The World Bank Formal Employment Creation Project-2 (P507276) Concept Environmental and Social Review Summary Concept Stage (ESRS Concept Stage) Public Disclosure Date Prepared/Updated: 10/14/2024 | Report No: ESRSC04525 Oct 15, 2024 Page 1 of 8 The World Bank Formal Employment Creation Project-2 (P507276) I. BASIC INFORMATION A. Basic Operation Data Operation ID Product Operation Acronym Approval Fiscal Year P507276 Investment Project Financing (IPF) FEC-2 2025 Operation Name Formal Employment Creation Project-2 Country/Region Code Beneficiary country/countries Region Practice Area (Lead) (borrower, recipient) Turkiye Turkiye EUROPE AND CENTRAL Social Protection & Jobs ASIA Borrower(s) Implementing Agency(ies) Estimated Appraisal Date Estimated Board Date Development and Development and Investment Bank of 11-Feb-2025 31-Mar-2025 Investment Bank of Türkiye Türkiye Estimated Concept Total Project Cost Public Disclosure Review Date 09-Oct-2024 500,000,000.00 Proposed Development Objective The project development objective is to enhance the conditions for formal job creation by firms operating in earthquake affected provinces. B. Is the operation being prepared in a Situation of Urgent Need of Assistance or Capacity Constraints, as per Bank IPF Policy, para. 12? No C. Summary Description of Proposed Project Activities Employment rates in the Turkiye have been lower than countries with similar levels of development. Disparities in the labor market are significant, with women, youth, and rural areas experiencing notably lower employment opportunities. The devastating Kahramanmaraş earthquakes of February 2023 have further exacerbated the regional disparities in employment opportunities. The proposed operation aims to address credit and labor market constraints to job creation in the earthquake-affected area through expanded credit access to enterprises, and enhanced skills. The project will (i) expand credit access to firms to spur job creation and (ii) support for firm capacity building and demand-driven worker Oct 15, 2024 Page 2 of 8 The World Bank Formal Employment Creation Project-2 (P507276) skills training. The proposed project builds on the successes of and lessons learnt from the ongoing Formal Employment Creation Project (P171766), with modified design features to strengthen job creation. D. Environmental and Social Overview D.1 Overview of Environmental and Social Project Settings The project activities will take place in the provinces of Adana, Adıyaman, Diyarbakır, Elazig, Gaziantep, Hatay, Kahramanmaras, Kilis, Malatya, Osmaniye, and Şanlıurfa and additionally, in the Gürün District of Sivas Province and neighboring districts in Bingöl, Kayseri, Mardin, Tunceli, Niğde and Batman Provinces that contain damaged buildings due to the February earthquakes and declared as “disaster areas affecting normal life”. Given the focus of the Project these are unlikely to be rural areas. The focus will primarily be on industrial areas in urban locations (though the exact details are to be determined during design). The main sectors to be financed by the project are wholesale, retail trade, motor repair; transport; other service activities; manufacturing. The February 2023 earthquakes caused significant damage to productive capacity and disrupted economic activity. Damaged infrastructure, basic services and labor shortages and lack of employment opportunities coincide to restrain the pickup in business activities in the earthquake affected areas. Small and Medium Enterprises (SMEs) need increased access to finance to overcome the consequences of recent shocks, averting the closure of otherwise viable SMEs. On the other hand, some of the provinces most affected by the February 2023 earthquake have the highest poverty rates exceeding the national average. And the third of youth NEET (not in education, employment or training aged 15 to 29) is living in the earthquake regions with youth women representing three out of four youth NEET. Therefore, the project could provide significant opportunities for inclusion in these lagging regions as the recent economic growth is yielding Public Disclosure fewer higher-quality jobs and remains less inclusive for women, youth, and vulnerable groups. D.2 Overview of Borrower’s Institutional Capacity for Managing Environmental and Social Risks and Impacts The project will be implemented by the Development and Investment Bank of Türkiye (TKYB) as the financial intermediary, based on the loan agreement between IBRD and TKYB. TKYB will provide sub-loans to private enterprises to support the creation of jobs in the earthquake affected region. TKYB is an experienced implementing agency for Development Finance Institutions (DFIs) projects including the World Bank-financed projects. Currently, TKYB is implementing World Bank financed projects (such as the Emergency Firm Support Project [P174112], Formal Employment Creation Project [P171766] and the Turkey Geothermal Development Project [P151739]). Therefore, TKYB has strong familiarity with the World Bank Environmental and Social Framework. The project will build on the ongoing Formal Employment Creation Project by enhancing its focus on employment and training as well as extending its scope to all earthquake affected provinces. TKYB has a Sustainable Impact Department with good environmental and social expertise. The department has been expanded by hiring additional Environmental and Social Specialists recently. Therefore, qualified E&S experts are already on board to support the preparation and implementation of the project. TKYB already has an ESMS, established in January 2020 and operational since then, applicable to its regular business activities which will be used and adapted to this project as was done for previous FEC and EFSP projects. TKYB’s experienced PIU, staffed with capable and qualified personnel, will be responsible for monitoring project implementation, including adherence to all fiduciary and E&S requirements. Its ESMS is based on the World Bank ESF. Oct 15, 2024 Page 3 of 8 The World Bank Formal Employment Creation Project-2 (P507276) II. SCREENING OF POTENTIAL ENVIRONMENTAL AND SOCIAL RISKS AND IMPACTS A. Environmental and Social Risk Classification (ESRC) Substantial A.1 Environmental Risk Rating Substantial The Environmental risk is rated as Substantial on a precautionary basis, since the sectors and locations that will be funded are not defined yet. The structure of the project is based on providing loans to small-medium enterprises to large enterprises. As of now large scale civil works are not expected within the scope of the project. However, small scale construction and rehabilitation works may be financed by the project which would be installed within the perimeters of existing facilities. Screening mechanism will be put in place to allow for the identification and exclusion of subprojects of high risk, and subprojects that are likely to have significant impacts on the sensitive areas (e.g., nationally and internationally protected areas, cultural values etc.). There are no restrictions on sectoral basis at this stage, except the exclusion list of the Bank and TKYB. The project supported civil works and other operations may carry risks and cause adverse impacts, specifically: emissions of dust and vehicle exhausts impacting air quality; noise and vibration; generation of hazardous and non-hazardous waste and soil pollution; OHS-related risks; traffic and road-related risks from increased traffic volume and movement of heavy-duty vehicles; associated community health and safety. The potential impacts are mostly temporary, predictable and/or reversible, and the nature of the project does not preclude the possibility of avoiding or reversing them (although substantial investment and time may be required). There is a medium to low probability of serious adverse effects to human health and/or the natural environment (e.g., due to accidents, toxic waste disposal), and there are known and reliable mechanisms available to prevent or minimize such incidents. As project preparation progresses, and borrower and beneficiary profiles become Public Disclosure clearer, this classification will be reviewed and suitably modified, if needed, at appraisal. Moderate A.2 Social Risk Rating The social risk is assessed as Moderate as the potential adverse social risks and impacts are not likely to be significant in scale or type and can be mitigated in a predictable manner. The project is designed to increase job creation in earthquake affected regions which are already lagging regions in terms of poverty and unemployment, and hence, could result in positive social outcomes. Potential subprojects and their supporting activities are not known yet entirely. Large scale civil works are not expected within the scope of the project. However, small scale construction and rehabilitation works may be financed by the project. The project will not support any kind of activity that will lead to involuntary resettlement and land acquisition. Should any of sub-projects require any construction works to be conducted, this will include works such as refurbishment and expansion of current facilities that will not require additional infrastructure or land. Risks to cultural heritage, and community health and safety are limited, labor influx is not expected. The main social risks will be associated with (i) labor and working conditions and occupational health and safety (OHS) in beneficiary firms; (ii) social inclusion aspects, i.e. access to finance by women-led or women- managed industries, as they are likely to face greater obstacles in accessing finance in Türkiye. Also, the fact that sectors are unknown can pose specific risks like child labor and forced labor in agriculture, exposure to hazards such as pesticides especially for vulnerable groups like women and children, health hazards associated with waste management etc. Once the sectors are more clarified during appraisal stage, these risks will be assessed again and risk rating will be adjusted accordingly. These risks would be managed by the measures included in the project design and TKYB’s ESMS. Thus, the potential social impacts and commensurate risks are not significant and can be rated as “Moderate”. Oct 15, 2024 Page 4 of 8 The World Bank Formal Employment Creation Project-2 (P507276) B. Relevance of Standards and Policies at Concept Stage B.1 Relevance of Environmental and Social Standards ESS1 - Assessment and Management of Environmental and Social Risks and Impacts Relevant The project is expected to have primarily positive social impacts. However, the subprojects may result in some adverse environmental and social impacts as well. Large-scale civil works are not expected at this stage, small-scale construction and refurbishment activities may be supported. The anticipated construction-related impacts include habitat disturbance, waste and soil pollution, air and noise emissions, risks to community health and safety (including traffic-related risks) and OHS risks. TKYB will use its ESMS, which has designated officials for managing E&S risks of project activities. The ESMS provides an Exclusion List, process of assessment of E&S risks using Environmental and Social Due Diligence process, requirement and guidance for the preparation of an Environmental and Social Action Plan, Risk Categorization, determination of Contractual Environmental and Social obligations, monitoring arrangements etc. The provisions for the ESMS use will be outlined in the ESCP. ESS10 - Stakeholder Engagement and Information Disclosure Relevant The main stakeholders include potential SMEs and LEs; unemployed workable people in earthquake affected provinces; Turkish Employment Agency (ISKUR), Social Security Agency, local government representatives in selected 11 provinces and local NGOs and CSOs. TKYB will prepare a SEP in accordance with the ESF. The SEP will identify and analyze key stakeholders and describe the process and modalities for sharing information on the project activities, Public Disclosure incorporating stakeholder feedback into the project design and implementation and reporting and disclosure of project documents. The SEP will also integrate proposed citizen engagement activities and indicators. TKYB’s ESMS provides for a GRM in line with international standards and acceptable to the World Bank which would be accessible to all stakeholders as well as an internal GRM in compliance with ESS10 and ESS2. These GRMs will also include channels for handling SEA/SH complaints sensitively and confidentially. ESS2 - Labor and Working Conditions Relevant The project will include direct (TKYB’s employees and technical consultants engaged in the project) and contracted workers (employees of consulting firms engaged to provide technical advice and capacity building). TKYB has a corporate level Human Resource Policy which is in line with national regulations and ESS2 requirements. TKYB will be required to ensure the inclusion of SEA/SH GM in the existing labor procedures and policies. While the OHS impacts/risks are highly dependent on the specific sector, the construction risks may include falling from height, slips and falls, exposure to dust and noise, working in confined spaces etc. Operational phase impacts may include poor workplace conditions, noise, vibration, poor illumination, working at height, and risks related to site traffic, handling hazardous chemicals, etc. In line with ESS9, TKYB will apply relevant requirements of ESS2 to subprojects to be met ME and LE loan recipients. ESS3 - Resource Efficiency and Pollution Prevention and Management Relevant ESS3 is relevant for the project. During the implementation of reconstruction, rehabilitation, and civil works, the project will ensure resource efficiency and pollution prevention in line with the World Bank ESF. Identified risks Oct 15, 2024 Page 5 of 8 The World Bank Formal Employment Creation Project-2 (P507276) include noise, dust emissions, waste generation (including e-waste), and consumption of water and energy. Industries with significant pollution risks include textiles (water pollution from dyeing processes, air pollution from volatile organic compounds), agriculture (pesticide runoff, soil degradation, greenhouse gas emissions), and service industries (chemical waste, high energy consumption). Mitigation measures will focus on noise and dust control, waste management plans, and efficiency in water and energy use. TKYB’s environmental and social policy emphasizes resource efficiency, combating climate change, and promoting positive environmental impacts. Site-specific environmental and social action plans and management plans will be developed. ESS4 - Community Health and Safety Relevant ESS4 is relevant for the project. The implementation of subprojects may cause impacts associated with community health and safety. Such impacts will be identified, assessed, and addressed within the scope of subproject-specific ESAPs after subproject locations and detailed activities become known during the project implementation. Subprojects which may cause significant impacts (classified as “High”) will be considered ineligible for financing. Labor influx is not expected in this project. The project GRM will be adapted to receive confidential complaints related to workplace harassment and SEA/SH and make referral as relevant. ESS5 - Land Acquisition, Restrictions on Land Use and Involuntary Resettlement Not Currently Relevant This standard is not relevant within the scope of this project. The project will not finance any activities which would cause restrictions on land use, land acquisition and/or involuntary resettlement. ESS6 - Biodiversity Conservation and Sustainable Management of Living Natural Not Currently Relevant Public Disclosure Resources Sub-projects which may adversely impact conservation and sustainable use of biodiversity and living natural resources will not be eligible for financing within the scope of the project., Therefore the standard is not relevant at this stage. ESS7 - Indigenous Peoples/Sub-Saharan African Historically Underserved Traditional Not Currently Relevant Local Communities This Standard is not relevant as there are no Indigenous Peoples who meet the criteria under ESS7 in Türkiye. ESS8 - Cultural Heritage Relevant Subprojects having significant impacts on cultural heritage will not be eligible for financing within the scope of the project. However, the subprojects may include simple construction works, which may entail chance finds. Therefore, the standard is relevant for the project, and a chance finds procedure, as per the requirements of the national legislation and requirements of this standard, will be described in the subproject-specific ESA documents. ESS9 - Financial Intermediaries Relevant TKYB has an ESMS which has been developed in 2020 in accordance with ESS9. The ESMS provides detailed E&S procedures including an exclusion list, E&S risk categorization, preparation of an ESAP, determination of contractual E&S obligations, E&S monitoring and reporting throughout the loan term etc. It also incorporates the requirement Oct 15, 2024 Page 6 of 8 The World Bank Formal Employment Creation Project-2 (P507276) and guidance for the preparation of SEPs, and implementing internal grievance mechanism. Overall, TKYB's ESMS is functioning effectively, although there remains potential for enhancement. Collaborative efforts between TKYB and the Bank are underway to reinforce the ESMS by identifying gaps and challenges in its implementation. These initiatives are informed by lessons from previous projects, such as the FEC and EFSP, that were executed by TKYB under the ESMS. During preparation, TKYB’s ESMS will be assessed and strengthened to ensure that any gaps identified and filled prior to any financing. The Bank will monitor TKYB’s ESMS performance. B.2 Legal Operational Policies that Apply OP 7.50 Operations on International Waterways No OP 7.60 Operations in Disputed Areas No B.3 Other Salient Features Use of Borrower Framework In Whole TKYB ESMS (which has been developed as per IFC’s Performance Standards) will be followed for this project. Use of Common Approach No No other financiers are expected to finance the project activities. Public Disclosure C. Overview of Required Environmental and Social Risk Management Activities C.1 What Borrower environmental and social analyses, instruments, plans and/or frameworks are planned or required by Appraisal? • ESCP: The WB and MoAF will agree on an Environmental and Social Commitment Plan (ESCP), which will set out the material measures and actions required for the project to meet the ESSs over a specified timeframe. The ESCP will be prepared, disclosed and cleared by WB prior to appraisal and will form part of the legal agreement. • Prior to Appraisal, the Borrower will prepare, to a level acceptable to the World Bank, consult upon, and disclose the Stakeholder Engagement Plan and start implementing it as early as possible during project preparation. • TKYB’s ESMS will be assessed prior to appraisal for compliance with ESS9 requirements and activities will be planned to strengthen and streamline the ESMS. • TKYB’s internal human resources policy and other related policies and procedures will be assessed for compliance with ESS2 requirements. III. CONTACT POINT Oct 15, 2024 Page 7 of 8 The World Bank Formal Employment Creation Project-2 (P507276) World Bank Task Team Leader: Sirma Demir Seker Title: Senior Economist Email: sdemirseker@worldbank.org TTL Contact: Siddharth Hari Job Title: Economist Email: shari@worldbank.org IV. FOR MORE INFORMATION CONTACT The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 473-1000 Web: http://www.worldbank.org/projects V. APPROVAL Task Team Leader(s): Sirma Demir Seker, Siddharth Hari Public Disclosure ADM Environmental Specialist: Emre Dolek ADM Social Specialist: Ebru Demir Aykan Oct 15, 2024 Page 8 of 8