Guatemala: Real LRIF-01/Coban

Date Filed
29 Oct 2014
Status
Open
Phase
Compliance
Country
Guatemala

Case Tracker

Eligibility
Eligibility
Assessment
Transferred
Assessment
Dispute Resolution
Compliance
Appraisal
Investigation
Monitoring
CURRENT Status
Monitoring (COMPLIANCE)

Complaint Overview

Complainant

Local NGOs on behalf of several affected communities

Concerns

Impacts on water, livelihood, indigenous peoples, lack of information and consultation, social and environmental due diligence

Cross-Cutting Issues
Risk Management Resource Efficiency Land Resettlement Indigenous Peoples Land Water Violence / Abuse Loss of Livelihoods

Project Information

Region
Latin America & the Caribbean
Institution
IFC
Name & Number
Real LRIF 31458
Company
Latin Renewables Infrastructure Fund, L.P.
Sector
Financial Markets
Department
Other
Category
FI
Commitment

US $15 million equity investment

Synopsis

Project Overview

In 2012, IFC made a US$15 million equity investment in the Latin Renewable Infrastructure Fund LP (LRIF), a private equity fund investing in infrastructure projects in the renewable power and energy efficiency sectors of Latin America and the Caribbean.

Complaint

In October 2014, CAO received a complaint from community members residing near the Santa Rita project, a 23-megawatt hydro-electric power plant on the Río Icbolay in Alta Verapaz, Guatemala. The project is managed by a local development company, Hidroeléctrica Santa Rita (“HSR”), which is partly owned by Latin Renewables Infrastructure Fund.  

The complaint was submitted by two local organizations, Colectivo Madre Selva and the Consejo de Pueblos de Tezulutlan, on behalf of several communities downstream and upstream of the Santa Rita project, citing the project’s failure to comply with IFC’s free, prior and informed consent (FPIC) consultation requirements and ignored their concerns about its design and potential negative impacts on local water sources. They feared the project would harm their income and livelihoods and claimed that their opposition led to violence, repression, and the criminalization of community leaders.

Action

In November 2014, CAO found the complaint eligible and conducted an assessment. Following the CAO assessment, the case was transferred to CAO’s compliance function. In July 2015, CAO completed its appraisal with a decision to initiate a compliance investigation.

In October 2017, CAO published its Investigation Report. The investigation made several non-compliance findings in relation to IFC’s review and supervision of its investment in LRIF and the Santa Rita project:

  1. IFC Pre-investment Review 

The investigation found that while IFC correctly categorized its investment as “high risk” and required LRIF to follow IFC Performance Standards (PS), its pre-investment review was inadequate for the associated risks. IFC lacked a proper understanding of the contextual risks and did not fully consider the challenges LRIF would face in implementing updated Indigenous Peoples requirements. Additionally, IFC’s review approach for LRIF’s E&S due diligence did not allow sufficient time or information for staff to assess compliance with IFC standards. CAO noted that IFC’s E&S review standards exceeded market guidance.  

  1. IFC Review of Santa Rita Project 

In August 2012, IFC reviewed LRIF’s Environmental and Social Due Diligence (ESDD) for the Santa Rita project and noted gaps, recommending additional mitigation measures. However, CAO found that IFC’s review missed several weaknesses: incomplete environmental assessment information, absence of a social impact assessment, inadequate analysis of impacts on biodiversity, land use, drinking water, livelihoods, and cultural heritage, and no assessment of the dam's compliance with World Bank standards. Additionally, IFC’s review did not ensure proper assessment of PS7, particularly the requirement for Free, Prior, and Informed Consent (FPIC), nor did it consider previous protests against the project.   

  1. IFC’s Supervision Post-review of Santa Rita Project 

In July 2013, opponents damaged machinery and established a roadblock in Monte Olivo. In August 2013, an unclear incident in Monte Olivo led to the deaths of two children and a former worker. Despite a July 2014 agreement to resume construction, the roadblock was temporarily removed by police in August 2014. In October 2014, indigenous community representatives opposing the project met with IFC and filed a complaint with CAO. 

Over four years after IFC's disbursement to LRIF, the roadblock remained. CAO’s investigation found that IFC did not adequately engage with LRIF to address rising tensions, violent incidents, and serious E&S impact allegations from the community. CAO also noted that community opposition should have prompted IFC to reevaluate the applicability of its Indigenous Peoples standards to the project.  

More broadly, CAO’s findings raised questions as to the effectiveness of IFC’s control over compliance when it comes to the application of its E&S standards to high-risk Financial Intermediary (FI) investments.   

CAO Monitoring Reports  

In August 2019, CAO released its First Compliance Monitoring Report. The report found that IFC has improved its internal procedures for appraising and supervising FI investments since its investment in LRIF. In response to CAO’s investigation, IFC highlighted enhancements in fund selection, disclosure and supervision of fund subprojects, legal requirements for E&S non-compliance, and contextual risk analysis. However, IFC did not commit to addressing the project-level issues raised by the complainants with its client. 

Since the investigation's release, IFC determined that LRIF’s E&S performance had improved to a satisfactory level. However, IFC had not documented engagement with LRIF on the HSR project or the issues raised in the complaint. CAO’s monitoring report noted that the complainants still claimed residual project impacts were unaddressed and that LRIF owns a controlling share in the project. Although IFC’s supervision documentation covered the Santa Rita project's history and the complaint to CAO, IFC had not adequately supervised LRIF to ensure assessment and appropriate mitigation or compensation for residual project impacts in line with IFC’s Sustainability Policy and PS1. 

In May 2024, CAO completed its Second Compliance Monitoring report for the case. The report outlines the project-level actions taken by IFC. However, since IFC has not yet ensured that Hidro Santa Rita’s residual impacts have been adequately assessed according to the IFC Sustainability Policy and PS 1. CAO will continue to monitor this case. 

The Omnibus Monitoring Report for this case is available in English and Spanish

Status

This case is in compliance monitoring.   

Status as of June 4, 2024. 

Case Documents

  • Assessment Report
    Assessment Report
    Jun 26, 2015
    English
    Assessment Report
    Assessment Report
    Jun 26, 2015
    Q'eqchi
    Assessment Report
    Assessment Report
    Jun 26, 2015
    Spanish
    Assessment Report
    IFC Response to Assessment Report
    Jun 26, 2015
    English
    IFC Response to Assessment Report
  • Compliance

    Appraisal Report
    Compliance Appraisal Report
    Jul 31, 2015
    English
    Compliance Appraisal Report
    Compliance Appraisal Report
    Jul 31, 2015
    Compliance Appraisal Report
    Compliance Appraisal Report
    Compliance Appraisal Report
    Jul 31, 2015
    Q'eqchi
    Compliance Appraisal Report
    Terms of Reference
    Terms of Reference
    Oct 20, 2015
    English
    Terms of Reference
    Terms of Reference
    Oct 20, 2015
    Spanish
    Terms of Reference
    Terms of Reference
    Oct 20, 2015
    Q'eqchi
    Terms of Reference
    Investigation Report
    Investigation Report
    Oct 30, 2017
    English
    Investigation Report
    Investigation Report
    Oct 30, 2017
    Spanish
    Investigation Report
    Investigation Report
    Oct 30, 2017
    Q'eqchi
    Investigation Report
    IFC's Management Response and Management Action Plan
    Oct 06, 2017
    English
    IFC's Management Response and Management Action Plan
    Monitoring Report(s)
    First Monitoring Report
    Aug 08, 2019
    English
    First Monitoring Report
    First Monitoring Report
    Aug 08, 2019
    Spanish
    First Monitoring Report
    Second Monitoring Report (Omnibus)
    May 01, 2024
    English
    Second Monitoring Report (Omnibus)
    Second Monitoring Report (Omnibus)
    May 01, 2024
    Spanish
    Second Monitoring Report (Omnibus)
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