The document discusses the U.S. Development Finance Corporation's (DFC) approach to assessing environmental and social risks and development impacts of projects. It describes DFC's Office of Development Policy, which conducts environmental and social risk assessments, ensures compliance with international standards, and measures development impacts using a scoring system called the Impact Quotient. It also discusses DFC's process for policy clearance of projects, monitoring project compliance, and evaluating development outcomes.

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U.S. Development Finance
E&S Risk Assessment & Impact Quotient
OECD SEARP RPN
– Sustainable Infrastructure
Manila - April 25, 2022

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Topics
1) Intro to DFC
2) Office of Development Policy
3) Environmental and Social Risk Assessment
4) Impact Quotient Methodology
5) Monitoring and Evaluation

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Introduction to DFC

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DFC catalyzes private sector investment by providing
its tools to commercially viable investments when the
private sector is not willing or able to do the same.
• Investment transaction -based
• Development impact – not equipment/exports – focused
• International environmental, social & governance standards
What We Do

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Products and Services
Debt
Financing
Corporate and project
loans and guarantees of
up to $1 billion with
tenors as long as 20
years for private sector-
driven, commercially
viable investments
Political Risk
Insurance
Protection up to $1 billion
against risks including
currency inconvertibility,
governmental interference,
and political violence
Investment
Funds
Debt and equity
investments in
emerging market
private equity funds
committed to
development impact
Equity
Investment
Direct investment into
high impact
technology-based
businesses seeking
growth capital
Technical
Assistance
Targeted technical
assistance to promote
viability or impact of
potential DFC-supported
projects

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Office of Development Policy

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ODP works to ensure projects produce positive
developmental impacts, apply best practices with
respect to environmental and social safeguards, and
respect human rights, including worker rights.
Office of Development Policy

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ODP Responsibilities
Development
Impact & U.S.
Economic Impact
Social Risk
Assessment
Environmental Risk
Assessment
Technical
Development
Impact Measurement
and Monitoring
DFC evaluates every
project using its
performance
measurement tool, Impact
Quotient (IQ) to measure,
monitor, and evaluate its
developmental impact
around the world across
three main areas: Growth,
Innovation and Inclusion.
DFC annually monitors
projects in its portfolio
through self reporting by
clients via the
Development Outcome
Survey and conducts in-
depth on-site evaluations
for both risk and
developmental impact.
Considers potential and
existing DFC projects in
order to identify and
require commensurate
mitigation and
management measures
for negative impacts to
a project’s workforce
and affected groups or
people.
Considers potential and
existing impacts of DFC
projects in order to
identify and require
commensurate mitigation
and management
measures for negative
impacts on Worker’s
Occupational Health and
safety and the
Environment
Feasibility studies and
technical assistance
support robust project
preparation to support
development outcomes,
or improve the
developmental impact or
commercial sustainability
of existing DFC activities.

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Policy Clearance Process
1. Screen: Review the
project and identify any
environmental, social or
US Effects risks as well
as identify the
Development Challenges
in the country or region.
2. Application:
Project sponsor
submits Form 007 to
ODP along with
Project Documents.
3. Review: An analyst
from ENV, SOC and
ECON is assigned to the
project and analysts
review and assess
documentation to identify
gaps and determine what
additional information is
required for the IQ Score
analysis and clearance.
4. Due Diligence: Analysts
send questions to the clients
and the deal teams and due
diligence site visits are
performed as applicable.
5. Clearance: Analysts draft
clearances based on research,
responses from clients
incorporating any development
objectives, mitigation measures
or loan conditions as well as the
final IQ score and analysis.
6. Document: Projects are
“Cleared” and ODP reviews final
conditions incorporated in finance
and insurance agreements and
consents for accuracy.
7. Monitor: ODP reviews reports
required under contracts as well
as reviews the annual
Development Outcome Survey
(Form 008) submitted annually by
clients.
8. Evaluate: ODP conducts
on-site visits to projects to
check for compliance as well
as to understand the
development impacts of a
project for lessons learned.

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Environmental & Social Risk Assessment

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Topics Covered in the ESPP
• Risk screening and categorization
• Due diligence
• Standards
• Public consultation and disclosure
• Contract conditions and compliance
• Monitoring
• Climate change and GHG accounting
• Country Eligibility for Worker Rights
• Illustrative List of High-risk Projects
• DFC’s Categorical Prohibitions

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Environmental and Social Standards
In addition:
• Internationally Recognized Worker Rights
• World Bank Industry Sector Environmental, Health and Safety Guidelines

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Transparency and Disclosure
• ESPP is currently the only DFC policy document that is public
• Includes some non-E&S disclosure issues because DFC does not have a stand-alone
transparency policy
• References the Office of Accountability
Project-specific disclosure requirements:
• Required by statute to disclose E&S Impact Assessment for 60-day public comment
period
• Required by statute to notify host countries about potential support for high-risk projects

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Sectoral topics covered in ESPP
• Financial Intermediaries
• E&S review focuses on the management systems of the Fund
• Do not assess downstream investments (but we do monitor) on E&S
• Global health
• Third-party accreditation for patient care, safety and efficacy of pharma and vaccines
• Forestry
• Third-party accreditation like Forest Stewardship Council
• Traceability
• Climate change
• GHG accounting on project and portfolio basis
• Climate risk screening
• Developing new methodology to better support adaptation and resilience support
• Worker rights/ human rights
• GSP eligibility
• DRL screening

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What is IQ?

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IQ: DFC’s Development Impact Management System
The IQ is the DFC’s development impact management system that calculates
an IQ Score based on each project’s projected and actual contribution to
economic growth, inclusion, and innovation. The IQ Score:
 helps inform decision-making during the project approval process
 classifying projects into Highly Developmental (score of 112.5 or more),
Developmental (score between 37.5 and 112), and Indeterminate
(score below 37.5)
 reflects both the positive and negative impacts of the investment
 considers the relevance of the impacts within the country context
 creates mechanisms to maximize the development impact of every
investment that the DFC supports
 enables the Agency to assess development performance at both the
project and portfolio level.
PROJECT IQ SCORE
Inclusion
Risk
122.6 /150
Highly
Developmental
Economic
Growth

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Components of the IQ Score
Economic Growth
Measures the scale of impact.
Includes infrastructure, job
creation, financial intermediaries.
The larger the scale of impacts,
the higher the score.
Innovation
Inclusion
Measures market and energy
diversification, and demonstration
effects. Sector-wide innovations
will have a higher score than firm-
level innovations.
Measures benefits to
disadvantaged populations and
geographies. The higher the
percentage of beneficiaries that
are from these populations, the
higher the score.
Development
Impacts
Country
Context
Risks
Will the project’s impacts help address a critical development challenge in the
host country? Is the project meaningful? If yes, the higher the score.
Assessment of environmental, social and developmental risks that have the potential for
negative impacts or impedes ability to achieve positive impacts. This assessment is based
on the sophistication of the investor and the country/sector context. The score is adjusted
downward to reflect risks.
Opportunities Are there opportunities to increase positive impacts for employees, the environment,
and/or local communities? If yes, bonus points may be awarded.

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Monitoring and
Evaluation

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Objectives of Monitoring and Evaluating
Assess compliance with DFC’s environmental and social standards.
Monitor projects’ progress to achieving developmental objectives as
established by the IQ scoring during project origination.
Take corrective measures where appropriate to improve compliance
and impact performance.
Evaluate and report on DFC’s development performance at the
portfolio level.
Glean and communicate lessons to be learned from monitoring to
improve future projects, as well as the IQ framework itself.
Contribute to the Agency’s strategy development.
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Environmental and Social Monitoring
• Project selection annually based on E&S risk, impact,
performance. Can also add projects as needed if situation
changes.
• Endeavor to monitor during highest risk phase of project (often
construction but not always)
• Contracting vehicle for third-party specialist support or to
supplement staff availability.
• Client must complete annual E&S reporting required of high-risk
projects
• Client must contract third-party audit for all high-risk projects

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Monitoring for Impact Performance
Project
Committed
• E&S Action Plan
• Impact Reporting
Requirements
Project
Disbursed/
Activated
• E&S Action Items
• 1st IQ Results Table
• E&S Action Items/ Risk-Based
Monitoring
• IQ Rescore
1 Year after
Disbursement/
Activation
• Development Outcomes
Survey
• E&S Action Items/ Risk-
Based Monitoring
• IQ Rescore
• December: IQ Results Table
• June: Development Outcomes Survey
• E&S Risk-Based Monitoring
• IQ Rescore
Year 3-5
• Eligible for Mid-term
Performance Assessment
• Project close-out
Assessment
Project
Close
Bi-Annual
Impact
Reporting over
life of project
6 Months after
Disbursement/
Activation

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Q&A
Thank you
U.S. International Development Finance
Corporation (DFC)

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Contact
Geoffrey Tan
Managing Director, Asia Pacific
U.S. International Development
Finance Corporation (DFC)
U.S. Embassy Singapore
geoffrey.tan@dfc.gov
Contacts & Resources
Resources
For more information,
visit www.dfc.gov.