Processes

Environmental and Social Risk Assessment as part of Assessments of Customers/ Loans/ Financing

 

As of 2021, we also assess environmental and social risks of selected non-individual customers based on our Environmental and Social Risk Assessment (ESRA) Guideline:

  • for new applications
  • for applications for additional facilities
  • during annual reviews for existing customers

In assessing the customer’s capacity, commitment and track record, we assess whether the customer has a history of the following:

  • significant accidents, injuries/illness or significant environmental damages
  • local stakeholders’ grievances, negative media or NGO campaigns over environmental and social issue
  • non-compliance to government’s policy regarding water, air and noise pollutions as well as lack of waste disposal procedures

Relationship managers and business units conduct the assessment using the ESRA Checklist to generate the environmental and social risk grade (ES–RG). The ES-RG outcomes influences the decisioning approval authority and depth of assessment.

For transactions rated high ES-RG:

  • Escalation to the Credit and Commitments Committee is mandatory
  • Customers are required to develop a mitigation plan with time-bound monitoring triggers, where appropriate

Client Monitoring and Engagement

The Bank will gradually enhance the process as we understand customers and the economy need time to transit. We are evaluating the appropriate manner for the inclusion of clauses related to environmental and social issues in loan/ financing documentations.

For transactions rated high ES-RG, customers are required to develop a mitigation plan with time-bound monitoring triggers, where appropriate.

Customers are subjected to the annual review process. As part of the process:

  • ES-RG will be reassessed
  • Mitigation plans and timeline will be revisited for customers with deteriorated ES-RG or breaches
  • Customers with mitigation plans are tracked to ensure compliance

The Bank reserves the right to incentivise customer with improved ES-RG or impose premium for those with deteriorated ES-RG. In the event of non-compliance to agreed mitigation plans, the bank may consider to impose premium, increase security, tighten covenants, event of default or ultimately exit relationship.

In line with the Group’s Internal Policy Management Framework, our policies and guidelines will be reviewed every two (2) years or earlier if new legislation or circumstances render it appropriate.