Environmental and Social Risk Management
All IIC corporate projects must include a description of their environmental and social impacts and any necessary mitigation measures. IIC customers are also required to submit an Environmental and Social Action Plan (ESAP), which is appended to the loan agreement. As required, the IIC’s team of environmental and social experts will help customers develop an ESAP.
Financial institutions engaged in onlending or investing IIC funds must adhere to the IIC’s List of Excluded Activities and are required to attend an annual environmental risk management course conducted by the IIC.
All corporate and financial institution customers are required to submit annual environmental performance reports for the duration of each transaction.
Environmental and Social Risk Management: Corporate Projects
The IIC’s environmental team will typically refer customers seeking project financing to the following useful resources for completing the environmental and social review process:
- IDB Sustainability Tools and Guidelines
- Environmental Protection Agency (United States) Sector Notebooks
Environmental and Social Risk Management for Financial Institutions
The IIC believes that financial institutions with a firm commitment to managing environmental and social risks will ensure that their customers deal responsibly with pollution, health, safety, and product quality issues. The IIC believes that such a commitment, in addition to helping customers avoid fines and other sanctions, will actually make them profitable. In fact, managing these kinds of risks reduces the need for reserves on nonperforming loans, improves earnings and balance sheets, and increases the value of shareholder equity.
Pollution, waste, and associated risks are products of the inefficient use or improper handling of resources. Companies with clean and efficient operations can be more competitive and profitable. A clientele with a good environmental performance record can improve a financial institution’s portfolio and bottom line. Financial institutions that proactively manage environmental risks enhance their image in the financial sector and are more likely to attract funding on the international market.
The IIC can assist its partner financial institutions with environmental and social risk management by helping them develop and implement environmental risk management policies and procedures, grasp business opportunities and better understand how environmental and social risk management can strengthen their own portfolios, make the business case to their customers for improving operating efficiency and environmental performance to make them more competitive in domestic and global markets, and build their capacity through the IIC’s environmental risk management course for the financial sector.
The following additional resources and tools are designed to assist financial institutions implement environmental risk management procedures: