Environmental & social risk

Solid waste collection, disposal, landfill and recycling Solid waste collection, disposal, landfill and recycling

Description (What is the Risk)

The risk of existing latent environmental conditions affecting the project and the subsequent risk of damage to the environment or local communities.
The risk that all necessary statutory and environmental permits and consents for the processing and treatment of relevant waste sources have been obtained.

Risk Allocation (Who typically bears the risk)

Allocation: Public Private Shared
Rationale

The Private Partner will have primary responsibility to accept the project site in an 'as is' condition, subject to Contracting Authority's disclosure of relevant matters, and manage the environmental and social strategy across the project, as well as obtaining all required licenses, permits and authorizations as necessary.

Existing environmental risks of the site prior to the Private Partner's acceptance of the site that have not been disclosed or within the knowledge of the Private Partner prior to commercial close will be deemed to be the responsibility of the Contracting Authority. See comments on 'Land purchase and site risk' for a waste management BOT project in developed markets.

Social risks, insofar as they may involve indigenous groups, will be the responsibility of the Contracting Authority.

The Private Partner will procure the necessary consents, including environmental permits, at its own expense.

The Private Partner will be required to comply with the terms of and observe all conditions attaching to any and all necessary consents and any planning agreements insofar as they may apply to the site from time to time. This includes a requirement to obtain, implement and maintain and renew as necessary all necessary consents.

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

The Contracting Authority should conduct the necessary due diligence in order to ascertain the environmental fitness of the site and disclose all known environmental issues to the Private Partner.

The Contracting Authority will be required to review all environmental plans put forth by the Private Partner, to ensure that such plans will be adequate to appropriately manage the risks of the project.

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

The Contracting Authority 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 need to be contractualised.

Comparison with Emerging Market

Environmental scrutiny is increasing even in emerging markets, as both Private Partners and Contracting Authorities have come under increasing burdens to develop sound environmental and social risk management plans before construction begins.

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