ENVIRONMENTAL AND SOCIAL COMMITMENT PLAN (ESCP) FOR COVID-19 EMERGENCY RESPONSE PROJECT Ministry of Industry and Commerce (MOIC) through its Department of Small and Medium Enterprise Promotion (DOSMEP) Emergency Support for MSME Access to Finance Project (P174169) ENVIRONMENTAL and SOCIAL COMMITMENT PLAN (ESCP) August 31, 2020 1|Page ENVIRONMENTAL AND SOCIAL COMMITMENT PLAN (ESCP) FOR COVID-19 EMERGENCY RESPONSE PROJECT ENVIRONMENTAL AND SOCIAL COMMITMENT PLAN 1. Lao PDR (hereinafter the Recipient) will implement the MSME Access to Finance Emergency Support Project (the Project). The International Development Association (hereinafter the Association) has agreed to provide financing for the Project. 2. The Recipient will implement material measures and actions so that the Project is implemented in accordance with the Environmental and Social Standards (ESSs). This Environmental and Social Commitment Plan (ESCP) sets out material measures and actions, any specific documents or plans, as well as the timing for each of these. 3. The Recipient will also comply with the provisions of any other environmental and social (E&S) documents required under the Environmental and Social Framework (ESF) and referred to in this ESCP, such as Environmental and Social Management System (ESMS), Stakeholder Engagement Plan (SEP) and Labor Management Procedure (LMP) and the timelines specified in those E&S documents. 4. The Recipient is responsible for compliance with all requirements of the ESCP even when implementation of specific measures and actions is conducted by the Ministry referenced in 1. above. 5. Implementation of the material measures and actions set out in this ESCP will be monitored and reported to the Association by the Recipient as required by the ESCP and the conditions of the legal agreement, and the Association will monitor and assess progress and completion of the material measures and actions throughout implementation of the Project. 6. As agreed by the Association and the Recipient, this ESCP may be revised from time to time during Project implementation, to reflect adaptive management of Project changes and unforeseen circumstances or in response to assessment of Project performance conducted under the ESCP itself. In such circumstances, the Recipient will agree to the changes with the Association and will update the ESCP to reflect such changes. Agreement on changes to the ESCP will be documented through the exchange of letters signed between the Association and the Borrower. The Recipient will promptly disclose the updated ESCP. 7. Where Project changes, unforeseen circumstances, or Project performance result in changes to the risks and impacts during Project implementation, the Recipient shall provide additional funds, if needed, to implement actions and measures to address such risks and impacts. 2|Page ENVIRONMENTAL AND SOCIAL COMMITMENT PLAN (ESCP) FOR COVID-19 EMERGENCY RESPONSE PROJECT MATERIAL MEASURES AND ACTIONS TIMEFRAME RESPONSIBLE ENTITY/AUTHORITY MONITORING AND REPORTING A REGULAR REPORTING: Prepare and submit to the Association regular Six-monthly, throughout Project DOSMEP (With input from PFIs) monitoring reports on the environmental, social, health and safety implementation. (ESHS) performance of the Project, including but not limited to, stakeholder engagement activities and grievance log in a format to be provided by the Association. ESS 1: ASSESSMENT AND MANAGEMENT OF ENVIRONMENTAL AND SOCIAL RISKS AND IMPACTS 1.1 ORGANIZATIONAL STRUCTURE: The Recipient shall establish and An E&S senior representative and an ESF DOSMEP (supported by PFIs) maintain a unit within DOSMEP to take on overall responsibility for Focal Point will be designated/appointed by Project implementation, including implementation of this ESCP with DOSMEP when each PFI will be established qualified staff and resources to support management of ESHS risks and to support the Project before the beginning impacts of the Project including ensuring there is a nominated E&S of the relevant Project activities and Focal Point who is responsible for the monitoring of the throughout Project Implementation. implementation of the Environmental & Social Management System (ESMS). The DOSMEP will prepare and implement the ESMS as well as Part time consultants may be hired and PFIs and PCG facility. In order to achieve this, the DOSMEP and retained on an as-required basis. Participating Financial Institutions (PFIs) as well as the Partial Credit Guarantee (PCG) Fund Manager need to assign both a senior Each PFI and the PCG fund manager will PFIs and PCG fund manager management representative to have overall accountability for assign/appoint E&S focal point(s) to support environmental and social performance plus a staff member as an E&S the implementation of and compliance with focal person to coordinate E&S requirements and implementation of the ESMS and ESCP. the project ESCP and ESMS. 3|Page ENVIRONMENTAL AND SOCIAL COMMITMENT PLAN (ESCP) FOR COVID-19 EMERGENCY RESPONSE PROJECT MATERIAL MEASURES AND ACTIONS TIMEFRAME RESPONSIBLE ENTITY/AUTHORITY 1.2 ENVIRONMENTAL AND SOCIAL ASSESSMENT/MANAGEMENT PLANS a. The ESMS needs to be prepared, DOSMEP- (with input from PFIs) AND INSTRUMENTS/ CONTRACTORS consulted, and disclosed 45 days after a. Assess the environmental and social risks and impacts of proposed the Effective Date and before the Sub-project activities, in accordance with Environmental and Social approval of any subproject under Management System (ESMS), prepared pursuant to the provisions of components A and B (PCGs and Line of the Financing Agreement. The ESMS will identify, assess, manage, Credit). and monitor the E&S risks and impacts of MSME sub-loans on an ongoing basis, commensurate with the nature and scale of their risks b. Before the approval and carrying out of and impacts and support Participating Financial Intermediaries (PFIs) the relevant Project activities, and PFIs in meeting the ESMS requirements. thereafter throughout the carrying out b. Prepare, disclose, adopt, and implement any environmental and of such activities. social management plans or other instruments (as required under ESS1, 2, 3, 4, 7, 9 and 10) required for the respective Sub-project c. Before approval and launching the activities based on the assessment process, in accordance with the procurement process for the relevant PFIs ESSs, the ESMS and other relevant Good International Industry Project activities, and thereafter Practice (GIIP) in a manner acceptable to the Association. throughout the carrying out of such c. Incorporate the relevant aspects of this ESCP, including, inter alia, activities. any environmental and social management plans or other instruments, ESS2 requirements, and any other required E&S measures, into the E&S specifications of the procurement documents and contracts with contractors and supervising firms. Thereafter ensure that the contractors and supervising firms comply with the ESHS specifications of their respective contracts. 4|Page ENVIRONMENTAL AND SOCIAL COMMITMENT PLAN (ESCP) FOR COVID-19 EMERGENCY RESPONSE PROJECT MATERIAL MEASURES AND ACTIONS TIMEFRAME RESPONSIBLE ENTITY/AUTHORITY 1.3 EXCLUSIONS: Exclude the following type of activities as ineligible for DOSMEP/(with input from PFIs) financing under the Project: • Any activities under the Exclusion List or where there is a non- The exclusion list will be agreed with the compliance with the relevant E&S legal requirements of Laos. Bank and finalized as part of the ESMS prior • Any financing that does not fit the eligibility criteria for MSMEs to disclosure 45 days after effectiveness under the Project. • Any activities that are “substantial� and “high� risk. • Any other exclusion criteria to be specified in the ESMS. The exclusion list and applicable Lao PDR’s E&S laws as well as guidance under ESS1, 2, 3, 4, 7, 9 and 10 are the “Applicable Performance Requirements�. 1.4 The preliminary environmental and social risks screening of the first two Prior to the approval of these sub-loans. DOSMEP/PFIs sub-loans of each PFI should be sent to the Association for prior approval. ESS 2: LABOR AND WORKING CONDITIONS 2.1 LABOR MANAGEMENT: The Project shall be carried out in accordance Throughout Project implementation. DOSMEP/(with input from PFIs) with the project’s Labor Management Procedure (LMP) aligned with ESS2, which includes provisions on Occupational Health and Safety (OHS) and measures related to emergency preparedness. This shall be done in a manner acceptable to the Association, for the Recipient and the PFI’s own operations. ESS 3: RESOURCE EFFICIENCY AND POLLUTION PREVENTION AND MANAGEMENT 3.1 Relevant aspects of this standard shall be considered, as needed, under action 1.2 above, including, inter alia, measures to manage health care wastes and other types of hazardous and non-hazardous wastes as well as promote resources (water, energy, raw material) efficiency ESS 4: COMMUNITY HEALTH AND SAFETY 4.1 Relevant aspects of this standard shall be considered, as needed, under action 1.2 above including, inter alia, measures to: prevent and respond to sexual exploitation and abuse, child labor and sexual harassment. ESS 5: LAND ACQUISITION, RESTRICTIONS ON LAND USE AND INVOLUNTARY RESETTLEMENT 5|Page ENVIRONMENTAL AND SOCIAL COMMITMENT PLAN (ESCP) FOR COVID-19 EMERGENCY RESPONSE PROJECT MATERIAL MEASURES AND ACTIONS TIMEFRAME RESPONSIBLE ENTITY/AUTHORITY 5.1 Not relevant . ESS 6: BIODIVERSITY CONSERVATION AND SUSTAINABLE MANAGEMENT OF LIVING NATURAL RESOURCES 6.1 Not relevant ESS 7: INDIGENOUS PEOPLES/SUB-SAHARAN AFRICAN HISTORICALLY UNDERSERVED TRADITIONAL LOCAL COMMUNITIES 7.1 Relevant aspects of this standard shall be considered, as needed, under action 1.2 above. Ensure the implementation of Project activities affecting Indigenous Peoples in accordance with ESS7 including through adapting the project’s ESMS and SEP in a manner acceptable for the Association to make sure that IPs are fully consulted in a culturally-appropriated manner about and have opportunities to benefit from the Project activities. ESS 8: CULTURAL HERITAGE Not relevant. 6|Page ENVIRONMENTAL AND SOCIAL COMMITMENT PLAN (ESCP) FOR COVID-19 EMERGENCY RESPONSE PROJECT MATERIAL MEASURES AND ACTIONS TIMEFRAME RESPONSIBLE ENTITY/AUTHORITY ESS 9: FINANCIAL INTERMEDIARIES 7|Page ENVIRONMENTAL AND SOCIAL COMMITMENT PLAN (ESCP) FOR COVID-19 EMERGENCY RESPONSE PROJECT ESMS: The DOSMEP, PFIs and fund manager will implement, and The ESMS will be prepared, consulted, and DOSMEP, PFIs and fund manager update as appropriate, the ESMS to meet the requirements of ESS 9, disclosed 45 days after the Effective Date 1,2, 3, 4, 7, 10 including ensuring there is the capacity to maintain it (before the approval of any subproject through the appointment of the E&S Focal Point. under components A and B (PCGs and Line of Credit) andmaintained throughout The ESMS will include at a minimum the following components: (i) the implementation of the Project. PFI’s environmental and social policy; (ii) Clearly defined E&S procedures and capacity: to screen subprojects (application of exclusion list, review of industry sector and technical aspects of each subproject) and conduct due-diligence to evaluate E&S risk and assign risk categories (low, moderate, substantial and high risk); (iii) systems/processes for due diligence within the PFI to evaluate, monitor, review and manage E&S risks and impacts of the subprojects: evaluate the E&S performance of on-going subprojects and the portfolio on a periodic basis; (iv) organizational capacity and competence: including a budget and a senior management position designated for reporting on the ESMS as well as providing training and capacity-building on ESMS procedures and performance; (v) procedures of update the ESMS; (vi) the project’s Labor Management Procedure (LMP) aligned with ESS2, including provision on Occupational Health and Safety (OHS) and measures related to emergency preparedness; and (vi) external communications mechanism, including a Stakeholder Engagement Plan and a Grievance Mechanism. PMU and each of the Participating Financial Institutions (PFIs) joining the project will assign both a senior management representative to have overall accountability for environmental and social performance plus a staff member or consultant as E&S Focal Point to manage the day-to-day implementation of ESMS. The Terms of Reference of the E&S Focal Point, including required technical skills and experience, will be included in the ESMS and Project Operations Manual (POM). ESMS will specifically include the project’s exclusion list, following action 1.3. The ESMS will specify the exclusion list referred to in action 1.3. During the implementation stage of this project, all candidate sub- projects will be screened against the project’s exclusion list of the ESMS, 8|Page ENVIRONMENTAL AND SOCIAL COMMITMENT PLAN (ESCP) FOR COVID-19 EMERGENCY RESPONSE PROJECT MATERIAL MEASURES AND ACTIONS TIMEFRAME RESPONSIBLE ENTITY/AUTHORITY categorized and assessed for their E&S risks and impacts prior to financing under the project. ESS 10: STAKEHOLDER ENGAGEMENT AND INFORMATION DISCLOSURE 10.1 STAKEHOLDER ENGAGEMENT PLAN: Prepare, disclose, adopt, and A draft SEP has been prepared and DOSMEP/PCG fund manager/PFIs implement a Stakeholder Engagement Plan (SEP) consistent with ESS10, disclosed during the Appraisal. The SEP in a manner acceptable to the Association. shall be implemented throughout the Project. 10.2 GRIEVANCE MECHANISM: Accessible grievance arrangements shall be A project Grievance Mechanism is DOSMEP /PFIs made publicly available to receive and facilitate resolution of concerns described in the SEP and shall be and grievances in relation to the Project, consistent with ESS10, in a maintained throughout Project manner acceptable to the Association. implementation. CAPACITY SUPPORT (TRAINING) A DOSMEP, PFIs and the PCG Fund Manager and other relevant A SEP has been prepared and disclosed DOSMEP/PFIs/Association implementing support staff responsible for the Project, including the during the Appraisal. The SEP shall be E&S Focal Point, to receive training (mainly from consultants but, updated as necessary and implemented sometime, from the staff of the Association) on the Project’s ESMS and throughout the Project SEP, GRM Labor Management Procedures, provisions to prevent sexual abuse (SEA), Gender Based Violence (GBV) and/or violence against children (VAC), and the roles and responsibilities of different key agencies in the ESF implementation. B The Recipient will implement environmental and social training At project launch workshop after board DOSMEP activities, per agreed timelines to DOSMEP’s senior management and approval and throughout the project internal staff at PIU and involved units, E&S consultant, PFIs, PCG Fund implementation Manager and MSMEs CONTINGENCY EMERGENCY RESPONSE (CERC) COMPONENT 1 In case the Contingent Emergency Response Component (CERC) is Adopt CERC Manual and include CERC DOSMEP/PCG fund manager/PFIs activated, activities envisaged under CERC will be similar in nature and provisions in ESMS before CERC design as activities under the project and following the similar eligibility activation. Apply the CERC Manual and criteria and exclusion lists to be implemented by PFIs and PCG fund CERC-ESMS provisions throughout the manager in line with the same ESMS and implementation arrangement implementation of CERC activities. under this project. DOSMEP will prepare a CERC Operations Manual and CERC provisions in the ESMS and submit to Association for approval before CERC activation to govern the operation of the CERC component. 9|Page