Environmental and Social Due Diligence in the Renewable Energy Industry

Eligibility Criteria Needed for Conducting ESDD in the Renewable Energy Industry

The entities conducting ESDD in the renewable energy industry must comply with the following eligibility criteria, as discussed below:

• The projects in the sensitive zone must have a capacity of hydro >100 MW.
• The projects in the non-sensitive zone must have a capacity of solar/ wind >25 MW.
• The rooftop installations must have a capacity of solar/ wind <25 MW.
• EIA requirements are mandatory, which vary based on the public hearing or fast-track option.
• Must obtain MoEFCC forest land stage I and II clearance, if required.
• Must mandatorily obtain NBWL clearance.
• Must ensure compliance with IFC/ EP alignment.

Who Needs Environmental and Social Due Diligence in the Renewable Energy Industry?

The list of key stakeholders required to conduct environmental and social due diligence in the renewable energy industry is as follows:

• Renewable energy developers.
• Banks and financial institutions.
• International lenders and DFIs.
• Private equity and infrastructure funds.
• Government & PSU entities.
• Engineering, procurement, and construction (EPC) contractors.
• Carbon credit buyers & traders.
• Corporate offtakers.

Process for Conducting Environmental and Social Due Diligence in the Renewable Energy Industry

The process for conducting environmental and social due diligence in the renewable energy industry is as follows:

1. Step: Preliminary Screening & Scoping
   The first step in the ESDD process is to conduct a preliminary screening and scoping in compliance with the EIA Notification and to identify applicable regulations.


2. Step: Baseline Data Collection
   The next step requires the field teams to conduct an environmental baseline study and collect meteorological data and survey maps that affect communities, livelihoods, cultural heritage, and vulnerable populations.


3. Step: Conduct Impact Assessment
   The next step is to conduct an impact assessment to predict potential environmental and social impacts throughout the project lifecycle.


4. Step: Stakeholder Engagement & Public Consultation
   In the next step, it is crucial to conduct formal public hearings, stakeholder meetings, Gram Panchayat consultations, and written submissions to the State Environmental Impact Assessment Authority.


5. Step: Gap Analysis & Risk Rating
   The next step is to conduct a GAP analysis and compare project conditions against applicable standards. It further ensures that a risk rating is assigned and prioritized for the correction plan.


6. Step: Mitigation Planning
   The next step is to develop a risk mitigation plan, including a resettlement & rehabilitation plan, a biodiversity offset plan, and a lender-specific environmental & social action plan, depending on the project type and sensitivity.


7. Step: Regulatory Submission & Clearance
   In the next step, it is crucial to submit a complete EIA report, SIA, and supporting documentation to the MoEFCC or SEIAA.


8. Step: Lender Review & Approval
   The next step requires an independent review of the technical & lender conditions, contingent on ESDD approval for projects financed by IFC, ADB, or Equator Principles signatories, or for green bond issuances.


9. Step: Implementation & Monitoring
   Once all clearances are obtained, it is crucial to maintain and monitor quarterly and annual audits throughout the construction and operational phases.

What are the Core Components of Environmental and Social Due Diligence in the Renewable Energy Industry?

The core components of environmental and social due diligence in the renewable energy industry are as follows:

• Environmental Assessment: This process helps evaluate the air quality, water resources, soil conditions, noise levels, biodiversity, and habitat integrity in the project zone.
• Social Impact Analysis: It refers to the assessment of community displacement, livelihood disruption, cultural heritage, indigenous rights, gender impacts, and stakeholder engagement outcomes.
• Regulatory Compliance Review: ESDD ensures verification of adherence to the EPA 1986, the EIA Notification (2006), the Forest Conservation Act, the Wildlife Protection Act, and the state-level clearance requirements.
• Lender Standards Alignment: This process includes conducting a GAP analysis against IFC performance standards, the Equator Principles IV, the ADB safeguard policy, and the RBI's environmental risk management framework.
• Risk Mitigation Planning: It includes developing environmental management plans, resettlement & rehabilitation plans, biodiversity offset plans, and environmental & social action plans.