A project in Colombia can have its environmental license in force, its permits up to date and its compliance reports filed, and still fall short of what international lenders require. That is not a contradiction: the license and the IFC Performance Standards answer different questions.
Two frameworks with different purposes
The environmental license confirms that the project complies with Colombian law and authorizes it to proceed under a set of management and monitoring obligations. The Performance Standards test whether environmental and social risks are managed in a way the lender finds acceptable for its own exposure, including reputational exposure.
National law is always the starting point: the IFC standards require compliance with it. Gaps appear where the international standard asks for something more, or asks for it differently.
The most common gaps, standard by standard
| Standard | What the Colombian framework normally covers | What lenders usually ask for in addition |
|---|---|---|
| PS1 | Environmental impact assessment, environmental management plan, monitoring plan, environmental compliance reports. | An environmental and social management system that covers contractors, assessment of cumulative impacts and associated facilities, a stakeholder engagement plan and a grievance mechanism for the life of the project. |
| PS2 | Labor law and the statutory occupational health and safety management system (SG-SST). | Human resources policies, a workers' grievance mechanism, oversight of contractor labor conditions, accommodation standards and labor risk management in the supply chain. |
| PS3 | Emission, discharge and resource-use permits, with national regulatory limits. | Performance levels from the Environmental, Health and Safety Guidelines where more stringent, greenhouse gas quantification and climate change risk assessment (EP4). |
| PS4 | Disaster risk management plan and contingency plan. | Traffic and labor influx management, security personnel risk assessment, and emergency preparedness coordinated with the community. |
| PS5 | Land acquisition: purchase, easements and, where applicable, expropriation, with compensation for those with recognized rights. | Attention to economic displacement and to occupants and users without formal title, compensation at replacement cost, and a monitored livelihood restoration plan. |
| PS6 | Biotic characterization and offsets under the national biotic offsets manual. | Critical habitat assessment, demonstration of no net loss or net gain, and a biodiversity action plan with long-term monitoring. |
| PS7 | Prior consultation with the ethnic communities whose presence is certified by the competent authority. | Identification using the standard's own criteria, a documented process of informed consultation and participation and, in specific circumstances, free, prior and informed consent. |
| PS8 | Preventive archaeology program before the national archaeology institute (ICANH). | A chance find procedure applied by all contractors, and consideration of intangible heritage and community access. |
Three gaps worth looking at first
Land and livelihoods
Land acquisition focuses on owners and rights holders. PS5 also asks about those who live or work on the land without owning it: tenants, sharecroppers, day laborers, occupants. If the project has already acquired the land without documenting what happened to them, closing the gap means reconstructing that history.
Biodiversity
The license offsets and PS6 do not measure the same thing. The former respond to the ecosystems affected; the latter focuses on the biodiversity values that trigger critical habitat and requires net gain for them. A timely critical habitat assessment avoids finding this out during due diligence.
Contractors
The license binds the license holder. Lenders expect that holder to show how it controls its construction contractor and subcontractors: what it requires of them by contract, how it supervises them and what they report. It is far easier to include this before signing the construction contract than to negotiate it afterward.
What the license does resolve
A rigorous licensing process settles a good part of the work: the baseline, the identification of impacts, the management measures, preventive archaeology and, where applicable, prior consultation. The analysis against the Performance Standards does not start from scratch; it starts from there and focuses on what is missing.
How to get ahead of it
- Do the gap analysis during development. The earlier gaps are identified, the more options there are to resolve them within the schedule.
- Align the scope of studies from the outset. If the impact assessment is still being prepared, including IFC requirements costs less than supplementing it later.
- Carry the requirements into the construction contract. What is not in the contract is hard to enforce.
- Document. Many due diligence gaps are evidence gaps: the project did things properly but cannot demonstrate it.
At Watenka we carry out gap analyses against the IFC Performance Standards and the Equator Principles for projects in development, construction and operation. For a refresher on what each standard requires, see our guide to the eight Performance Standards.
Note. This article is a general guide. Each project's gaps depend on its sector, its location, the quality of its studies and the specific requirements of its lenders.