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Labour Issues and EBRD

Labour Issues and EBRD. Alke Schmidt Environment Department, EBRD. EBRD. AAA-rated international financial institution founded in 1991 Mandate: facilitate the transition to market economies in CEE/ CIS Capital base of €20 billion Largest single investor in the region Project finance

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Labour Issues and EBRD

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  1. Labour Issues and EBRD Alke Schmidt Environment Department, EBRD

  2. EBRD • AAA-rated international financial institution founded in 1991 • Mandate: facilitate the transition to market economies in CEE/ CIS • Capital base of €20 billion • Largest single investor in the region • Project finance • Over 70% private sector/privatisation projects • Sound banking principles

  3. A strong mandate in EBRD’s Founding Agreement • Requires a commitment from EBRD members to respect human rights as a condition of membership and borrowing • EBRD to promote sustainable development “in the full range of its activities” • EBRD to foster productive investment…thereby assisting in making a competitive environment and raising productivity, the standard of living and conditions of labour.

  4. Operationalising the mandate: Policy/Portfolio level • Countries’ human rights record assessed annually in country strategies. Lending may be restricted or suspended if lack of progress • Assessment criteria explicitly include • Right to form trade unions and to strike • Rights of ethnic minorities (cf ‘Political Mandate Papers’, 1991/93)

  5. Operationalising the mandate: Project level EBRD Environmental Policy (2003) covers • Ecological issues • Worker protection issues • Occupational health and safety • Child labour, forced labour, non-discrimination • Community issues

  6. How does EBRD assess labour issues? • Process managed by Environment Department (ED) • Integrated into ED’s due diligence • Risk-based, iterative procedure: • Screen all projects (risk assessment) • Due diligence may include questionnaires or site visits by ED / consultants • Focus resources on high risk projects • Process developed in consultation with other IFIs, ILO, experts

  7. Labour standards risk assessment • Credit risk (fines, loss of markets, productivity) • Reputational risk • Risk indicators: • Country • Industry / sector • Client policies / compliance record / reputation • Employment impact of EBRD financing

  8. Benchmarks • All projects must meet • National laws • ILO conventions on child labour, forced labour, discrimination • Additional benchmarks are • EU (re discrimination) • For remediation: private sector good practice

  9. What if there is a problem? • Key is to move towards compliance • i.e. reject financing only in extreme cases • Action plan to achieve compliance with national law / ILO standards within a reasonable time frame • Often changes in client’s HR policies required • Enforcement agencies may impose corrective action plan • Client reporting on action plan implementation

  10. Legal documentation • All projects: Covenant on compliance with national labour laws and ILO standards in template legal documents • Covenant on Action Plan implementation if required • Reporting on covenant labour compliance/action plan implementation as part of annual reporting on environmental and social matters

  11. Monitoring • Client reporting • Monitoring visits by EBRD staff and/or labour experts • Third party audits • Role of NGOs/media

  12. Resources and support • 1 ED staff, plus labour expert consultants on retainer • All ED environmental staff trained on labour issues and risk assessment • Basic training for bankers on labour issues • Country fact sheets, sample questionnaires, ‘case book’ on project work • N.B.: This takes time!

  13. Main issues to date • Regulatory compliance • Work hours /overtime in supermarket chain • Retrenchment in privatisation/restructuring • Exploitation of migrant workers in construction • Endemic problems in country/region • Supply chain issues • Child/forced labour in cotton supply chain in Central Asia

  14. Outlook • Revision of Environmental Policy in 2006 offers opportunity to broaden scope and weight of social assessment • Need to clarify supply chain requirements • Process of continuous learning and improvement • Share experiences with others

  15. Labour Issues and EBRD Alke Schmidt Environment Department, EBRD

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