Environmental and Social Risk Analysis (ESRA) Introductory Workshop 28 th May, 2010 Athens, Greece.

Transcription

1 Environmental and Social Risk Analysis (ESRA) Introductory Workshop 28 th May, 2010 Athens, Greece

2 Introduction ENVIRONMENTAL AND SOCIAL RISK MANAGEMENT

3 Lessons Learned Risk does not always come from obvious sources Environmental and social risks can be a financial risk and not just a reputational risk Reputation is hard to price until you have lost it

4 S&E Risk Management I. Identification of S&E risks II. Categorisation III. Assessment of social and environmental risks IV. Managing client compliance

5 Process Integration Marketing Origination Know Your Client Technical/Due Diligence S&E position in marketing material Information available on S&E risk analysis Initial project & client screening & appraisal Exclusion lists Presentation of financing proposal to Client, including S&E appraisal Filter for antimoney laundering, terrorism Categorisation S&E Assessment Independent reviews Process findings & establish deal conditions Term Sheets/investmen t documentation Credit Approval & Review of Legals Monitoring & Annual Reviews S&E requirements included in loan documentation Deal review against internal S&E standards Presentation to Client Agree to final terms Closure Disbursement Client submits monitoring reports Engagement over nonperformance

6 S&E Risk Management Categorisation S&E Assessment Independent reviews Process findings & establish conditions S&E requirements included in loan documentation Credit review & approval Presentation to Client Agree to final terms Closure Disbursement Client submits monitoring reports Independent verification Engagement over nonperformance

7 Group Work ANALYSING THE CONTEXT

8 Risks to the Client Loss of operating license Disinvestment Shareholders Community Employees Strike, sabotage Market loss Export market Regulators Company Government Shutdown, delay Increased cost Financiers NGOS Campaigns Loss of cover Insurers Clients Media Negative publicity Contract loss, boycott

9 Risks to the Client Loss of operating license Disinvestment Shareholders Community Employees Strike, sabotage Market Loss Export market regulators Company Government Shutdown, delay Financiers NGOs Increased cost Campaigns Insurers Media Loss of cover Clients Negative Publicity Contract loss, boycott

10 Risks to the FI Credit Risk Defaults Payment rescheduling Market Risk Sector wide practices Market devaluation Guarantee Risk Defunct/devalued collateral Legal Risk potential transfer of liability from borrower to lender Funding Risk Access to capital Cost of funds Reputational Risk National International

11 Risks to the Client Operating license Long-term investors Shareholders Community Employees Retention Open markets Export market regulators Company Renewal, expansion Government Financiers NGOs Reduced cost Cooperation Insurers Media Reduced cover Clients Reputational benefits Stable markets, premium pricing

12 Implementation I ANALYSING THE CONTEXT

13 Aspects to Analyse Type and scope of the project - associated & related facilities Sector risk Market Location Policy & regulatory framework, capacity to regulate, governance Prevailing natural and social environment, trends Levels of stakeholder activity in the sector Existing/past impacts on environment Impacts associated with inputs and raw materials, supply chain Third party risk Client commitment & capacity

14 Challenges Access to information Client willingness, resistance Reliability of information Benchmarks for performance National standards EU directives and standards IFC Performance Standards and EHS Guidelines

15 Group Work ANALYSING AND MANAGING RISKS

16 Implementation II - Categorisation ANALYSING AND MANAGING RISKS

17 Categorisation A screening process to categorise a project based on the nature and magnitude of its potential impacts sector, location, scale, type, related & associated activities, supply chain, For the purpose of determining level of social and environmental risk assessment and management required

18 Definitions Category A B C Characteristics Potential significant adverse social or environmental impacts that are diverse, irreversible or unprecedented Potential limited adverse social or environmental impacts that are few in number, generally site-specific, largely reversible and readily addressed through mitigation measures Minimal or no adverse social and environmental impacts Reference IFC Policy on Social and Environmental Sustainability, April 2006

19 Group Work Categorisation Tool ANALYSING AND MANAGING RISKS

20 Implementation III Due Diligence, S&E Assessment ANALYSING AND MANAGING RISKS

21 E&S Assessment The duration, depth and type of E&S assessment required depends on the nature, scale and potential impact of the project, company activities. Area of influence Alternatives Avoid, minimise, mitigate and compensate Increase positive impact

22 S&E Assessment Category Assessment ESRA Form A B SEIA and/or Audit, Action Plans, Public Consultation & Disclosure Independent Review Environmental Audit or internal Environmental Management Analysis, Evaluation of Risks, Corrective Action Plan ER006, ER007, ER008A, ER010A ER008, ER009

23 Group Work Risk Evaluation Tool for Category B Project ANALYSING AND MANAGING RISKS

24 Implementation IV Managing Client Compliance ANALYSING AND MANAGING RISKS

25 Managing Client Compliance Action plans Identify conditions for financing approvals, disbursements Inclusions into loan documentation & provisions Monitoring all category A and B should be monitored independent verification of compliance