GCPF Environmental and Social Management System (ESMS)

Transcription

1 GCPF Environmental and Social Management System (ESMS) Annual Report 2016

2 Contents Introduction: Portfolio Overview Banco Atlántida, Honduras Banco de la Producción S.A., Nicaragua The City Bank Ltd., Bangladesh Chase Bank, Kenya Cronimet, South Africa Off-Grid Electric, Tanzania Pan Asia Banking Corporation, Sri Lanka Prasac, Cambodia Banco Pichincha, Ecuador Banco Pine, Brazil Banco ProCredit, Ecuador Promerica Costa Rica, Costa Rica Banco Múltiple Promerica de La Republica Dominicana RBL Bank, India Şekerbank, Turkey Southeast Bank, Bangladesh SREI Infrastructure Finance Ltd, India TBC Bank, Georgia Ukreximbank, Ukraine Vietinbank, Vietnam XacBank, Mongolia...25 GCPF ESMS Annual Report

3 Introduction: Portfolio Overview 1.1. Investment Overview s Direct Investments No. of investments 19 2 Total volume USD 333.0mn USD 2.4mn Portfolio share 99.3% 0.7% Avg. transaction size Max. transaction size No. of Category FI-1/A No. of /B 16 1 No. of Category FI-3/C Overview Portfolio share Total exposure (USDmn) Average transaction size (USDmn) Max transaction size (USDmn) Senior debt 95.5% Subordinated debt 4.5% Sector overview, disbursed sub-loans since inception of the Fund Technology Disbursed sub-loans (USDmn) Sub-loan portfolio share Agriculture % Buildings % Consumer Appliances % Industrial Process % Renewable Energy % Transportation % Other 3.6 1% 1 The 2015 GCPF ESMS previously rated partner institutions on an A (High Risk), B (Medium Risk), C (Low Risk) basis. As per the Fund s updated ESMS, which is expected to receive approval in Q1 2017, financial institutions are categorized on an FI-1, FI-2 and FI-3 scale while direct investments are categorized on the A, B and C scale. GCPF ESMS Annual Report

4 1.4. Sector overview by partner institution, disbursed sub-loans since inception Financial Institutions Agriculture Buildings Consumer Appliances Industrial Process Renewable Energy Transport Other Şekerbank 5% 93% 0% 0% 2% 0% 0% Vietinbank 37% 0% 0% 63% 0% 0% 0% Banco Pichincha 0% 0% 74% 5% 4% 12% 5% Ukreximbank 9% 0% 0% 8% 83% 0% 0% Banco Procredit 33% 2% 3% 36% 0% 21% 5% Banco Pine 0% 0% 0% 100% 0% 0% 0% XacBank 0% 74% 0% 5% 2% 17% 2% Pan Asia Bank 0% 0% 0% 0% 0% 100% 0% BanPro 10% 10% 0% 11% 56% 13% 0% Ratnakar Bank 89% 0% 0% 0% 11% 0% 0% Banco Atlántida 0% 0% 0% 0% 100% 0% 0% The City Bank 0% 0% 0% 87% 13% 0% 0% SREI 0% 0% 0% 0% 100% 0% 0% Southeast Bank 0% 11% 0% 83% 6% 0% 0% Promerica Costa Rica Promerica Dom. Republic 0% 0% 0% 0% 33% 63% 4% 0% 0% 89% 0% 11% 0% 0% TBC Bank 0% 0% 0% 0% 100% 0% 0% Chase Bank N/A no disbursed sub-loans due to the bank s placement under receivership in April Prasac N/A no disbursed sub-loans since August 2016, when signed as partner institution. Direct Investments Agriculture Buildings Consumer Appliances Industrial Process Renewable Energy Transport Other Cronimet 0% 0% 0% 0% 100% 0% 0% Off Grid Electric 0% 0% 0% 0% 100% 0% 0% GCPF ESMS Annual Report

5 1. Banco Atlántida, Honduras USD 15mn Date of Investment 20 March 2014 s of projects funded Other IFIs to which ing on Small hydro projects ranging from 3-9 MW The bank updated its E&S categorization procedures for renewable energy, industry, agriculture and infrastructure. Previously, projects in these sectors were categorized as having either High, Medium or Low E&S risk. As part of the continuous review of its ESMS policies, the bank decided to add an additional layer of granularity on the lower scale of the risk categorization, segmenting Low level into two sub-categories: A: Low and B: Moderate. The main difference between the two sub-categories is that in the latter, the project is near a designated Buffer Zone or Protected Area and requires additional E&S due diligence and monitoring, both during construction and operation. This continuous ESMS improvement is supported by IFC and SERNA E&S specialists. ed. The bank cites limited client awareness of E&S impacts and mitigation as the main implementation challenge. However, through close monitoring and frequent visits, its clients willingness and ability to identify and mitigate relevant E&S impacts has improved.. Relevant bank staff underwent the following trainings in 2016: IFC: The impact and benefits of RE projects: Implementing of E&S standards in emerging markets ; UNEP-FI/GIZ/INCAE: E&S risk analysis for FIs ; FUNDAHRSE: o CSR; Compliance with national regulations o Corporate Environmental Management SERNA (Ministry of National Resources, the Environment and Mines): Update course on E&S compliance CTA: E&S Management, general industry application. IFC A team of in-house E&S specialists visit all renewable energy projects on a quarterly or annual basis. During each visit, compliance with IFC PS s and GCPF requirements is verified. GCPF ESMS Annual Report

6 2. Banco de la Producción S.A., Nicaragua USD 25mn Date of Investment 31 October 2013 s of projects funded Other IFIs to which ing on Projects range across multiple sectors, from commercial air conditioner replacements, industrial process upgrades, fuelefficient cars and small-scale to 1MW solar projects. ed The bank implemented two trainings related to E&S policy, reaching 25 credit analysts and 10 loan administrators. In addition, the bank is currently preparing an intensive training for directors and top operational staff to strengthen understanding of E&S risks and improve implementation of E&S action plans. Proparco and FMO The bank continues to work with the Cleaner Production Center, which provides technical assistance for green line allocation and E&S policy implementation. As a result of Banpro s focus on green lending, its clients perceptions of EE and RE investments have improved considerably, reflecting greater appreciation for their ability to reduce energy consumption and increase productivity. GCPF ESMS Annual Report

7 3. The City Bank Ltd., Bangladesh USD 30mn Date of Investment 24 July 2014 s of projects funded Category FI-1 Energy efficiency projects in the ready-made garment sector, financing equipment such as label weaving machines, dryers, irons and washing machines, as well as small-scale solar PV. In 2016, reflecting close relationships with the IFC and FMO, CBL completed a comprehensive overhaul of its E&S policies. It replaced its previous guidelines which were guided by central bank regulations with an Environmental and Social Management System (ESMS) aligned with IFC Performance Standards. CBL and IFC have agreed to a time-bound implementation plan to ensure that the new requirements are implemented by December At the end of this period, a portfolio review of High Risk projects will take place to identify latent E&S risks. Subsequently, these requirements will be implemented on an ongoing basis and the portfolio review will become an annual exercise. ed Other IFIs to which ing on GCPF TA is supporting a thorough enhancement of the bank s ESMS, from E&S risk evaluation and categorization to monitoring and implementation of E&S action plans. The project started in January 2016 and will last through October Since the program s inception, consultants have visited the bank twice. During their visits, consultants have also visited a number of CBL s clients in order to better understand the relevant E&S challenges and enhance the bank s ability to identify and address them. Following the publication of new central bank regulations in February 2017, the consultants are working to close any remaining gaps and ensure alignment with relevant local and international standards. The bank conducted several E&S trainings over the ing period, including: 15 orientation sessions for 530 employees (roughly 35 per session) on the bank s new ESMS and regulatory framework; 2 workshops on the new ESMS, as well as Ethics in Banking courses, for 67 participants; 1 two-day workshop on IFC Performance Standards for 5 participants, provided by a team of IFC specialists. IFC and FMO The Central Bank of Bangladesh published long-awaited revisions to its ESMS framework in February For more, follow this link: GCPF ESMS Annual Report

8 4. Chase Bank, Kenya USD 20mn Date of Investment 23 December 2015 s of projects funded Other IFIs to which ing on Chase Bank has not yet ed any on-lending activities to energy efficiency or renewable energy generation projects. ed GCPF TA funds were approved for commissioning environmental and social impact assessments (ESIAs). However, following Chase Bank s placement under receivership in April 2016, this TA project was cancelled. available Chase Bank was placed under receivership on 7 April At the time of writing this, it remains unclear whether GCPF will continue its partnership with the bank. GCPF ESMS Annual Report

9 5. Cronimet, South Africa Direct investment USD 1.21mn Date of Investment 20 December 2012 s of projects funded Status of ESMS Category B Off-grid solar PV installation for a chromium mine in South Africa. The installation substitutes part of the electricity that would otherwise be generated by diesel generators. The company s Environmental Management Program Report is implemented by Worley Parsons, which monitors performance on a weekly basis. Overall compliance is further audited on a monthly basis. In keeping with the EMPR, ISO certification is expected to be achieved in Cronimet amended the EMPR in 2016 and its updates were approved in February No significant issues ed, although there was a temporary suspension of mining activities due to health & safety issues. No penalties, fees or corrective action plans were imposed. Any identified non-conformances are documented and addressed through corrective and preventative actions. Non-conformances are published in the monthly EMPR Compliance Report and distributed to relevant government agencies. Personnel received various forms of training from Worley Parsons in 2016, including: 1) annual health & environmental safety training for all employees and contractor personnel; 2) waste management training, with a focus on waste separation and disposal (for selected participants); 3) spill kit usage training (for selected participants); 4) equity in employment training for all employees; and ISO implementation training. In addition, Cronimet conducts regular awareness days at the mine on HIV, tuberculosis, diabetes, nutrition and hygiene. The client s compliance with all relevant E&S laws and regulations, the GCPF exclusion list, and all commitments under the approved EMPR. GCPF is monitoring progress. GCPF ESMS Annual Report

10 6. Off-Grid Electric, Tanzania Direct investment USD 1.22mn Date of Investment 17 May 2016 s of projects funded Category C OGE sells and installs integrated small-scale solar home systems on a pay-as-you-go (PAYG) model.. The company s inventory management practices allow for close monitoring of E&S risks throughout the supply chain. ed. OGE s direct suppliers are in compliance with all local labor laws and must maintain these certifications to remain OGE partners. OGE s training Academy recruits and trains prospective sales agents from the local workforce. Training includes coverage of all relevant and is considered one of the most advanced training programs in the PAYG sector. OGE is contractually obliged to within three business days any social, labor, health and safety, security or environmental incident occurring on any of its sites, plants, equipment or those of its relevant parties. GCPF ESMS Annual Report

11 7. Pan Asia Banking Corporation, Sri Lanka USD 20mn Date of Investment 26 September 2013 s of projects funded Other IFIs to which ing on Hybrid vehicle leasing accounts for 100% of the ed green lending portfolio. The ESMS developed and completed over 2015 and 2016 received Corporate Management and Board of Director approval in Q PABC expects the ESMS to be implemented by Q2 2017, with the first annual audit taking place one year thereafter. All loans financed with GCPF funds are compliant with the Fund s E&S requirements. ed. GCPF TA continued to support the development and implementation of an ESMS aligned with the Fund s E&S standards and requirements. The selected consultants, Paterson Sustainability Limited, began work in May 2015 and are working on an open-ended contract. In 2016, as discussed above, the program achieved its first major milestone: the approval of its first ESMS. Having recently obtained final approval for its first ESMS, the bank is currently devising the training schedule, which will cover the entire credit approval process from commercial staff in local branches to credit risk teams. All trainings will be led by an E&S expert from Paterson Sustainability Limited, allowing the bank to benefit from her extensive knowledge and practical experience. In addition, the bank s ESMS Officer and Coordinator participated in a three-day ISO training held by the Cleaner Production Center, which focused on ensuring borrower compliance with E&S requirements across different industries relevant to the bank s activities. GCPF ESMS Annual Report

12 8. Prasac, Cambodia USD 3mn Date of Investment 15 August 2016 s of projects funded Other IFIs to which ing on Category FI-3 Projects targeted include EE equipment and appliances, as well as solar home systems and water heaters. Prasac updated its ESMS in September 2016, adding 17 indicators to its E&S monitoring requirements. In addition, an IFC-aligned exclusion list was added to loan documentation, and E&S checklists were developed for credit officers to analyze the potential E&S impact of a client s income-generating activities. Credit officers follow up with clients after loan disbursement to, among other things, ensure continued compliance with E&S criteria. ed Prasac provided an E&S refresher course to all staff and a more in-depth training to new recruits, focusing on social performance management, client protection principles and environmental protection. Over the year, the MFI held 37 separate E&S training courses at which 1,226 staff members participated. Not disclosed. Prasac uses CERISE's SPI4 and SP Tracking tools to monitor social risk and over-indebtedness across its portfolio, and an annual internal audit verifies overall compliance with E&S policy. In December 2015, PRASAC earned the Client Protection Certification from the Smart Campaign, underlying its commitment to excellence in client protection practices. To be certified, an organization must be found to meet all 30 client treatment standards. GCPF ESMS Annual Report

13 9. Banco Pichincha, Ecuador Subordinated loan USD 15mn Date of Investment 29 December 2011 s of projects funded Other IFIs to which ing on Projects include energy efficient appliances (mainly washing machines and fridges), tractors for smallholder farmers and small-scale renewable energy. In 2016, the bank implemented two enhancements to its ESMS: first, it developed clearer guidelines and tools for assessing and monitoring E&S risk; second, it broadened the categories of loans which require E&S analysis. ed The bank held several trainings in 2016, including: capacity building on compliance with environmental laws for relevant commercial staff; ISO 9001 training for the bank s E&S Officer; and training on client protection practices for all commercial and E&S staff involved in microfinance activities. The bank also evaluated its internal sustainability practices as per ISO and trained relevant officers on addressing the shortcomings identified. BID, CII, FMO, Proparco, responsability, IFC, Blue Orchard Microfinance Fund, and Blue Orchard Microfinance Fund In 2016, for the second-consecutive year, Banco Pichincha s E&S performance was evaluated by RobecosSAM for inclusion in the Dow Jones Sustainability Index. The bank s performance registered an improvement over the previous year, achieving a total score of 72 points as compared to 56 points in 2015 (out of a possible 100). In addition, in June 2016 the bank s microfinance activities were certified by the Smart Campaign for excellence in Client Protection, becoming the first Ecuadorian organization to receive such certification. GCPF ESMS Annual Report

14 10. Banco Pine, Brazil USD 10mn Date of Investment 25 September 2012 s of projects funded Other IFIs to which ing on Energy efficiency measures for industrial processes, including replacement of cane-crushers in a sugar mill and pumping systems. Banco Pine improved its environmental risk management and monitoring, as mandated by Central Bank regulations. ed The bank s E&S compliance team attended a special training organized by FEBRABAN (the Federação Brasileira de Bancos), the country s principal banking association. The training focused on E&S regulations, processes and lessons learned across a variety of industries. IDB GCPF reduced exposure to Banco Pine to USD 10mn in 2016, reflecting the amount being utilized for eligible projects. GCPF ESMS Annual Report

15 11. Banco ProCredit, Ecuador USD 10mn Date of Investment 22 March 2012 s of projects funded Other IFIs to which ing on Mainly small to mid-size EE loans for equipment replacement, ranging from baking ovens to sewing equipment, workshop machines, tractors and taxis. ed The bank provided training to all branch managers and approximately 100 credit analysts on a variety of social and environmental topics, with a focus on incorporating E&S analysis into loan assessments. The training included an exercise on classifying projects with high E&S risk. Throughout the year, the bank received support from IPC on developing its ESMS, which evaluated the bank s practices and supported continued improvements. GCPF ESMS Annual Report

16 12. Promerica Costa Rica, Costa Rica USD 10mn Date of Investment 27 October 2015 s of projects funded Other IFIs to which ing on Projects are predominantly small-scale solar PV and energyefficient buses. ed GCPF TA contributed to the development of E&S guides and checklists tailored to the transport and renewable energy sectors. The selected consultant Steward Redqueen developed the checklists in close collaboration with the bank, adapting relevant national and international regulations to the bank s real operating environment. These have already been piloted with certain clients, and the bank will begin implementing them in Q The bank provided in-house training to all credit analysts on general E&S theory and implementation. In addition, the bank provided training to relevant commercial staff on the use of the new checklists to be used for assessing E&S risk in the transport and renewable energy sectors. Different IFIs, although not specified. GCPF ESMS Annual Report

17 13. Banco Múltiple Promerica de La Republica Dominicana USD 5mn Date of Investment 19 November 2015 s of projects funded Other IFIs to which ing on Projects are principally consumer appliances (washing machines, refrigerators, ACs), and small-scale solar PV. A TA project to support the financing of ESIAs was cancelled in 2016, reflecting the bank s decision to dedicate GCPF funds towards consumer appliances and micro-scale solar PV, which do not require ESIAs. All new staff members received training on credit approval process, which includes focus on E&S risk categorization and appraisal. GCPF ESMS Annual Report

18 14. RBL Bank, India USD 20mn Date of Investment 24 December 2013 s of projects funded Other IFIs to which ing on Projects are predominantly efficient pumping and drip irrigation systems for smallholder farmers. In 2016, the bank s Sustainability Policy was further strengthened by: 1. Officially acknowledging climate change as a significant business risk, leading to transactions being monitored for medium- and long-term climate change risk. 2. Adding checklists for assessing the E&S impacts of land acquisition on indigenous peoples. ed All relationship managers and credit risk team members undergo mandatory E&S training, as per the bank s ESMS. The latest training session took place in August 2016 and included all new relationship managers and credit risk team members. In addition, the bank s E&S team provides periodic thematic and specialized training to relevant commercial and risk teams. Furthermore, the bank is preparing to launch two mandatory e- learning programs: a comprehensive module for relationship managers and credit risk team members involved in corporate lending, and an abridged version of the module for all other staff. IFC, CDC and ADB GCPF ESMS Annual Report

19 15. Şekerbank, Turkey USD 30mn Date of Investment 11 April 2011 s of projects funded Other IFIs to which ing on Mainly building insulation projects, and some tractors and solar thermal installations for smallholder farmers. With close support from the IFC, the bank's Sustainable Development Banking department completed an update of the bank's ESMS Manual, expanding the loans covered by the policy and redefining the roles and responsibilities of different departments and credit officers. In addition, the SDB has initiated an infrastructural IT project to streamline the E&S credit analysis process. ed As part of update to ESMS discussed above, the SDB developed an online sustainability training session entitled "CDP Climate Change and Water" for regional and branch managers. The platform, developed by Ernst and Young, has been used to train 700+ employees across 272 branches, raising awareness on the importance of reducing CO2 emissions and adhering to the bank s sustainability policy. In addition, the bank is currently planning a company-wide training on E&S credit risk analysis and the updated ESMS and procedures. The training materials will be converted into an e- learning platform that will be mandatory for all new employees. The training is scheduled to take place in Q IFC, Green for Growth Fund (GGF), FMO, EBRD and OeEB GCPF ESMS Annual Report

20 16. Southeast Bank, Bangladesh USD 10mn Date of Investment 15 February 2015 s of projects funded Other IFIs to which ing on Energy efficiency projects in the ready-made garment sector, financing equipment such as label weaving machines, dryers, irons and washing machines. The new ESMS, developed with GCPF TA support, will be operational as of 2018 onwards. ed A GCPF-funded TA project to strengthen the bank s ESMS was launched in 2016 and is expected to conclude in Q Enclude the implementing partner has supported development of an E&S risk framework that is aligned with GCPF and international standards. It has also supported the mainstreaming of E&S considerations into the bank s day-today business risk and lending decisions through on-site visits and awareness-raising workshops for management. While the new ESMS policy was ready to be piloted at end-2016, the flareup in the security situation in mid-2016, as well as the Central Bank s announcement that new E&S regulations would be published shortly, resulted in delays. Enclude is working with SEBL to ensure that its ESMS is compliant with the newly published central bank regulations. Once ready, the focus will shift to implementation across the portfolio. As part of the ESMS being developed with GCPF TA, the bank ran train-the-trainers sessions in July It also provided one general training on E&S risk compliance issues to 50 participants. The Central Bank of Bangladesh published long-awaits revisions to its ESMS framework in February For more, follow this link: GCPF ESMS Annual Report

21 17. SREI Infrastructure Finance Ltd, India USD 30mn Date of Investment 30 September 2014 s of projects funded Medium-scale renewable energy projects, with a focus on onshore wind projects of up to 50MW (the GCPF threshold). SREI s E&S Questionnaire and Certificate were still pending at the time of publication. However, GCPF has confidence that its funds are being used in compliance with GCPF requirements. Over the last year, SREI allocated the entirety of its GCPF Facility (USD 30mn) to a 50MW wind project in Tamil Nadu, India. The project received all necessary social and environmental approvals and achieved commercial operation on 26 March As a GCPF partner institution, in addition to local regulations, eligible projects must comply with IFC Performance Standards as well. In the instance of this wind project, while Indian regulations did not require an Environmental and Social Impact Assessment (ESIA), GCPF requested that one be done. PwC was selected to perform the ESIA, which was concluded in July Following its on-site visit, PwC submitted a draft for discussion between SREI, the project promoter, and GCPF s ESMS expert and Carbon Reporting Team. As the ESIA did not reveal any severe E&S issues, the project was determined to be eligible for GCPF. GCPF ESMS Annual Report

22 18. TBC Bank, Georgia USD 10mn Date of Investment 27 December 2016 s of projects funded Other IFIs to which ing on Small-scale renewable energy projects, with a focus on hydropower. The bank re-classified the E&S Risk of Hospital Activities from low to medium risk, reflecting the sensitive nature of the activities involved. Separate from its ESMS, it prepared a Waste Management Plan for the Ministry of Environmental Protection and natural Resources of Georgia. ed. To be conservative, TBC considers all renewable energy projects as high or potentially high risk in order to ensure that they receive adequate E&S scrutiny (i.e. onsite visits and E&S Action Plans are mandatory, and the counterparties are regularly monitored for compliance with IFC, ADB and EBRD Performance Standards).. The bank has a fully-developed and implemented ESMS policy, which has benefited from extensive IFI support (including IFC, EBRD and FMO). In addition to broader E&S training for the bank s E&S Risk Manager and key staff, the project finance department has received training from the IFC on assessing the E&S risks that arise with hydropower projects. IFC, EBRD, EIB, FMO TBC Bank was added to the GCPF portfolio in December The ESIAs of projects in the bank s immediate pipeline were assessed by GCPF s E&S consultant, and the overall E&S system was found to be robust. For all transactions categorized as high or potentially high E&S risk, TBC Bank hires external consultants to determine whether all applicable E&S requirements have been fulfilled. GCPF ESMS Annual Report

23 19. Ukreximbank, Ukraine USD 30mn Date of Investment 16 February 2012 s of projects funded provided by GCPF in 2015 Other IFIs to which ing on Renewable energy projects, principally solar PV (ranging from 1-8MW), as well as energy efficiency loans in industrial processing. ed E&S training was carried out in October and December 2016 as part of the standard RE/EE product training for lending and origination officers. The bank noted that E&S ing provided to its other financial partners may be subject to limited or non-disclosure agreements. GCPF ESMS Annual Report

24 20. Vietinbank, Vietnam USD 25mn Date of Investment 8 December 2011 s of projects funded Other IFIs to which ing on Category FI-1 Mainly industrial process upgrades in the pharmaceutical, plastic, textile and agricultural industries. ed The bank ran an IFC-sponsored training on energy efficiency loans for corporate clients, with a focus on ensuring social and environmental sustainability. In addition, also with IFC-support, the bank underwent an evaluation of its in-house technical expert team to determine strengths and weaknesses in complying with green lending requirements. Not disclosed As a shareholder, IFC is a providing support to the bank in areas including corporate governance, SME banking and energy efficiency financing. GCPF ESMS Annual Report

25 21. XacBank, Mongolia USD 15mn Date of Investment 21 December 2012 s of projects funded Other IFIs to which ing on A variety of projects, mainly linked to the building sector such as insulation and windows, mortgages for energy-efficient housing and boiler replacement projects. The bank enhanced its risk categorization procedures in mid in order to comply with the UNFCCC s Green Climate Fund s accreditation framework. This required broadening the range of social risks that are analyzed during credit assessments (previously, the ESMS focused on risks related to indigenous peoples). ed In 2016, the bank provided an in-depth Social and Environmental Responsibility Training to 67 loans officers and 82 new staff members. IFC, EBRD and Proparco GCPF ESMS Annual Report