Environmental & social risk

Solar PV Solar PV

Description (What is the Risk)

The risk of the existing latent environmental conditions affecting the project and the subsequent risk of damage to the environment or local communities.

Risk Allocation (Who typically bears the risk)

Allocation: Public Private Shared
Rationale

The Private Partner will have primary responsibility to manage the environmental and social strategy across the project.

The Private Partner will retain responsibility for social impacts which are unavoidable as a result of the development of the project (e.g. compensation relocation of urban communities / businesses).

Mitigation Measures (What can be done to minimize the risk)

The Private Partner must ensure that the construction and/or operating contractor complies with any applicable permits and consents by way of the inclusion of corresponding obligations in the construction contracts.

Government Support Arrangements (What other government measures may be needed to be taken)

The project may be treated as a "strategic interest" ?project and benefit from an expedited or co-ordinated permitting process.

Comparison with Emerging Market

Contracting authorities are requiring Private Partners to engage in wider community engagement during the permitting phase. A recent trend is a push for localisation of benefits including community investment and requiring Private Partners to give priority to local contractors and suppliers.

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Description (What is the Risk)

The risk of the existing latent environmental conditions affecting the project and the subsequent risk of damage to the environment or local communities.

Risk Allocation (Who typically bears the risk)

Allocation: Public Private Shared
Rationale

The Private Partner will have primary responsibility to manage the environmental and social strategy across the project.

The Private Partner will retain responsibility for social impacts which are unavoidable as a result of the development of the project (e.g. compensation for expropriation of indigenous land rights and/or relocation of urban communities / businesses).

Mitigation Measures (What can be done to minimize the risk)

The Private Partner must ensure that the construction and/or operating contractor complies with any applicable permits and consents by way of the inclusion of corresponding obligations in the construction contracts.

Government Support Arrangements (What other government measures may be needed to be taken)

The Private Partner will need to take meaningful steps both before and during the project to manage social impacts of construction and operation.

Investors and lenders may expect to see a plan to see how these aspects are dealt with and this may to be recorded in the Finance Documents.

Comparison with Developed Market

International lenders and development finance institutions are particularly sensitive about environmental and social risks, as a result of their commitment to the Equator Principles. They will look very closely at how these risks are managed at both private and public sector level and this scrutiny is helpful to mitigate the risks posed by these issues.

Contracting Authorities may seek strong protections as regards site remediation ?and transfer provisions due to solar PV projects having a shorter design life than traditional infrastructure projects.

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