog ram,CAF also supp ort s the adop t ion of best environ-ment al pract ices geared to t he saving and ef f i-cient use of water and energy, the use of cleantechnologies and processes, and of renewableenergies, the subst it ut ion of pollu tant input s andraw materials, and t he polluti on reduction of thecities and the various production, mining, andservice processes.

Disaster Risk Management Program (PREVER)

For more than five years, PREANDINO gavemomentum to national and sectoral policy-making th at prevent ed and mit igated t he risk of

natural disasters, and to the incorporation ofprevention in planning development in theAndean region.

Building on the results of PREANDINO, CAF iscurrent ly directing it s eff ort s at i t s new DisasterRisk Management Program, which aims tosupport the prevention, mitigation, and treat-ment of socioeconomic and environmentalimp act s associated wit h natural disast ers.

The Risk M anag emen t Pro gr am-PREVER has, aslines of act ion, est ablished suppo rt f or project sand act ivit ies t o do w it h: i) El Niño-relat ed riskmanagement and vulnerability reduction; ii)adapt ation and vulnerability t o climat e change;iii) contingent t reatment in response t o disasters;and iv) risk prevention from the municipalperspective.

Program to Promote Sustainable Development inFinancial Institut ions

This Progr am seeks to f oster t he int ernalizatio nof environmental management principles andpract ices in the reg ion ’s f inancial sect ors.

Among its long-term objectives, the Programraises the possibil it y of incorporat ing changes inthe countries’ financial system through a jointagenda with local actors and financial institu-t ions that are also CAF part ners and client s. Thesechanges wo uld encourage th e adopti on o f envi-ronmental management in financial practicesand bui ld a t raining and dissemination st rategyfor organizations to reduce risk, cut operatingcosts, and create new business opportunitiesthrough the incorporation of the concept ofsustainable development in their management.

Coordination of Environmental Strategy with

other CAF programsThe environmental and social principles, safe-guard guidelines, strategic lines of work, andothers matters set out in this EnvironmentalSt rategy are involved horizont ally in the wid erange of CAF programs. These includ e t he SocialResponsibility Programs, the CompetitivenessSupp ort Program, t he Governance Progr am, theAndean Educat ion A genda, and many more.

F.2 Environment al sector f inancing

CAF also supports its shareholder countries’public, private, and mixed sectors through vari-ous forms of financing aimed at strengtheningand d evelopi ng t he environment al sector. Theseinclude credits, asset investment, and guaran-tees, either independently or cofinanced withot her f inancial inst itu t ions.

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G. Implem entat ion and follow -upof CAF Environmental Strategy

CAF periodically assesses the procedures andinst rument s in t his Environmental St rat egy docu-ment in the framework of continual improve-ment, seeking at all times to opt imize and rat ion-alize the use of technical, economic, and humanresources. This assessment also pays at t ent ion tot he inherent dynamics of t he region’s poli t ical,economic, cultural, social, and natural processes.

CAF includ es the widespread part icipat ive consul-tation of all the organization’s internal andextern al aut horit ies in it s periodi c assessment s,with the participation of governments, NGOs,and civil society represent at ives.

On this basis, CAF can modify its instruments,procedures, and programs while, at the sametime, seeking a healthy environment, and theprot ect ion and conservation of nature.



This book was printedin November 2008Caracas-Venezuela.This edit ions is fora t housand copies.

caf and the environment caf and the environment

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