IFC has a US$8.6 million equity investment with Enso Hydro, an Austrian company specializing in investments in small and medium-scale hydropower plants in southeast Europe, Turkey, Alpine Regions, and Scandinavia. One 8.9 Megawatt (MW) hydropower plant on the river Lengarica in Albania has already been identified, and the concession has been signed. The project is classified as a Category B.

In June 2015, a complaint was lodged with CAO by two local residents with the support of the Organic Agriculture Association. The complainants raise issues regarding the impacts of the Lengarica project, alleging that project construction negatively impacts biodiversity, critical habitats, and ecotourism livelihoods, among other broader concerns related to project due diligence.  

The complaint was found eligible for assessment in July 2015, and an assessment trip was conducted in September 2015. During the assessment, the parties agreed to engage in a CAO facilitated Dispute Resolution process to try to resolve the issues raised in the complaint. A CAO Assessment Report was subsequently released in December 2015. However, after the power plant became operational subsequent to the complainants’ decision to commence a dispute resolution process, the complainants determined that they were unwilling to meet with the company. This decision ended the CAO dispute resolution process. CAO released the Dispute Resolution Conclusion Report in February 2016.  In accordance with CAO’s Operational Guidelines, the case was transferred to CAO Compliance for appraisal of IFC’s/MIGA’s performance about the project.  

CAO released the compliance appraisal report in May 2016, concluding that the complaint raises substantial issues related to IFC’s appraisal and supervision of the environmental and social (E&S) impacts of the project. As a result, CAO determined that a compliance investigation was warranted. 

In June 2016, CAO published Terms of Reference (ToR) for the compliance investigation, defining the scope of the investigation, including IFC’s pre-investment review and supervision of project impacts on biodiversity and ecosystem services, the location of the project in a national park, and impacts on tourism. A field visit was completed in November 2016.

CAO released the investigation report in October 2018, finding material deficits in IFC’s pre-investment review of the project, particularly regarding alleged biodiversity impacts. Shortcomings included errors and omissions in the client’s Environmental and Social Impact Assessment (ESIA) related to: (a) the identification of endangered and endemic species; (b) a lack of assessment of cumulative impacts emerging from the construction of multiple hydropower projects in the Lengarica river system; and (c) the lack of assessment of the adequacy of proposed environmental flow metrics. However, these deficits in IFC’s review were addressed during project implementation as additional biodiversity studies were commissioned and a biodiversity monitoring program was established. Monitoring results to date do not suggest that the construction of the Lengarica HPP has led to measurable adverse impacts on biodiversity. In these circumstances, CAO found that IFC’s supervision has been adequate.

Outstanding issues identified in CAO’s investigation relate to: (a) disclosure of the E&S assessment and monitoring information for the Lengarica HPP; (b) the assessment and mitigation of project impacts on tourism; and (c) the alignment of the Lengarica HPP with the management plan for the Bredhi i Hotovës-Dangelli National Park, within which it is located.

IFC’s official response to the investigation contains an action plan with project-level responses, including aligning the IFC client’s actions with the objectives of the National Park’s management plan, engaging with the tourism community to enable the use of the canyon for recreational activities, and disclosing the project’s environmental and social impact assessment. 

In December 2019, CAO released a first monitoring report on IFC’s actions in response to the investigation. The monitoring report acknowledged that IFC disclosed relevant information, including the 2011 ESIA for the project and regular updates on river flow monitoring, and the monitoring of these issues was thus closed. Regarding the project’s alignment with the National Park’s management plan, potential impacts on tourism, and related stakeholder engagement, IFC reported several actions initiated with the client, in particular initial steps in engaging with national and local authorities around these issues. While acknowledging the progress made by the company as reported by IFC, in order to close this monitoring process with a satisfactory result, the monitoring report noted that IFC would be expected to provide the company with appropriate advice and assistance about:

(a) Its efforts to engage with national authorities, particularly about the development of the National Park’s management plans and any related adjustments to the management of environmental and social impacts of the project; and

(b) Engagement with stakeholders to effectively assess and address project impacts on tourism, including consultation with local authorities and tourism operators.

CAO released its first compliance monitoring report on December 6, 2019. A second compliance monitoring report was issued on April 19, 2022. CAO found that IFC’s ongoing supervision of the project had only partially addressed CAO’s non-compliance findings regarding the project. In a previous monitoring report, CAO had noted that the finding regarding the need to disclose project environmental and social assessment and monitoring information had been addressed. However, CAO notes in a second monitoring report that IFC has not fully addressed findings regarding the need to:

(a) Assess and mitigate project impacts on tourism, especially kayaking

(b) Verify that project operations are consistent with the management plan of the National Park where the project is located, particularly concerning biodiversity conservation and tourism

Since neither IFC nor Enso have proposed any further action to address CAO’s investigation findings, CAO concludes that further monitoring has limited value and has decided to close the compliance monitoring process for this case with a partially unsatisfactory result.

All documents about this case, including CAO's compliance appraisal, investigation, monitoring reports, and IFC’s response, can be found in the "Case Documents" section.