Berkeley Energy Environmental & Social Management System (ESMS)


Berkeley Energy developed a corporate environmental and social management system (ESMS) initially in 2011 to provide a framework for the identification, assessment and management of environmental and social (E&S) risks and impacts associated with its investments. The ESMS has been revised several times to ensure ongoing adherence with the requirements of the company’s Development Finance Institution (DFI) Limited Partners (LPs) and other LPs. The current ESMS is dated January 2015 and it covers the three funds managed by Berkeley Energy; AREF (Africa Fund), REAF and REAF II (Asia Funds).The ESMS was built around the requirements of the International Finance Corporation (IFC) Performance Standards (PS) on Environmental and Social Sustainability (2012). In addition, the ESMS commits Berkeley Energy to meet the following E&S requirements (collectively known as the E&S Safeguards) where their standards are more stringent than those of the IFC PS:

  • World Bank Group (WBG) Environmental, Health and Safety (EHS) Guidelines, including:
    • General EHS Guidelines, April 2007;
    • Wind Energy, August 2015; and
    • Geothermal Power Generation, April 2007;
  • European Bank for Reconstruction and Development (EBRD) Environmental and Social Policy (2014) and Environmental and Social Performance Requirements (May 2014);
  • European Investment Bank (EIB) Environmental and Social Standards, October 2018;
  • Inter-American Development Bank (IADB) Safeguards Policies, Standards and Guidelines;
  • Asian Development Bank (ADB) Safeguard Policy Statement, June 2009;
  • African Development Bank (AfDB) Integrated Safeguards System, December 2013;
  • Multilateral Financial Institutions Working Group on the Environment (MFI-WGE);
  • International Labour Organisation (ILO) Declaration on Fundamental Principles and Rights at Work, June 1998 and Core Labour Standards (covering discrimination, forced labour, child labour, and collective bargaining); and
  • National laws in each country in which Berkeley Energy operates.

The E&S Safeguard Requirements specify the E&S performance expectations of Berkeley Energy’s Portfolio Companies, that falls within the specific jurisdiction that the requirements apply, during the lifetime of an investment. The requirements include the need for a robust E&S assessment process, application of effective impact mitigation measures, disclosing information and undertaking meaningful stakeholder consultation, establishing a grievance mechanism, and conducting monitoring and reporting. These requirements are implemented through the E&S assessment process including execution of environmental and social management plans (ESMPs), and through asset specific ESMSs.

The main E&S areas covered by the AREF E&S Safeguard Requirements are:

  • Assessment and Management of Environmental and Social Risks and Impacts (refer to IFC PS1);
  • Labour and Working Conditions (refer to IFC PS2);
  • Resource Efficiency and Pollution Prevention (refer to IFC PS3);
  • Community Health, Safety, and Security (refer to IFC PS4);
  • Land Acquisition and Involuntary Resettlement (refer to IFC PS5);
  • Biodiversity Conservation and Sustainable Management of Living Natural Resources (refer to IFC PS6);
  • Indigenous Peoples (refer to IFC PS7);
  • Cultural Heritage (refer to IFC PS8); and
  • Environmental Flows (as defined in AfDB Safeguard 3).

The corporate ESMS is aligned with the requirements of IFC PS1 and that full implementation of the system would provide an effective mechanism to ensure that Berkeley Energy’s Portfolio Companies adhere to the corporate E&S Safeguards. The ESMS provides a framework for identifying, assessing and managing E&S risks and impacts and defines mechanisms for reporting the company’s E&S performance.

The key elements of the corporate ESMS are outlined below. In addition to the below, each Portfolio Company where AREF invests in is required to develop a project specific ESMSs describing asset specific management measures to be implemented.

Policy and Objectives

The environmental and social policy includes commitments to:

  • Ensure that applicable Environmental and Social Requirements are met for all investments;
  • Integrate environmental and social risk into the internal risk management analysis;
  • Ensure appropriate consultation and transparency in Portfolio Company activities;
  • Work together with the Portfolio Company management to put into practice applicable internationally recognized environmental and social safeguard requirements; and
  • Promote investments with environmental and social benefits.

These policy commitments are indicated on the BE website ( The objectives of the ESMS are:

  • To avoid projects that are expected to have significant adverse social and/or environmental impacts that are diverse, irreversible, or unprecedented (Category A projects);
  • Where projects are expected to have limited adverse social and/or environmental impacts, to minimize and mitigate these impacts through good international practices; and
  • To maximize opportunities for environmental and social benefits.

Investment Screening and Categorisation

The ESMS includes a documented process for screening of all investment opportunities for environmental and social risk. Pre-screening is undertaken against a Prohibited Investment Activities List (PIAL), which is includes the following 20 categories:

  1. Production or activities involving forced labour or child labour;
  2. Production or trade in any product or activity deemed illegal under host country laws or regulations or international conventions and agreements;
  3. Any business relating to pornography or prostitution;
  4. Trade in wildlife or wildlife products regulated under the Convention on International Trade in Endangered Species or Wild Fauna and Flora (CITES);
  5. Production or use of or trade in hazardous materials such as radioactive materials, nuclear reactors and components thereof, unbounded asbestos fibres and products containing Polychlorinated biphenyls (PCBs);
  6. Cross-border trade in waste and waste products unless compliant to the Basel Convention and the underlying regulations or waste incineration (other than forestry or agricultural waste used for biomass power schemes) and processing of toxic waste other than landfill gas (or other waste gas) waste-to energy schemes or flaring; Where waste incineration related to forestry or agricultural waste used for biomass power schemes and processing of toxic waste related to landfill gas (or other waste gas) waste-to-energy schemes or flaring is envisaged (i) extensive due diligence has to be performed in order to avoid any reputation risk to the Partnership and its Investors; (ii) additional studies and project monitoring should be performed by the Portfolio Company; and (iii) such project should be capable of participation in the Clean Development Mechanism under the Kyoto Protocol;
  7. Marine and coastal fishing practices, such as blast fishing, large scale pelagic drift net fishing and fine mesh net fishing, harmful to unwanted vulnerable and protected species in large numbers and damaging to the marine biodiversity and habitats;
  8. Production, use of or trade in pharmaceuticals, pesticides/herbicides, chemicals, ozone depleting substances and other hazardous substances subject to international phase-outs or bans or production, commercial-scale use, trade, storage, or transport of products containing polychlorinated biphenyls; and hazardous chemicals;
  9. Destruction of critical habitat or commercial logging operations or the purchase of logging equipment for use in primary tropical moist forest;
  10. Production and distribution of racist, anti-democratic and/or neo-nazi media;
  11. Religious organisations;
  12. Psychiatric hospitals involving custodial facilities;
  13. Abortion clinics, euthanasia services;
  14. Crematoria;
  15. Housing (except housing associated with accommodation for employees of or contractors to, a Portfolio Company);
  16. Purchase of land or real-estate investment except where it is directly associated with investments (e.g. of land for the construction of a power plant);
  17. Investment in real-estate activities with the aim of making profit on sales in the short term;
  18. Production or activities that impinge on the lands owned, or claimed under adjudication, by indigenous peoples, without full documented consent of such peoples;
  19. Production or trade in (i) weapons, munitions or paramilitary materials; (ii) tobacco or tobacco related products; or (iii) alcoholic beverages (excluding beer and wine); and
  20. Gambling, casinos and equivalent enterprises.

Further screening is conducted to determine the project categorization and to identify key issues. The Environmental and Social Manager classifies projects into one of the following:

  • Category A Investment (with potential significant adverse social and/or environmental impacts that are diverse, irreversible, or unprecedented);
  • Category B Investment (with potential limited adverse social or environmental impacts that are few in number, generally site specific, largely reversible and readily addressed through mitigation measures); or
  • Category C Investment (with minimal or no impacts).

The ESMS manual states that in most cases, if the investment falls within Category A and in all cases if investment breaches the PIAL, the prospective Portfolio Company will be informed that the investment will not be considered. If an investment is likely to be classified as a Category A project for any of its environment, resettlement or indigenous people impacts, the Funds shall refer the investment to their respective Investor Advisory Committee for review and clearance before the Investment is approved by the Funds. This approval shall be by majority vote.

Berkeley Energy’s investments are Category B and only two AREF projects are Category A. The preliminary project categorization may be revised following detailed environmental and social due diligence. For example, the Kikagati Hydropower project in Uganda was reclassified from Category B to Category A following a detailed Environmental and Social Impact Assessment (ESIA) that was commissioned by AREF on the project.

Environmental and Social Due Diligence

Berkeley Energy is committed to completing E&S due diligence for all investments. The due diligence, which may include a desk-based review or a full assessment including site visit, is conducted by staff specialising in environmental and social management, or by consultants, depending on the nature, size, and location of the project, and the expected nature and magnitude of potential E&S impacts and risks.

Higher risk projects (category A) may require the involvement of an independent consultant depending on the quality and/or timing of the ESIA report and related documents. In situations where the deal team and the Environmental and Social Manager have insufficient evidence to determine whether a project should be categorised as A or B, a due diligence report is prepared by an external E&S consultant to inform the decision-making process by the Investment Committee.

Each prospective Portfolio Company is expected to provide the corporate deal team with information relevant to demonstrating compliance with the applicable E&S Safeguard Requirements. For investments under development, this information includes an ESIA report and an Environmental and Social Management Plan (ESMP). In addition, specialist studies such as a Resettlement Action Plan (RAP), Cultural Heritage Management Plan (CHMP), Biodiversity Management Plan (BMP) and/or an Indigenous Peoples Plan (IPP) are developed if relevant to the project. For example, in the Kikagati Hydropower Project in Uganda a RAP, CHMP and BMP were prepared by consultants.

For investments in development projects, with the exception of Category A projects, if an ESIA report is not yet available for review or a due diligence report has not been completed by an external consultant prior to the final investment review, the deal team submits an E&S questionnaire to the prospective Portfolio Company. A separate E&S questionnaire is submitted to the prospective Portfolio Company for investments in existing facilities with a preliminary classification as Category B.

Following detailed E&S due diligence, a final project categorization is made and an Environmental and Social Action Plan (ESAP) is prepared to identify actions for the project company to take to ensure compliance with Berkeley Energy’s E&S Safeguard Requirements. Where BE is the majority owner, the ESAP is developed internally. In addition, lenders undertake their own due diligence before financing the operations, mainly using consultants. Their findings are integrated into the ESAP for implementation. The ESAP commitments are included in the investee contractual covenants and become legally binding.

The E&S assessment process during Investment Decision Making is summarized below:

Investment Decision Making

Compliance Monitoring and Reporting

After an investment has been approved, each Portfolio Company is required to develop and implement an ESMS, appropriate to the size and the nature of the business and to confirm that it is operating in compliance with all applicable Environmental and Social Requirements. For all Category A projects and some Category B projects (selected by the Environmental and Social Manager) third party audits are performed regularly by independent E&S consultants.The Environmental and Social Manager (or other designated officer) visits all Portfolio company sites to assess compliance with the applicable Environmental and Social Requirements and/or the project ESAP. The frequency of these visits depends on the project categorisation and project phase. A report and corrective action plan is prepared following each site visit, and ESAPs are updated monthly until all actions have been completed.

The E&S reporting requirements are summarized below:

Reporting Requirements

  • Each Portfolio Company reports to Berkeley Energy on its E&S performance on a monthly basis. In addition, Portfolio Companies submit an Annual Environmental and Social Monitoring report to Berkeley Energy for an assessment of performance against the applicable E&S Safeguard Requirements.
  • Each Fund is required to promptly report to the Investor Advisory Committee (IAC) of any actual or potential breach of the compliance requirements after becoming aware of it, and to implement a corrective action plan to address the deficiencies within 90 days.
  • The Funds are required to notify the Investors within three business days of becoming aware of any E&S incident (i.e. any social, labour, health and safety, security or environmental incident including any E&S claim, accident, loss of life, material breach of law, or material effect on the environment).
  • As soon as reasonably practicable, the Fund is required to specify the nature of the incident, accident, or circumstance and the impact or effect arising or likely to arise therefrom, and the measures being taken, or planned to be taken, to address them and prevent any future similar event; and keep the Investors informed of the on-going implementation of those measures.
  • The Funds are required to prepare a Fund Annual Environmental and Social Report on the performance of each Portfolio Company, which is supplied to each Investor.

Roles and Responsibilities

The ESMS has clear description of E&S roles and responsibilities within the organization and at an asset level.

Roles and Responsibilities

Berkeley Energy has two E&S Managers at the Fund level; one based in Singapore, for REAF and REAF II funds; and one based in Nairobi, for the AREF fund.

As of December 2019, Berkeley Energy had 43 E&S professionals covering all funds and at Portfolio Companies, including 25 covering REAF/REAF II, and 18 focused on AREF. These Berkeley Energy E&S specialists are supported by additional E&S personnel with the EPC contractors and subcontractors.

Training and Competence

All new staff at the funds and portfolio project are trained in the ESMS as part of their induction training, and staff are updated when the ESMS is updated. Berkeley Energy also provides training on its E&S Safeguards to members of its Investment committee, Investment Directors/Managers and Project Directors/Managers, and to appropriate members of staff of its Portfolio Companies.E&S training is conducted at the annual off-site meeting for all Berkeley Energy staff, including Investment Committee members, investment staff, project management staff, legal counsel, HR, financial controllers, all senior management and others. Training covered an overview of corporate E&S management each year, plus coverage of selected additional topics.

Environmental and Social Procedures

BE ESMS contains as attachments the various E&S management checklists to be used in the implementation of the ESMS. These include:

  • The Prohibited Investment Activities List.
  • Environmental and Social Safeguard requirements.
  • Environmental and Social questionnaire for projects under development.
  • Environmental and Social questionnaire for existing facilities.
  • Outline of an Environmental Impact Assessment report for investments.
  • Outline of a Resettlement Action Plan for Investments.
  • Environmental and Social Due Diligence report template.
  • Annual Environmental Monitoring Report for Portfolio Companies.
  • Fund Annual Environmental and Social Report.

ESMS Implementation

The BE ESMS requirements are implemented across all portfolio projects. Each portfolio project develops its own ESMS to meet the BE ESMS requirements applicable to the project. Construction sites have ESMS focusing on the management of E&S risks during construction and operational sites have ESMS relevant for project operational activities. Project level ESMS have detailed implementation procedures to address the E&S risks specific to the project such as stakeholder engagement plan and grievance mechanisms. Project companies report on a monthly basis to the BE E&S manager on the performance of the ESMS.BE also provides a platform on the website for any interested party to directly contact the BE compliance manager should the need arise. ( This platform allows for interested party to communicate directly with BE Senior management with regard to issues they would like to raise.

Continuous Improvements

BE commits to continuously review the ESMS to ensure that its relevant in addressing the E&S risks and impacts associated with the portfolio projects. The ESMS review process is undertaken as appropriate and based on the need to ensure that the ESMS remain relevant to the investors and national law requirements as well as the evolving E&S topics globally that a relevant to the BE portfolio such as gender mainstreaming and climate change.