Allianz Eurasia Health Care

Environmental & Social Review Summary

This Environmental and Social Review Summary is prepared and distributed in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board of Director’s decision. Board dates are estimates only.
Any documentation which is attached to this Environmental and Social Review Summary has been prepared by the project sponsor and authorization has been given for public release. IFC has reviewed this documentation and considers that it is of adequate quality to be released to the public but does not endorse the content.

Project number	27977
Country	Russian Federation
Sector	Health Care
Department	Health and Education
Company name	Allianz Eurasia Health Care
Environmental category	B
Status	Pending Approval

Date ESRS disclosed	June 8, 2009

View Summary of Proposed Investment (SPI), click here

Overview

Category & Applicable Standards

Key Issues & Mitigation

Community Engagements

Client's Documentation

Overview of IFC's scope of review

The review of this project consisted of appraising technical, environmental, health, safety and social information submitted by the project sponsor, and a site visit in March 2009. The environmental and social (E&S) specialist visited the company’s headquarters in Moscow, an existing flagship and satellite clinic in the North West Region and the site of future facility in Volga Region, held meetings with Allianz Eurasia Healthcare management and technical staff as well and reviewed presented documentation on compliance with the local Environmental, Health and Safety (EHS) requirements and the conclusions of state EHS audits.

Project description

The proposed project by Allianz Eurasia Healthcare (“AEHC” or the “Company”), a healthcare provider in Russia, involves the expansion of its existing operations through establishment of 15 new outpatient clinics within the North West Region, Moscow Region and Volga Region (the “Project”). The Company will conduct its operations as “MedPlanet”. IFC’s investment is comprised of a senior loan of up to EUR 15 million (US$19.5 million) and an option to buy shares in the Company of up to EUR 5 million (US$6.5 million).

Identified applicable performance standards

While all Performance Standards are applicable to this investment, IFC’s environmental and social due diligence indicates that the investment will have impacts which must be managed in a manner consistent with the following Performance Standards:

While all IFC’s Performance Standards on Social and Environmental Sustainability are applicable to this investment, IFC’s environmental and social due diligence indicates that the investment will have impacts which must be managed in a manner consistent with the following Performance Standards:

- PS 1: Social and Environmental Assessment and Management Systems
- PS 2: Labor and Working Conditions
- PS 3: Pollution Prevention and Abatement
- PS 4: Community Health, Safety and Security
- PS 5: Land Acquisition and Involuntary Resettlement
- PS 8: Cultural Heritage

The findings of the project review indicate that there are no impacts related to PS 6: Biodiversity Conservation and Sustainable Natural Resource Management (PS 6) and Indigenous Peoples (PS 7).

Environmental and social categorization and rationale

This is a Category B project according to IFC’s Environmental and Social Review procedures because a limited number of specific environmental and social impacts may result which can be avoided, or mitigated, by adhering to IFC’s Performance Standards, guidelines and the Environmental and Social Action Plan (ESAP).

Environmental and social issues associated with this project include: (i) development and implementation of a corporate environmental, health and safety management system; (ii) occupational health & safety issues, including fire protection; (iii) management of medical and other waste; and (iv) community engagement.

Project is currently in compliance with applicable IFC requirements and in full compliance with local regulatory requirements for health service providers in Russia. The company is aiming at building on its existing expertise and management system and plans to expand its EHS system to make it commensurate with the expansion of company’s business and the number of facilities. In particular, the company plans to extend the number of its clinics in the following formats: MiniClinics (400-600 square meters of space) and MiniMeds (less than 400 square meters of space).

Mitigation measures for the potential environmental and social impacts have been identified and are incorporated into an attached Environmental and Social Action Plan (ESAP). The Company has committed the resources to implement comprehensive environmental, health, safety and quality management systems consistent with IFC’s Performance Standards.

Key environmental and social issues and mitigation

Allianz Eurasia Healthcare has presented plans to address these impacts to ensure that the proposed project will, upon implementation of the specific agreed measures, comply with the environmental and social requirements - the host country laws and regulations and the IFC’s Performance Standards and the World Bank Group (WBG) environmental, health and safety guidelines. The information about how these potential impacts will be addressed by the Company is summarized in the paragraphs that follow. Further information is provided in the attached ESAP, which has been agreed upon by IFC and the Company and will address the compliance gaps with IFC’s requirements.

- Social and Environmental Assessment and Management Systems:

The company built a system for environmental assessment and management as a part of its quality control and regulatory compliance system. The company conducts assessments of the environmental impacts of its operations in accordance with the local requirements and laws. In particular, company’s performance on liquid effluent, solid, and hazardous materials as well as epidemiological and fire safety, working conditions, training for staff and other labor issues are reported to the local regulatory authorities and the state occasionally conducts inspection of company’s facilities. The local process for licensing of medical services providers requires a thorough assessment of company’s compliance with epidemiological, safety, environmental, safety, consumer, human welfare and labor issues and the process is undertaken every five years. The company has an annual supervision plan and a contract with independent consultant for the provision of monitoring services and facility inspections. As a part of the monitoring program, the consultant conducts monthly bacteriological samplings in facilities and annual measurements of light, noise, air. Ventilation systems, radiological and sterilizing equipment also undergo monthly inspections and radiation data is reported on a monthly basis. Management of the EHS compliance process is undertaken jointly by the Facility maintenance departments and Medical department and is under direct supervision of the Company’s CEO.

- Labor policy:

The Company follows Russian labor regulations in recruiting, retaining and retiring its employees. Currently Alliance Eurasia Healthcare employs more than 200 people and plans to increase this number with the expansion of the company’s operations. The HR department is responsible for hiring, retaining, and incentivizing the employees. All prospective employees selected for vacant positions receive terms of employment before executing employment contract and company’s HR policy. HR procedures describe in detail the HR processes and guidelines for HR actions, such as remuneration, benefits, conditions of employment, working conditions, performance evaluation and disciplinary actions. The Company will update its Personnel Policy and HR procedures to include the requirements of the IFC performance standards.

Allianz Eurasia Healthcare prioritizes the welfare of its employees and reports taking proactive steps to properly incentivize its employees and prevent potential disputes or grievances. Company follows the non-discrimination practices mandated by the local regulations and has a performance evaluation system for promoting and incentivizing its employees. Currently, company’s level of compensation is commensurate with other private healthcare providers in the region and is above the level of state-owned healthcare providers. Due to the complicacies of the local laws for obtaining certain state-provided retirement benefits by non-state medical employees, which are at present granted only by decision of the local court, the company provides advice and supports its retirees in obtaining the state retirement benefits in the court.

- Training:

All new employees undergo safety and equipment training and many positions are licensed by the authorities as required by the local regulations. HR department together with medical department plans and implements training program for employees that includes on the job training and formal internal and external training courses. In addition, all employees must receive a biannual hygienic training that is performed by the Federal Supervision Service for Protection of Consumer and Human Welfare.

- Workers grievances:

According to the local laws, all employees have a right to join a trade union. The company has not experienced significant conflicts or disputes with any employees to date. In case of labor dispute, the employees bring the issue directly to the HR Manager by filling the complaint stipulated by the internal HR procedures. In case of no immediate resolution, the Commission may be formed to address and resolve the issue or the issues. The Commission consists of equal number of employees and management, according to the Russian laws. This Commission assesses the complaint and delivers its decision to the complainant and management of the company. An employee’s grievance can also be raised at the meeting of Clinical Council comprised of professional company’s staff. The Council communicates its decision to Company’s management. In addition, the employees have the right to involve the country-wide professional trade union of medical workers.

- Occupational Health and Safety (OHS)OHS management system is very thorough and in compliance with IFC requirements. A work safety expert performs introductory briefing on work safety and accident prevention with each new hired employee. The head of department performs primary briefing for the employee on the workplace. All workplaces have to undergo state certification for safety and all employees required to use personal protective equipment (masks, gloves, gowns) necessary for their workplaces and undergo periodic safety training. Safety records are maintained as well as records of hygienic inspections. All employees must undergo regular medical examinations. The Company had no LTIs in 2008. Annual OHS results are reported to the local regulator who also conducts periodic inspections of company’s facilities. To prevent staff exposure to infectious diseases, hazardous waste and radiation, the company has established management procedures and undertakes ongoing health monitoring and periodic heath screening of all employees. Adequate facilities are provided for preventing infectious diseases including separated facilities for different procedures and types of patients.

- Pollution Prevention and Abatement:

The company generates solid wastes, liquid effluent and a limit number of hazardous materials (medical waste and mercury-containing lighting).

- Liquid effluent:

Company’s flagship facility in St. Petersburg currently produces about 5 cubic meters of liquid effluent. Domestic liquid effluent is disposed to the municipal sewage system; the quality of effluent is monitored by the company jointly with the state regulatory oversight agency and is compliance with IFC requirements. Liquid effluent from the medical lab undergoes several level of disinfection before the disposal into the sewage which is mandated by local regulations. There is no high category of hazard effluent (category V) produced in the facility.

- Solid waste:

Domestic solid waste (plastic, papers, old furniture and non-hazardous equipment) are disposed with the help of garbage collection contractors to the municipal garbage sites. Hazardous materials (medical wastes) are disposed of with the help of specialized licensed contractor to specialized medical waste destruction facilities. The process of collection, storing, accounting for and disposing of medical waste is undertaken under the established multi-level procedure in order to ensure elimination of associated risks. All employees have to comply with waste disposal procedure and the medial department audits the compliance of different units. All mercury-containing lighting systems are disposed off with the help of independent contractors to specialized and licensed facilities.

- Energy and water consumption:

The company�s flagship facility currently consumes about 5 cubic meters of potable water a day which it receives from the municipal water system. Quality of potable water is monitoring and is compliance with IFC requirements. Additional measures for ionization of water are provided by the company. Power is provided by the grid and company’s power consumption for its main flagship facility is 25 kWh per month. No power is generated and no boilers operated by the company itself.

- Community Health, Safety, and Security:

The main risk to community health and safety will relate to life and fire safety (LFS) risks for patients and visitors to the company’s facilities. The company has created an adequate system of fire safety and protection that includes a primary firefighting equipment, facility-wide notification system, automated fire alarm and warning systems which are in line with international best practices and compliance with IFC requirements. Safety instructions, schematic floor plans and diagram of exit routes are located at visible places around the facility, emergency exits are clearly identified and a separate emergency exit for disabled patients is built in the facility. The facilities undergo periodic inspections and audits by the municipal firefighting department that has to provide an approval for any planned renovations and structural changes in the facilities. Company’s employees receive training in LFS procedures and participate in periodic drills. Regular round the clock monitoring of LFS processes is conducted by watch officer of the security contractor (“Connection-Security”) by the automated fire warning alarm desk. The security guard on duty is monitoring the fire safety situation and multiple alarm systems.

- Security services

The company has retained an independent certified security contractor to provide security services to its flagship clinic in the North West Region and plan to maintain similar arrangements in its other facilities. Security is provided by a guard around the clock and security monitoring systems are installed in the lobby. The guards are unarmed and are connected to a corporate security support system of the contractor (“Connection-Security”) as well as with the local law enforcement, fire protection and civil defense agencies, in order to ensure security supports in the case of emergency.

- Land Acquisition and involuntary resettlement:

The company does not plan to acquire property rights for residential real estate for its operations which may involve resettlement. Allianz Eurasia Healthcare plans to lease commercial real estate for its new facilities from private owners on the basis of willing-buyer-willing-seller agreements using mutually agreed prices. In the hypothetical cases of property rights acquisition for commercial or residential real estate acquisition that may involve resettlement the company will follow local regulations and IFC Performance Standard 5.

- Cultural Heritage:

The Company’s flagship facility in the North West Region is located in a historically significant building which is however not officially designated as a historical preservation site. Upon acquisition of the real estate in 2000 the company followed the local regulation for preservation of the historical heritage and conducted restoration of the building according to the local architectural and historical heritage preservation requirements. The company secured all necessary local permits and approved the design for restoration with the architectural committee responsible for advising on historical preservation projects. The company does not currently plan to acquire other real estate that will have historical value, but in potential future cases, it will comply with the Russian regulations and IFC Performance Standard 8.

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