Guidelines on Environmental and Social Risk Management

Guidelines on Environmental and Social Risk Management (ESRM) for Banks and Financial Institutions

Guidelines on Environmental and Social Risk Management (ESRM) for

Banks and Financial Institutions

Draft version

June 2015


Table of Contents 1 Introduction ......................................................................................................................... 6

1.1. ERM Guidelines and its revision .................................................................................. 6 1.2. Environmental and social risk management ................................................................ 7 1.3. Inter-linkage between E&S and credit risk .................................................................. 8 1.4. Applicability of ESRM Guidelines ................................................................................ 8

2 Organisational requirements ............................................................................................. 11 2.1 Key requirements ......................................................................................................... 11 2.2 Organisational structure .............................................................................................. 11 2.3 Roles, responsibilities and authorities ........................................................................ 12 2.4 Transaction-specific financing conditions or covenants ............................................ 14 2.5 Portfolio management ................................................................................................. 15 2.6 Capacity-building requirements .................................................................................. 16 2.7 Research and Development ......................................................................................... 16

3 Technical manual ............................................................................................................... 18 3.1 Environmental and social policies, regulations and standards .................................. 18

3.1.1 Environment ........................................................................................................ 18 3.1.2 Occupational health and safety ............................................................................. 18 3.1.3 Social, culture and heritage ................................................................................ 19 3.1.4 Ecology ................................................................................................................. 19 3.1.5 Climate change .................................................................................................... 20

3.2 Environmental and social regulatory frameworks and treaties ................................. 20 3.3 Environmental and social risk review ........................................................................ 22

3.3.1 Prohibited transactions ...................................................................................... 22 3.3.2 General environment and social due diligence ................................................ 22 3.3.3 Sector-specific, environment and social due diligence ................................... 23

3.4 Document reference ................................................................................................... 23 3.5 ESRR ........................................................................................................................... 24 3.6 Third-party review of IEE and EIA reports ................................................................ 24 3.7 Post loan disbursal E&S performance evaluation ...................................................... 24 3.8 Provision of incentives and disincentives .................................................................. 24

4 Technical Annexes .............................................................................................................. 27 4.1 General environmental and social due diligence checklist ......................................... 27 4.2 Environment and social risk rating evaluation .......................................................... 34

4.2.1 Qualitative assessment of ESRR .......................................................................... 34 4.2.2 Quantitative assessment of ESRR ....................................................................... 38

4.3 Post loandisbursal E&S due diligence checklist .......................................................... 41


List of tables Table 1: Abbreviations, acronyms and terms ...................................................................................................... 4

Table 2: Quantitative thresholds ......................................................................................................................... 9

Table 3: Escalation matrix .................................................................................................................................. 14

Table 4: Template for post disbursal monitoring .............................................................................................. 14

Table 5: Template for portfolio management .................................................................................................... 15

Table 6: List of relevant national regulations and international treaties ........................................................ 20

Table 7: ESRR decision matrix .......................................................................................................................... 24

Table 8: Options for incentives and disincentives ............................................................................................ 25

Table 9: Qualitative ESRR steps ........................................................................................................................ 34

Table 10: Impact rating assessment matrix ...................................................................................................... 35

Table 11: Impact rating assessment matrix ....................................................................................................... 35

Table 12: Template for qualitative ESRR .......................................................................................................... 36

Table 13: Template to assign parameter importance value (PIV) .................................................................... 38

Table 14: Degree of risk and risk value ............................................................................................................. 38

Table 15: Template for quantitative ESRR ........................................................................................................ 39

Table 16: Decision-making criteria based on quantitative ESRR .................................................................... 40


Table1: Abbreviations, acronyms and terms

Banks Financial Intermediaries licensed under the Bank Company Act 1991 (Amended in 2013) BB Bangladesh Bank BDT Bangladesh taka Business activity

All activities considered for financing

CAMELS Capital adequacy, Asset quality, Management, Earnings, Liquidity and Sensitivity to market risks CDM Clean Development Mechanism CO Credit Officer CRM Credit Risk Management CSR Corporate Social Responsibility DOE Department of Environment E&S Environmental and Social ECA Environmental Conservation Act ECR Environmental Conservation Rules EDD Environmental Due Diligence EHS Environment, Health and Dafety EIA Environment Impact Assessment EnvRR Environmental Risk Rating ERM Environment Risk Management E&S DD Environmental and Social Due DiligenceESG Environment, Social and GovernanceESIA Environmental and Social Impact AssessmentESMP Environment and Social Management PlanESRA Environment and Social Risk AssessmentESRM Environment and Social Risk ManagementESRR Environment and Social Risk RatingESSRi Each Environment and Social ComponentETP Effluent Treatment Plant FI Financial Intermediaries under the Financial Institutions Act 1993Financing Denotes equity, loan, lease and/or credit facility (both funded and non-funded)GBU Green Banking Unit GHG Green House Gas GRI Global Reporting Initiative HoCRMRM Head of Credit Risk Management IEE Initial Environment Examination IESE Initial Environment and Social ExaminationIFC International Finance Corporation ISO International Organisation for StandardisationLDC Least Developed Country MD Managing Director MOEF Ministry of Environment and ForestsMSDS Material Safety Data Sheet NA Not Applicable NEMAP National Environment Management Action PlanNOC No Objection Certificate NPL Non-Performing Loans OHSAS Occupation Health and Safety Assessment SeriesPIV Parameter Importance Value R&D Research and Development RM Relationship Manager RMC Risk Management Committee SBN Sustainable Banking Network SEDF South Asia Enterprise Development FacilitySME Small and Medium Enterprise STP Sewage Treatment Plant UNEP United Nations Environmental ProgrammeUNEP FI United Nations Environment Programme Finance Initiative

Part 1: Introduction

Guidelines on environmental and social risk management (ESRM) for banks and financial institutions

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1 Introduction

In providing credit and making investments, banks and financial institutions (FIs) institutions assume various kinds of risks, including credit risk, market risk, operational risk, liquidity risk, reputational risk, strategic risk and various others. If environmental and social issues are not considered, probability of default (PD) for these credit and investments may increase, management of these risks may become more difficult, and the achievement of organizational goals may be adversely impacted. The state of the environment in Bangladesh is deteriorating significantly. Key issues include land degradation, water stress and pollution, air pollution, overexploitation of biodiversity resources and frequent occurrence of natural disasters such as flood and cyclones in the coastal areas as a result of climate change. Also, there are social issues in the country related to work condition in industries, labour management, the rehabilitation and resettlement of indigenous populations, in the event of land acquisition and dislocation of local communities due to industrial activities. Considering the deteriorating environment and climactic scenario as well as challenging social issues in Bangladesh; financial risks arising out of these, Bangladesh Bank has been taking concerted efforts since 2011 to guide banks and FIs in protecting their financing from environment and social risks. Bangladesh Bank is one of the founding members of the Sustainable Banking Network launched in 2012. Facilitated by the IFC, the SBN is an exclusive group of banking regulators and associations from emerging countries who are interested in sustainable banking policies, guidelines and practices. The main objective of the SBN is to facilitate the collective learning of its members on E&S standards and to support members in their efforts of developing their own standards, policies and guidelines for E&S risk management for the financial sector in their countries. As one of the founding members of the SBN, Bangladesh Bank is committed to support its financial sector through effective policy development for driving sustainable finance practices, apart from conceptualising and updating the guidelines to preserve the environmental and social well-being of the country. In addition, the Governor of Bangladesh Bank is a member of the UNEP Advisory Council for the ‘Inquiry into the design of a sustainable financial system: Policy innovations for a green economy’. Bangladesh Bank is also an active member of the following national-level initiatives and supports the government in environment-friendly industrial development.

National Clean Development Mechanism Project in Bangladesh National Climate Fiscal Framework in Bangladesh Dhaka Environmentally Sustainable Water Supply Project

As a central bank around the globe, Bangladesh Bank pioneered by introducing Policy Guidelines on Green Banking in 2011 that, inter alia, covered the aspect of policy formulation and governance, environment risk management in CRM, climate risk fund, in-house environmental management, automated banking, sector-specific environmental policies, bank and FI-specific environmental risk management plan, green branch, green strategic planning.

1.1. ERM Guidelines and its revision In January 2011, Bangladesh Bank issued Environmental Risk Management (ERM) Guidelines for Banks and FIs in Bangladesh. ERM Guidelines had four parts- Introduction, Organisational Requirements, Technical Manual and Technical Annexes. ERM Guidelines contained a number of recommendations for the future: Updating the guidelines at least once every three years Further integration with credit risk management Use of numerical risk rating methods Database of external consultants Environmental insurance


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This update to ERM Guidelines, now titled as ESRM Guidelines, has been developed to address the first three recommendations (the database of external consultants and environmental insurance will be considered later), the feedback obtained from banks and FIs after implementation of ERM Guidelines and outcomes of Environmental & Social Risk Management (ESRM) Baseline Survey for Bangladesh Financial Sector conducted by IFC. In particular, it expands the scope of social assessments and introduces a robust and quantitative scoring methodology for better estimation of environmental and social (E&S) risks along with risk-based screening criteria to evaluate a proposed transaction. It aligns this with the categorisation (red, orange, green) under the Environment Conservation Rules (ECR) 1997, links the scope of E&S due diligence based on the risk category of the transaction and proposes the organisational requirements and decision-making process of banks and FIs. The purpose of these Guidelines is to encourage banks and FIs to better understand E&S risks and incorporate appropriate risk mitigation measures to be able to expand the lending portfolio rather than avoid investing in high E&S risks. The introductory section of ESRM Guidelines supplements the introduction section of the ERM Guidelines. ESRM Guidelines focus more on the concept of environmental and social risk management rather than only environment risk management and exemplify the sources of both environmental risks and social risks. It identifies E&S and credit risk as the two distinct but equally important components of the overall credit of a bank or FI. The updated Guidelines touch upon the types of E&S risk exposures of banks and FIs as well as the benefits of an ESRM system. The applicability of the ERM Guidelines was defined based on only the quantitative thresholds of investments and the loan categories included SMEs, corporate financing and real estate financing. In the updated ESRM Guidelines in addition to these three categories, agriculture and micro finance, retail finance and micro enterprise have been added. The investment thresholds for SME, corporate and real estate financing have been made more stringent and the applicability of the Guidelines is defined based on the investment thresholds as well as the risk category (red, orange A&B and green) of a loan application as per ECR 1997. Part 2 of ESRM Guidelines, i.e., the organisational requirements, is built upon the principles laid down in ERM Guidelines for integration of E&S risks into the bank or FI’s credit policies. It introduces an organisational flowchart to clearly delineate the responsibility of different functions of a bank or FI in terms of E&S risk assessment and the decision-making process based on E&S risk rating. In particular, it introduces the roles of green banking unit, Managing Director and Risk Management Committee of Board in addition to the roles of the credit risk management and relationship banking units of a bank or FI. Part 3 (Technical Manual) and Part 4 (Technical Annexes) of ESRM Guidelines replace Part 3 and 4 respectively of ERM Guidelines of 2011. Part 3 of ESRM Guidelines includes a detailed description and a list of the relevant national E&S regulations and international treaties (where Bangladesh is a signatory). This section reaffirms the concepts of general E&S due diligence and sector-specific E&S due diligence introduced in the ERM Guidelines and in addition introduces the procedure for E&S performance evaluation of borrowers post loan disbursal. It also provides a comprehensive list of documents that banks and FIs should refer to, while carrying out an E&S due diligence. In this section of the ESRM Guidelines, the concept of ESRR is introduced in place of EnvRR. Part 4 of the ESRM Guidelines includes a general environmental and social due diligence checklist which expands on the general environmental due diligence checklist in the ERM Guidelines and includes a number of social parameters. It includes robust methodologies for qualitative as well as quantitative assessment of E&S risk and calculation of ESRR. In addition, it includes the checklist for post loan disbursal E&S due diligence.

1.2. Environmental and social risk management Environmental and social risks arise as a result of non-compliance to national environmental and social regulations or an unexpected change in environment and social conditions. All banks and financial institutions are exposed to some level of environmental and social risks in their investment portfolio.


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Some of the sources of environmental risks are uncurbed air emissions, inefficient use of energy, excess use of water, uncontrolled generation and disposal of wastes, illegal discharge of untreated hazardous substances, land contamination, sound pollution, etc. Climate change can manifest through changes in precipitation, sea level, occurrence and frequency of extreme weather events, etc. Some of the sources of social risks include unhealthy and unsafe working conditions, inadequate measures for community health, safety and security, exploitation of indigenous people and cultural heritage, violation of human rights, etc. E&S risks can lead to regulatory action, increase in costs, loss of production, assets and reputation, disruption of supply chain and reduced market access for borrowers. This can lead to decrease in the value of collateral or security, increase in non-performing loan and loss of reputation of banks or FIs. Environmental and social risk management aims at systematic integration of environmental and social issues into the operations of banks and FIs and provides a clear mandate for senior management supervision, staff responsibilities and the provision of staff training. ESRM prescribes the procedure for collection, evaluation and reporting of relevant environmental and social information of a proposed transaction. ESRM Guidelines provide the methodology to evaluate and manage E&S risks associated with a transaction and facilitate the realisation of potential environmental and social benefits associated with the transaction.

1.3. Inter-linkage between E&S and credit risk Credit and E&S risk are two different types of risks that have different sources, mitigation measures, criteria and procedure for assessment and management. There may be cases where one may lead (or contribute) to the other. Both of them need to be evaluated and integrated as part of overall risk assessment in decision-making and post-disbursal monitoring. While evaluating a loan application, a bank or FI needs to consider both credit and E&S risks to assess overall credit before taking a decision on loan sanctioning. Banks and FIs need to include E&S risk management as a part of the loan approval and monitoring process such that both credit and E&S risk are evaluated and considered together while making an investment decision as well as during the monitoring of the loan portfolio. Because a credit proposal having positive credit rating/credit risk grading may have higher PD for high ESRR. Similarly, a loan application with low ESRR may be rejected for very poor credit rating/credit risk grading.

1.4. Applicability of ESRM Guidelines The loan categories for which the ESRM Guidelines are applicable are corporate finance, SME, real estate finance, agriculture and micro finance, retail finance and micro enterprise. Banks and FIs need to categorise all loan applications as red, orange A, orange B and green in-line with Schedule 1 of The Environment Conservation Rules (ECR), 1997 published by the Department of Environment (DOE), Government of Bangladesh. All loan proposals for agriculture and micro finance, retail finance and micro enterprise will have to go through a screening process using the general E&S due diligence checklist (Refer Technical Annex Section 4.1). The screening process will include filling in relevant parameters of the general E&S due diligence checklist and calculating the qualitative ESRR (Refer Technical Annex Section 4.2.1). Based on the screening process, banks and FIs may decide to undertake a quantitative ESRR assessment (Refer Technical Annex Section 4.2.2), if the E&S risks are significant. All loan proposals for corporate finance, SME and real estate will also have to undergo a screening process using the general E&S due diligence checklist (Refer Technical Annex Section 4.1) and where applicable, the sector-specific E&S due diligence checklist. The screening process will include filling in the general E&S due diligence checklist and where applicable, the sector-specific due diligence checklist and calculating the qualitative ESRR (Refer Technical Annex Section 4.2.1). In addition, the following categories will mandatorily require a quantitative ESRR assessment using the methodology specified in the Guidelines (Refer Technical Annex Section 4.2.2).


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Table 2: Thresholds for additional quantitative assessment

Category Quantitative threshold (loan amount) (BDT)

Corporate >7.5 million SME >2 million Real estate finance >7.5 million

All red category projects will require a quantitative ESRR assessment, irrespective of the category or quantitative threshold. In other cases (green, orange A&B), for investments below these thresholds, banks and FIs may decide to carry out quantitative ESRR assessment if screening reveals significant E&S risk.

Part 2: Organisational requirements


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2 Organisational requirements

2.1 Key requirements Banks and FIs need to

assess credit proposals (new, rescheduling, renewal, restructuring) to identify, quantify and mitigate E&S risks in their lending portfolio.

undertake a top management review on an annual basis to determine whether ESRM is being effectively practised in its operations or not.

maintain an updated record of appraisals and approvals and post-disbursal monitoring. As per Policy Guidelines for Green Banking issued by BB, all banks and FIs require to have an established green banking unit. They have to develop in-house capacity to assess E&S risk and combine it with credit risk assessment while taking a decision on loan sanction. Capacity building is necessary through appropriate recruitment (people right skill and expertise) and proper training for E&S risk assessment. Both credit and E&S risks are important components of risk assessment and their independent individual assessments need to be combined by the credit risk management department, i.e., the head of credit prior to forwarding his or her recommendation to Managing Director. Bank or FI may choose to require certain cases to be escalated to the board (for domestic bank or FI) or regional head1 (for foreign bank or FI) for approval based on the ESRR. 2.2 Organisational structure The organisational structure that banks and FIs need to follow for E&S risk assessment, rating and approval of transaction based on E&S rating is presented below. Figure 1 : Organisation structure

1 Hereafter the word ’Board’ used in the document will mean ’Board (for national domestic bank or FI)/regional head (for foreign bank or FI)’

Board of directors

Managing director

Risk management committee

Head of green banking nit Head of credit risk management

Head of corporate or commercial banking

Approval of high

E&S rated loans

Periodic reporting of

ESRM of bank

Periodic reporting of E&S ratingof loans

Monitoring of compliance of E&S


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2.3 Roles, responsibilities and authorities (1) Screening of application: As per credit risk management guidelines issued by Bangladesh

Bank, loan applications are received by RM of the commercial banking department. RM will check if the application falls under the category of prohibited transactions as per the local legal framework and international E&S treaties and agreements. RM will then assign the risk category as red, orange or green as per ECR 1997 to the application and submit the analysis to the head of the commercial banking department for review and to the head of CRM department for further consideration along with all relevant documents including IESE, ESIA reports as applicable. If the application falls under prohibited transactions, it will be rejected at the screening stage and RM will inform HoCRM accordingly.

(2) Due diligence: Based on the analysis of RM, COs responsible for E&S risk assessment in CRM department will carry out qualitative assessment of all applications received using the general E&S due checklist as annexed in the Guidelines (Refer Technical Annex Section 4.1). CO will undertake qualitative and quantitative ESRR assessment (Refer Technical Annex Section 4.2.1 and 4.2.2) for select applications in line with the investment threshold and applicability criteria mentioned under section 1.4 above and ascertain an ESRR for the particular transaction. For agriculture and micro finance, retail finance and micro enterprise and any other investments below the thresholds mentioned, only qualitative ESRR assessment is required. In all other cases, the overall ESRR will be arrived at through a combination of qualitative and quantitative ESRR assessment. The due diligence will be carried out through a combination of interaction with the borrower, document review and site visits. CO will prepare the E&S due diligence (E&S DD) report and archive all relevant documentation from the borrower as a part of the due diligence and rating exercise.

(3) Review and approval For low and moderate risk transaction: CO will forward the E&S DD report with all

documents to HoCRM. HoCRM will review the E&S DD report, ESRR and proposed financing conditions (if any) together with the supporting documents. Before forwarding to HoCRM, CO may require a third-party review of the IESE/ESIA reports. HoCRM will forward the application to MD for approval. MD will review the recommendations and provide approval. On MD’s approval, CO will inform RM for communication to the borrower.

For high-risk transaction: CO will forward the E&S DD report, ESRR and the proposed financing conditions with all documents to the HoCRM. Before forwarding to HoCRM, CO will obtain a third-party review of the IESE/ESIA reports. HoCRM will review the E&S DD report, the ESRR, the third-party review comments on the IESE/ESIA reports and proposed financing conditions and send back to it to CO with recommendations on the financing conditions and action plan. CO will share the financing conditions with RM who will communicate these with an action plan to the borrower. RM will arrange for site visits, collection of documents from the borrower for CO to monitor the borrower’s performance in terms of progress on the action plan. At the end of the monitoring period, CO will submit a report on the borrower’s performance on the financing conditions to HoCRM. Upon review of CO’s analysis of the borrower’s performance on the conditions, HoCRM will forward the findings to MD for review. MD will review HoCRM’s analysis and forward the application with findings to the board. Board, in consultation with RMC2, may take the following decisions:

2 As per the Banking Companies Act, 1991 (amended up to 2013), each banking company will have to form a risk management committee comprising the members of the board. In December 2013, Bangladesh Bank instructed the scheduled banks of the country to form a high-powered RMC to review the banks’ and FIs’ environmental policies and strategies for governing green banking activities. In line with this amendment, when there is a question from E&S risk perspective, the board will consult the RMC before taking a decision.


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Approve the transaction with a set of financing conditions and covenants. Approve the transaction appropriate financial incentive or dis-incentive (refer to

Section 3.3.8) and with a set of financing conditions and covenants. Require the borrower to rework the project and/or its base location and resubmit

the proposal. (4) Post-disbursal monitoring of financing conditions or covenants RM will communicate

with the borrower about the financing conditions or covenants along with an action plan. RM will then arrange site visits and collect written documents on a periodic (e.g. annual or biannual) basis to enable CO to monitor the borrower’s performance. CO in turn will review the borrower’s performance on the financing conditions or covenants through site visits, review of documents and declarations from the borrower. Based on the review, CO will evaluate whether the ESRR improves, remains unchanged or deteriorates and accordingly submit the analysis and revised ESRR to HoCRM. HoCRM subsequently will submit his findings to MD, who in turn will review the analysis and take a decision on the revision of ESRR and instruct CO to archive the decision. If the ESRR does not improve or deteriorates or if the financing conditions or covenants are not met by the borrower, MD will forward the case to the board, which in consultation with RMC, will decide on appropriate action.

(5) Coordination by the Green Banking Unit: The Green Banking Unit (GBU) in all banks or FIs will act as the coordinator between the following:

different branches of the bank or FI different departments of the bank or FI and the Board bank or FI and Bangladesh Bank

The GBU will be responsible for the following activities:

Coordination with departments, branches for portfolio management: The GBU will coordinate with Head of Credit (HoCRM) or Head of Commercial Banking of different branches of the bank or FI and obtain information about the outcomes of qualitative assessment, the ESRR of all transactions of the bank or FI and maintain a database of all loans disbursed, such as the investment threshold, sector, risk category, identified E&S issues, corrective action plans, current status and future recommendations. The GBU will also be responsible for identifying the gaps related to application of ESRM guidelines in different branches and departments of the bank or FI and discuss the issues subsequently with the board for resolution.

Coordination with MD, RMC and the board: It will update and discuss with the MD, RMC and the board on the portfolio of loan disbursals about the ESRR, percentage of high-ESRR transactions being financed by the bank or FI, types of financing conditions or covenants imposed on high-ESRR transactions and actions taken by the bank or FI to monitor the borrower’s performance in such critical cases. GBU’s responsibility will be to facilitate the Board for taking decisions on the course of action that a bank or FI should take for high-ESRR transactions.

Communication with Bangladesh Bank: The GBU will periodically report to Bangladesh Bank on the portfolio of loans of bank or FI about the ESRR, actions taken by the bank or FI in case of high-ESRR transactions, performance of borrowers, and any other findings and observations on the loan profile.

The Table 3 below describes the escalation matrix that all banks or FIs should follow for the review and approval of loan applications based on the ESRR.


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Table 3 : Escalation matrix

ESRR Nature of financing conditions or covenants

Person responsible for review and recommendation

Person responsible for approval

Persons to be kept informed

Prior to loan approval

Post disbursal of loan

Low

Limited Limited HoCRM MD RMC and GBU

Moderate

Comprehensive Limited

HoCRM MD RMC and GBU

High Comprehensive Comprehensive MD Board RMC, GBU and Board

2.4 Transaction-specific financing conditions or covenants Wherever the ESRR of a transaction is high, the bank or FI will be responsible for ensuring that additional financing conditions or covenants are included as a set of conditions before the sanctioning of the loan and include other relevant E&S covenants/conditions in the loan agreement. A set of financing conditions or covenants would generally describe the mitigation measures that a borrower should undertake or a set of activities that a borrower needs to refrain from to reduce certain E&S impacts. These financing conditions or covenants will be transaction/proposal-specific and not generic, i.e. the set of financing conditions or covenants between two high-ESRR transactions will vary depending on the sector, size and location. The set of financing conditions or covenants will come with an action plan and timeframe to be adhered to by the borrower before the loan is sanctioned. Depending upon the criticality of a transaction, the bank/FI may decide to include a set of post-disbursal financing conditions or covenants that a borrower has to implement to improve their ESRR. The performance of the borrowers on post-disbursal financing conditions or covenants will be periodically monitored by the banks or FIs and the ESRR will be adjusted. Banks or FIs may use the following template for this purpose: Table 4 : Template for post-disbursal monitoring Name of the

borrower

Project

details

Project category Date of loan

approval or

investment

Date of last

disbursement

Date of

assessment

Key

parameters

Identifies

E&S issues

during

appraisal

Corrective actions

and

recommendation

Progress

achieved

New corrective

actions and

support

required

Deadline for

implementation

Environmental parameters

Issue 1

Issue 1

Issue 1

Social parameters

Issue 1

Issue 1

Issue 1


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2.5 Portfolio management The GBU of banks or FIs should maintain a database of all investments made by the bank in terms of the sector, risk category, E&S issues, financing conditions or covenants, current status and future recommendations. The database should be regularly updated and periodically reviewed by the Board to take a decision on the following: Individual borrowers: whether to continue with a borrower or not, recommendations for future

financing conditions or covenants etc. Sector specific investments: Whether or not the bank should continue investing in a particular

sector if a significant percentage of the investments have a high ESRR, whether the percentage of investment in a particular sector to be increased or decreased, whether or not they should start investing in a new and more environment-friendly sector, etc.

Banks or FIs may use the following template for this purpose. Table 5: Template for portfolio management

S. No.

Name of the

borrower

Project name

Sector Project category

Identified E&S issues

Corrective actions

Status as on date

Future actions recommended

1 Environment

Issue 1 Issue 2 Issue 3

1 2 3

SocialIssue 1 Issue 2 Issue 3

1 2 3


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2.6 Capacity-building requirements To meet the organisational requirements as described above, banks or FIs should develop internal capacity through the following initiatives:

i) Recruitment of senior and junior staff with post-graduate qualifications and/or 5-10 years’ experience in environmental management in different industry sectors, experts in social welfare, industrial safety, occupational health, rural management, biologists, geologists, engineers, lawyers, etc.

ii) Two-tiered training of bank employees in the following manner: First tier: This is for all bank staff. It may be conducted annually and/or during

induction of a new recruit. The course will contain bank’s vision on E&S risk assessment, E&S impacts and risk exposures of a bank.

Second tier: This is for RMs, COs and HoCRMs. It may be conducted biannually. The course will cover the application screening process, harmful impacts of various emissions, identification and categorisation of risks, process of carrying out E&S due diligence, qualitative and quantitative ESRR assessment, mitigation measures of E&S impacts and transaction-specific financing conditions or covenants, processes of conducting pre and post disbursal monitoring etc.

iii) Preparing a database of external E&S experts (individual and firm): Where the ESRR is high (for moderate rating, it is optional), the bank or FI shall obtain an independent third-party review. For this, banks or FIs need to prepare a list of expert individuals and firms based on qualification and experience requirements. The guidelines or criteria followed by regulatory agencies for accreditation of consultants shall also be considered by the bank or FI for preparation of the list. Where there is a need to engage a third party, HoCRM will be responsible to carry out the selection process and the MD will approve the selection.

2.7 Research and Development A bank or FI should carry out research on E&S good practices, regulations and standards and mitigation measures (including specific technologies for abatement, treatment and monitoring of pollution, recycle and reuse of waste, etc) for diverse industry sectors. The bank or FI should focus on the sectors that are prominent in its portfolio. For example, if a bank or FI has invested majorly in tanneries, the research work should focus on issues pertinent to the tannery sector such as clustering of tanneries outside the urban area, design of common effluent treatment plants, treatment and reuse of chromium waste, etc. The bank or FI should also advise the borrowers on designing the E&S policy, implementing international management systems on environment, occupational health and safety such as ISO 14001, OHSAS 18001. The bank or FI should prepare approach papers on issues like technology innovation in an industry sector, potential policy or regulatory changes to integrate E&S issues, etc and submit it to Bangladesh Bank with a forwarding note to take the issue up with respective government departments. The bank or FI may establish a separate department for carrying out research and studies or entrust the GBU with the responsibility to carry out the studies.

Part 3: Technical manual


3 Technical manual 3.1 Environmental and social policies, regulations and standards Banks or FIs should take cognisance of the relevant national regulations pertaining to environmental and social governance and their requirements that need to be considered while carrying out E&S due diligence of a particular transaction. A short description of the relevant regulations is provided below for reference. 3.1.1 Environment There are a number of laws that contain provisions regarding the conservation of environment, improvement of standards and control of environmental pollution from various sources, all of which fall under the umbrella of the Bangladesh Environmental Conservation Act (ECA) 1995. This Act established the Department of Environment (DOE) and empowers its Director General to take necessary measures, such as conducting inquiries, preventing probable accidents, advising the Government, coordinating with other authorities or agencies, and collecting and publishing information about environmental pollution. To make ECA 1995 operational and in exercise of the power conferred under it, the Environment Conservation Rules (ECR), 1997 were issued by the government of Bangladesh. Together, ECA 1995 and ECR 1997 provide the framework of environmental regulations relevant to industries. ECR 1997 is currently undergoing revisions and as soon as the revised version is notified, it will be applicable as mandatory compliance under the purview of these guidelines. All activities need to adhere to the provisions of this Act and associated Rules. In procedural terms, no business activity (i.e. industrial unit or project) shall be established or undertaken without obtaining, in a manner prescribed by the relevant rules, an environmental clearance certificate from the Director General. For the purpose of issuing the environmental clearance certificate, an industrial unit or project shall, in consideration of its location and impact on the environment, be classified into the following four categories: (i) Green, (ii) Orange A, (iii) Orange B and (iv) Red. This categorisation indicates that Green is the least polluting and Red is the most polluting, with the two Orange categories regarded as having medium-scale impacts. In its Schedule I, the ECR 1997 includes a list of 22 industrial units or projects under Green, 26 types under Orange A, 69 types under Orange B and 69 types under Red. For each category of industries, there are different levels of documents to be provided at the time of seeking the environmental clearance certificate. The ECR 1997 prescribes various general and industry-specific performance standards such as: Water (Schedule 3), Sound (Schedule 4), Sewage discharge (Schedule 9), Waste from industries (Schedule 10), gaseous emissions from industries (Schedule 11) and sector-wise industrial effluent or emissions (Schedule 12). During operation of an industry the relevant performance standards have to be met in order to ensure compliance. 3.1.2 Occupational health and safety The Factory Act, 1965 is the main legal framework available to deal with the issues of workers pertaining to health, hygiene, safety, fire-fighting, welfare, working hours, leave and holidays with wages, child labour, etc. Under this Act, the Chief Inspector of Factory is authorised to ensure minimum standards, infrastructure, facility, hygienic environment for occupational health and safety of the workers within the industrial premises as per provisions made in Factory Rules, 1979. Prior permission from the Chief Inspector is required before starting any construction or extension of any factory. Every licence shall remain in force up to 31 December of the year in which the license is granted. The Chief Inspector, on receipt of an application in Form No. 1, may approve or reject the renewal of this license. The licence or a copy of it shall be displayed at a conspicuous place of the factory.


The Bangladesh Labour Law, 2006, amended in 2013, provides further legal support to the workers with respect to recruitment, relationships between employers and employees, fixing minimum wage rate, payment of wages, child labour, compensation of accident, formation of trade unions, industrial disputes and solution, health, security, welfare and constitution of job and environment and probationary period and concerned issues. The responsible authority for implementation of the Labour Law is the Director of Labour or the officer authorised on his behalf. Building Construction Rules, 1996,stipulate requirements such as the spacing between two buildings, distance from main road from a construction site from the main road, requirements of car parking and open spaces based on the area of construction, laying down of electric cables, digging ponds, height of a building, underground constructions, sun-shade, ventilation, elevators, etc. All these are specified for residential, commercial and industrial areas. 3.1.3 Social, culture and heritage The Land Acquisition Act, 1894, and The Acquisition and Requisition of Immovable Property Ordinance, 1982, and subsequent amendments in 1994, 1995 and 2004 provide the legal framework for acquisition of land and compensation to be paid for industrial and commercial activities. Deputy Commissioner of the area has been empowered to acquire the land and to decide on the payment of adequate compensation as per the procedure defined. The Antiquities Act, 1968,aims to consolidate and amend the law relating to the preservation and protection of antiquities. The Director of Archaeology is authorised to exercise or perform all or any of the powers or functions stipulated under this Act to ensure the protection of antiquities. Ancient monuments declared to be protected under the Ancient Monuments Preservation Act, 1904 (VII of 1904), shall be deemed to be protected antiquities for the purposes of this Act. A protected immovable antiquity in respect of which the Director has accepted guardianship in pursuance of an agreement under section 12 or the government has acquired any right under this Act, shall not, except as otherwise provided in such agreement or in this Act, be used for any purpose other than that directly related to its administration or reservation. 3.1.4 Ecology Forest Act, 1927, is an act to consolidate the law relating to forest, the transit of forest produce and the duty leviable on timber and other forest produce. Under Bangladesh Wild Life (Preservation) Order, 1973, certain national parks, wildlife sanctuaries, etc are declared as protected areas and are also declared reserved forest under the Forest Act, 1927. No industrial and commercial activity is allowed within the declared protected areas. Protected areas include wildlife sanctuaries, national parks and game reserves. Wildlife sanctuary means an area that is closed to hunting, shooting or trapping of wild animals and declared as such under Article 23 of Bangladesh Wild Life (Preservation) Order, 1973 by the government as undisturbed breeding ground primarily for the protection of wildlife inclusive of all natural resources such as vegetation soil and water (paragraph) (p) of Article 2). Article 23 of the Order has provisions for declaration of protected areas and also has regulations prohibiting activities in the protected areas. The primary responsibility for ensuring the compliance of Forest Act, 1927 and Bangladesh Wild Life (Preservation) Order, 1973 lies with the Forest Department, which has an independent Wildlife Management and Nature Conservation Circle. The Chief Conservator of Forests is the authorised person, who will be assisted by the Conservator(s) of Forests. In pursuance of Section 5 of the Bangladesh Environment Conservation Act, 1995, the government has declared certain wetlands of the country as ecologically critical areas for the protection of natural environment and sustainable environmental management, for example,


St. Martin’s Island, Hakaluki Haor, Tanguar Haor, Marjat Baor and Gulshan-Baridhara Lake. All activities that may deteriorate the environment further are prohibited in these areas. As per the (Draft) Ecologically Endangered or Sensitive Area Rules, 2010, an area is declared as ecologically sensitive through notification in a gazette that clearly identifies the area through maps, mouza number, latitude, longitude, area, inputs from cadastral survey, etc. The notification also consists of details of activities such as building construction, all types of manufacturing, mining, deforestation, use of fuel wood, tourism, natural and manmade heritage, water harvesting, plastic disposal, hazardous waste, solid waste, noise pollution, sewerage, road, rail, flyover, transportation, hunting or slaughter of animals, fish, birds, etc, mentioning whether or not these activities are permitted in an area notified as eco-sensitive. 3.1.5 Climate change Climate change is a serious global challenge as climate-related impacts may impede economic and social wellbeing and development efforts. Given the importance of the role of the private sector in reducing of greenhouse gas (GHG) emissions, preferences may be given by banks or FIs to innovative and sustainable investments that support climate-friendly solutions. The Clean Development Mechanism (CDM) is one tool to promote climate-friendly projects from Bangladesh, subject to the carbon market conditions. One of the six pillars of the Bangladesh Climate Change Strategy and Action Plan, 2009, focuses on ‘mitigation and low carbon development’. Banks or FIs should also take a proactive role to encourage projects that are in line with national policy objectives. 3.2 Environmental and social regulatory frameworks and treaties Banks and FIs need to understand local environment and social regulatory frameworks and international treaties on various aspects and impacts to assess levels of compliance. The list below covers the relevant national regulations and international treaties where Bangladesh is a signatory. Table 6: List of relevant national regulations and international treaties

Key E&S Areas Relevant local regulation Relevant international treaties and conventions for which Bangladesh is a signatory

Assessment and management of environmental and social risks and impacts

National Environmental Policy, 1992 Environment Pollution Control

Ordinance, 1977 Environmental Quality Standards for

Bangladesh, 1991 National Environment Management

Action Plan (NEMAP), 1995 Environment Conservation Act, 1995 and

amended in 2002 Environment Conservation Rules, 1997

and amended in 2003 EIA Guidelines For Industry, 1997

Management of labour related issues such as recruitment, wages, occupational health and safety and others

Labour Policy 2012 Bangladesh Labour Act, 2006 Labour Welfare Foundation law 2006 Bangladesh Labour (Amended)Law, 2013 Labour Relations under Labour Laws,

1996 National Child Labour Elimination Policy,

2010 Bangladesh Factory Act, 1965

Occupational Hazards Due to Air Pollution, Noise and Vibration (Geneva), 1977

Prevention and Control of Occupational Hazards (Geneva), 1974

Occupational Safety and Health in Working Environment (Geneva),



Bangladesh Factory Rules, 1979 OSH Policy, 2011 The Employees State Insurance Act, 1948 The Employer’s Liability Act, 1938 Maternity Benefit Act, 1950 Workmen's Compensation Act, 1923 The Employment of Children Act, 1938 Bangladesh Industrial Act 1974

1981 Occupational Health

Services (Geneva), 1985

Resource efficiency and pollution prevention

The Environment Pollution Control Ordinance, 1977

National 3-R Strategy, 2010 (3R: Reduce, Reuse and Recycle)

Ship-Breaking and Hazardous Waste Management Rules, 2010

Biomedical Waste Management Rules, 2008

Draft National Solid Waste Management Rules, 2010

Draft National River Conservation Act, 2011

International Convention on Climate Change (Kyoto Protocol), 1997

UN Framework Convention on Climate Change (New York), 1992

International Convention on Civil Liability for Oil Pollution Damage (Brussels), 1969

Convention on Oil Pollution (London), 1990

UN Convention on the Law of the Sea (Montague Bay), 1982

Community health, safety and security

Disaster Management Act, 2012 Public Health Emergency Provisions

Ordinance, 1994 Biomedical Waste Management Rules,

2008 Climate Change Act, 2010 Draft National Solid Waste Management

Rules, 2010 National Plan for Disaster Management

2010-2015 Sound Pollution Law, 2006 Ship Breaking and Hazardous Waste

Management Rules, 2010 Water Supply and Sewerage Authority

Ordinance, 1963 Noise Control Rules National Health Policy, 2011



International Convention on Civil Liability for Oil Pollution Damage (Brussels), 1969

Civil Liability on Transport of Dangerous Goods (Geneva), 1989

Land acquisition and Involuntary resettlement

National Land Use Policy The Land Acquisition Act, 1894 The Acquisition and Requisition of

Immovable Property Ordinance, 1982 Biodiversity conservation and sustainable management of living natural resources

National Biodiversity Strategy and Action plan (2004)

Bangladesh Wildlife Conservation and Security Act, 2012

Bangladesh Wild Life (Preservation) Act, 1974

Bio Safety Rules, 2012

Protocol on Biological Safety (Cartagena Protocol), 2000


International Plant



Forest (Amendment) Act, 2012 Forest Policy, 1994 Social Forestry Rules, 2004 National Forest Policy and Forest Sector

Review (1994,2005) Draft Tree Conservation Act, 2012 The Private Forests Ordinance Act, 1959 Forest Transit Rule, 2011 Climate Change Act, 2010 Deer Rearing Policy, 2009 The Protection and Conservation of Fish

Act 1950 Draft Wetland Policy, 1998 The Protection and Conservation of Fish

Rules (1985) The Protection and Conservation of Fish

Act, 1950 National Conservation Strategy, 1992 Private Fisheries Protection Act 1889 Marine Fisheries ordinance 1983 Revised National Conservation Act, 2010

Protection Convention (Rome), 1951


Convention Relative to the Preservation of Fauna and Flora in Their Natural State (London), 1933

International Convention for the Protection of Birds (Paris), 1950

Convention on Wetlands of International Importance Especially as Waterfowl Habitat (Ramsar), 1971

Convention on The Conservation of Migratory Species of Wild Animals (Bonn), 1979

Convention on Biological Diversity (Rio de Janeiro), 1992

Convention on International Trade in Endangered Species of Wild Fauna and Flora

UN Convention on The Law of The Sea (Montague Bay), 1982

Indigenous peoples Social Forestry Rules, 2004 The Acquisition and Requisition of

Immovable Property Ordinance 1982 The Land Acquisition Act, 1894

Cultural heritage The Antiquities Act, 1968

World Cultural and Natural Heritage (Paris), 1972

Any amendments, modifications to any of the regulations listed above will be automatically accommodated in relevant sections of these Guidelines.

3.3 Environmental and social risk review 3.3.1 Prohibited transactions Project activities that contravene country obligations under relevant local legal framework and international environmental treaties and agreements, as identified during the E&S risk review should not be considered for financing. Once an application is received, and the proposed project falls in the category of prohibited transactions, the bank or FI is to summarily reject the application. 3.3.2 General environment and social due diligence There are certain environmental and social issues that tend to cut across all sectors. These are legal compliance or compliance to various applicable laws, the appropriateness of a proposed


project site for the intended purpose, potential climate change impacts and the management systems of the potential borrower to manage the E&S risks. These cross-cutting aspects are captured in the general E&S due diligence (E&S DD) checklist appended to this Guidelines document as Technical Annex Section 4.1. General E&S due diligence will be carried out by banks and FIs for all categories (red, orange A&B and green) of transactions and for investment sizes SME, corporate financing and real estate financing as a part of the screening process to evaluate associated E&S risks. All applications above the investment thresholds mentioned in Table 2 will go for both qualitative and quantitative ESRR assessment, irrespective of the findings of the screening process. Applications below the investment thresholds mentioned in Table 2, will go only for qualitative assessment of ESRR. Quantitative ESRR assessment for those applications will be carried out only if the screening process using the general E&S due diligence checklist shows possibilities of harmful impacts on environment and society. All red category applications will go for assessment of both qualitative and quantitative ESRR, irrespective of investment thresholds or the findings of the screening process. For the investment categories of agriculture and micro finance, retail finance and micro enterprise, as a part of the screening process, relevant parameters, and questions from the general E&S DD checklist will be picked up and the qualitative ESRR will be calculated to assess if any lending proposal is harmful from E&S aspects. However, from the qualitative ESRR assessment, if any lending proposal is found to be harmful, then for that particular item, quantitative ESRR assessment will be carried out. The inputs from the filled-in general E&S due diligence checklist are used for both qualitative and quantitative assessment of ESRR. Once the general due diligence is carried out by banks and FIs, ESRR will be calculated for selected applications using the guidelines for qualitative and quantitative ESRR assessment provided in Technical Annex Section 4.2.1 and 4.2.2. 3.3.3 Sector-specific, environment and social due diligence Proposals for financing in different sectors are prone to different kinds of E&S impacts and risks. Specific E&S DD will be carried out by the bank or FI for transactions of categories red and orange (A&B) as per ECR 1997 for investment sizes i.e., SME, corporate financing and real estate financing. For any other transaction, if it is found from the general E&S due diligence that the ESRR is high then a sector specific due diligence will be carried out for that particular transaction. Bangladesh Bank will issue the sector-specific E&S due diligence checklists separately as a part of sector-specific policy and guidelines for selected ten (10) industry sectors. If a bank or FI decides to invest in a particular sector extensively and if the sector specific guidelines for that sector are not available then bank or FI may develop guidelines for that sector in line with the available sector-specific guidelines. Once the sector-specific due diligence is carried out by banks and FIs, ESRR will be calculated using the guidelines for qualitative and quantitative ESRR assessment provided in Technical Annex Section 4.2.1 and 4.2.2.

3.4 Document reference An indicative list of documents that may be referred to while carrying out an E&S due diligence is set out below. Techno-economic feasibility reports or detailed project reports (DPR) Initial environment examination (IEE) report, initial environment and social examination

(IESE) report Environmental impact assessment (EIA) report, environmental and social impact

assessment (ESIA) report Land and environmental clearances certificate from the Department of Environment Licence from factory inspector


Clearance or NOC for fire safety Land deeds Commitment or declaration on social and labour issues, etc. Environment management plan (EMP), environment and social management plan

(ESMP) All documents submitted by the borrower to the Department of Environment (DoE) or

Chief Factory Inspector The banks or FIs are encouraged to seek additional information if required based on the site, size and nature of the project.

3.5 ESRR Overall environment and social risk will be estimated in terms of ESRR which will be calculated via general due diligence and sector-specific due diligence on the basis of information contained in the E&S due diligence checklist(s). The methodology for estimation of ESRR will involve qualitative and quantitative assessment and it is annexed to this Guidelines document (Technical Annex Section 4.2.1 and 4.2.2). The overall ESRR needs to use the outcome of general E&S due diligence wherever only general E&S due diligence is applicable and should combine the outcomes of both general E&S due diligence and sector-specific E&S due diligence wherever sector-specific due diligence is applicable in addition to general E&S due diligence as described below.

Table 7: ESRR decision matrix

ESRR based on general E&S DD

ESRR based onsector-specific E&S DD

Overall ESRR

Low Sector-specific not applicable Low

Medium Sector-specific not applicable Medium

Low Low Low Low Medium Medium Medium Low Medium Medium Medium HighIf any one or both the generic and sector-specificESRR is indicated as ’high’

High

3.6 Third-party review of IEE and EIA reports A third-party review of the IEE/IESE and ESIA reports needs to be carried out if ESRR is high irrespective of the category and size of investments. For medium ESRR, it is optional.

3.7 Post loan disbursal E&S performance evaluation After loan disbursal, the bank or FI needs to review and revise ESRR regularly no later than once every two years. The review and revision of ESRR will be carried out based on the information obtained using post-loan disbursal E&S DD checklist (refer Technical Annex Section 4.3). In case ESRR assessment (loan approval) is based on sector E&S due diligence then during post disbursal assessment, relevant sector parameter(s) as identified during ESRR assessment (loan approval) need to also be considered. The methodology for estimation of ESRR will involve both qualitative and quantitative assessment as per the procedure defined in section 3.3.5.

3.8 Provision of incentives and disincentives On the basis of the performance of the borrower(s) and banks and FIs dealing with transactions with high ESRR, incentives and disincentives need to be considered for the following.


3.3.8.1 High ESRR at transaction/application/proposal level The board of the bank or FI is authorised to consider the provision of incentives and disincentives for projects that have high pre-disbursal ESRR. During post-disbursal monitoring of the performance of the project, if change in ESRR is observed, the following options may be considered, provided any change to the interest rate and repayment term has to be incorporated as part of the loan agreement linked with changes in ESRR. Table 8: Options for incentives and disincentives

S No

Particulars Probable option(s)

1 Incentive(s) if change in ESRR is positive

Issuance of appreciation letter and upload the name of project on bank’s website

Reduction in interest rate Higher debt-equity ratio for borrowers Flexibility in loan conditions Favourable loan to value ratio for borrowers

2 Disincentive(s) if change in ESRR is negative

Increase in interest rate Lower debt-equity ratio for borrowers Tougher loan covenants/conditions Tougher loan to value ratio for borrowers

3.3.8.1 High ESRR at portfolio level The purpose of these Guidelines is to encourage banks and FIs to better understand E&S risks and incorporate appropriate risk mitigation measures to be able to expand the lending portfolio rather than avoid investing in high E&S risks. Bangladesh Bank will monitor the share of high ESRR transactions of individual banks or FIs in total loan profile and actions taken by the boards for high ESRR transactions. Bangladesh Bank will consider the following options with respect to the performance of banks and FIs towards meeting the sanction target for high ESRR projects: Impact in CAMELS rating. Impact on liquidity and capital requirements Impact on credit growth Impact on profit distribution


Part 4: Technical annexes


4 Technical Annexes 4.1 General environmental and social due diligence checklist

Basic information (1)Name and type of the project Location of the project Approach to the project site (nearest national and/or state highway, airport or railway station) Capacity and type of products and by products Brief description of manufacturing process with flow diagram Type of raw materials to be used, including fuel, water and power and their respective quantity(s) Size of land required or acquired and layout plan

Total manpower to be employed

Type Permanent ContractedSkilled Semi-skilled Unskilled Others Total

Size of the investment

Legal status(2)

Issue Yes/No/NA Remark

Does the project fall under prohibited transactions?

The project falls under which category as per ’The Environment Conservation Rules, 1997’ (ECR)

Green

Orange A

Orange B

Red

Does the project have requisite certificates or licenses?

Land clearance certificate from the DOE

Environment clearance certificate from the DOE

Licence from the factory inspector

Others, if any

Has the project got land allotment?

Resources(3)


Raw materials or products

Does the project consist of captive mining?

Mode of transportation

Road

Rail

River


Sea

Does the project use any hazardous substances or chemical(s) in its process and produce hazardous product(s)?

If yes, do they have requisite permission for handling of such substances?

Water

What is the fresh water source?

Groundwater

Surface water (river, reservoir, etc)

Municipal Supply

Are there any issues of water quality andresources in the area surrounding the project site?

Does the project have the required permit for usage of water?

Is treatment of water required before use?

Energy

What is the source of energy?

Renewable

Non-renewable

Electricity board

Captive power plant

Does the project have the required permission for getting requisite power?

Is there a provision for electricity generator (s) for back-up energy?

If yes, then the fuel to be used for power generation

Coal

Oil

Gas

Other(s), if any

Land

Type of land allotted for the project

Agriculture

Forest

Waste

Barren

Other(s), if any

Location Industrial area

Other, if any

Does land included the following

Land oustee

House oustee

Land and house oustee

Pollution generation and management (4)



Air pollution

Does the project generate air emissions?

If yes, what are the sources of air emissions

From process Point source (s)

Fugitive source (s)

From combustion of fossil fuels

Stationary source(s)

Mobile source(s)

Does the project emit dust from material handling, including storage and transport?

Does the project generate toxic air emission?

Does the project generate greenhouse gases (GHG)?

Does the project emit ozone depleting substances?

Does the project cause emissions from the following sources?

Incineration of waste

Burning of waste in open air

Other sources

Does the project have any air emission control equipment? If yes, please specify details?

Does the design outlet air emissions concentration meet the requisite standards?

DOE Standards

Other standards, if any

Does the project have air emission monitoring systems?

Water pollution

Does the project generate:

Domestic effluent

Trade effluent

If yes, please specify the source, quantity and quality of effluent generated

If yes, then does project discharge

Treated effluent

Untreated effluent

Does the project have ETP or STP?If yes, then please specify a brief description of the ETP and/or STP and outlet of the treated effluent.

Location of Soak pit(s)


discharge On land for agriculture

Surface water

Sea

Sewer

Does the final effluent discharge meet the requisite standards?

DOE standards

Other standards, if any

Does the project have system to monitor quality and quantity of effluent generated?

Solid waste

Does the project generate the following waste materials?

Municipal waste

Hazardous waste

Overburden or mine waste

Construction waste

Sludge from ETP or STP

E-waste

Other non-hazardous waste

If yes, please specify the quantity(s) generated under each category?

Mode of disposal

Recycle or reuse

Landfill

Incineration

Others, if any (please specify)

Noise pollution

Sources of noise pollution

Operation of equipment and machinery

Traffic

Blasting or piling

Others, if any

Are there any noise mitigation equipment or measures being installed? If yes, please specify the details.

Labour and working conditions(5)


Occupational health and safety

Does the project have compliance in line with the requirements of the Factory Act and rules?

Has the project identified occupational


hazards and risks and has an appropriate system in place in order to identify and evaluate occupational hazards and risks on a regular basis?

Does the project have adequate preventive measures (such as provision of drinking water, toilets, places for shelters, sign board, SOPs, preventive maintenance, work to permit, PPE, ventilation, etc) to avoid or eliminate issues pertaining to occupational health and safety hazards?

Does the project have a system in order to undertake regular trainings of workers and mock drill on hazards as well as procedures to deal with issues pertaining to health and safety risks?

Does the project have a system for reporting and documenting occupational accidents, incidents and work-related illness?

Does the project have an appropriate onsite and offsite emergency preparedness and response programme?

Does the company have a regular health surveillance system in place?

Does the project have provision of adequate measures for housekeeping?

Does the company carry out regular health and safety audits (in-house or by third-party)?

Child labour

Does the project have a policy towards child labour and forced labour?

Are adequate safeguards in place to avoid child labour and forced labour, including training programmes?

Minimum wage

Does the project have policy and measures for recruitment of worker(s) in order to ensure minimum wage in line with the local regulations?

Does the project have provisions of documenting contract(s) and wage(s)?

Non-discrimination

Does the project have provisions to ensure equal opportunity of workers and non-discrimination (based on age, gender, race, colour, disability, religion)?

Collective bargaining

Does the project have provisions for labour unions, representation and collective bargaining?

Vulnerable labour Does the project have adequate mitigation


measures to protect vulnerable labour (such as third-party labour, workers within the supply chain)?

Grievance mechanism

Does the project have a grievance mechanism for workers to register their concerns?

Supply chain

Does the project have policies,provisionsor systems in line with in-house for primary suppliers with respect to working conditions, health and safety, wages, minimum working age, grievance mechanism, child or forced labour, etc?

Does the project have a policy to mandatorily authenticate status and compliance of issues pertaining to labour, environment and social?

Governance(6)


ESG risk management

Does the project have formal policies to address risks related to environment and social issues?

Is the project a signatory to environment, social and governance (ESG) related initiative(s)?

Does the project have an appropriate ESG risk management system in place?

Does the project have monitoring and auditing mechanisms to keep track of environment and social issues?

Corporate governance

Does the company have in place anenvironment and safety policy?

Does the company have a labour policy in place?

Does the company have a well-defined CSR policy?

Does the company have a system to capture, control and monitor associated ESG issues or risks?

Does the company implement management systems such as ISO 14000, OHSAS 18000, etc?

Does the company have a grievance redressal mechanism in place for both internal as well as external stakeholders?

Does the company have a system to carry out performance evaluation of environment and social issues by a third-party?


Does the company have a system to make voluntary disclosures on its environment and social performance? (for example, GRI-based report, etc)

Does the company have requisite resources and manpower to address environment and social issues?

Does the company have a system to recognise labour union under the labour act & rule (s)?

Site specific information(7)


Is the project located in an ecologically critical area as defined under sub-section (1) of section 5 of the ECR

Environment sensitivity within an area of 10 km radius

National Park

Wild life sanctuary

Forest

River

Sea

Any other water body(s)

Archaeological structure

Major habitation (population more than 5,000)

Defence installation

If yes, then provide the distance and direction from the project site

Social infrastructure within an area of 10 km radius

Health facility

Education facility

Approach roads or rail

Drinking water supply

Electricity

Irrigation facility

Others, if any

Occupational pattern within 10 km radius of the project site

Main worker(s)

Marginal worker(s)

Non-worker(s)

Please specify the composition of main worker(s) and marginal worker(s)

Availability of manpower within 10 km radius of project site

Skilled labour

Semi-skilled labour

Unskilled labour

Child labour


Is the area prone to natural hazards?

Earthquake

Cyclone

Flood

Others, if any

Please specify the sensitivity and frequency of natural hazards in past, if any

Mode of earning

Agriculture activities

Industrial activities

Commercial activities

Others, if any

Does the area have any water-related issue?

Does the area have any biodiversity-related issue?

Does the area have any health-related issue?

Does the area have any child labour-related issue?

Does the area have any religion-related issue?

Does the area have any heritage or culture-related issue?

Does the area have any community safety-related issue?

Does the area have any gender-related issue?

Does the project have negative impacts on local ecosystem services and livelihood?

Note: In case of presence of any issue as defined above, relevant details to the possible extent needs to be enclosed as an annexure for ESRR estimation. 4.2 Environment and social risk rating evaluation Generally, environmental and social impacts can be categorised as either primary impacts that are attributed directly by a projector secondary impacts that are indirectly induced, and typically arise from associated investments as well as changed patterns of social and economic activities by proposed actions. The environment and social risk assessment is based on assessing all impacts, whether beneficial or adverse, short or long-term (acute or chronic), temporary or permanent, direct or indirect and local or regional. For each identified potential environmental or social impact, the associated environmental risk is assessed on the basis of its likelihood and significance. For the estimation of ESRR, the applicable environment and social legal framework for the transaction needs to be considered as the minimum level of compliance as a part of the ESMP. 4.2.1 Qualitative assessment of ESRR Qualitatively, ESRR should be estimated as per following three steps: Table 9: Qualitative ESRR steps

Step 1 Identification of interactions between activities and environmental and social receptors

Step 2 Identification of potentially significant environmental and social impacts

Step 3 Evaluation of all significant environmental and social impacts

In step 1, based on the description of activities proposed to be undertaken and the available environmental and social baseline description, a detailed matrix of activities as well as receptors need


to be prepared, and using the relevant legal framework and available baseline data, interaction between an activity and a receptor needs to be examined. In step 2, based on the interactions identified within step 1, potentially significant impacts due to the proposed activities need to be identified. These impacts may either be beneficial or adverse, direct or indirect, reversible or irreversible and short-term or long-term as per the requisite criteria. Table 10: Impact rating assessment matrix

Impact CriteriaNature of impact Beneficial Positive

Adverse NegativeDuration of impact Short-term Impact will be confined to a stipulated time

Long-term Impact will continue till the end of the project life Impacted area Localised Impact will be locally confined

Regional Impact will continue on a regional basis

In step 3, all the potentially significant impacts will be qualitatively evaluated and the impact level is rated as ‘negligible’, ‘minor’, ‘moderate’ or ‘major’. The impact rating needs to be estimated based on two parameters, that is, the ‘severity of an impact’ and the ‘likelihood of occurrence of impact’.

Severity of an impact: The severity of an impact is a function of a range of considerations, including magnitude, duration, extent, compliance of the prescribed legal framework and the characteristics of receptors or resources.

Likelihood of occurrence: The likelihood of occurrence is a function of probability of an E&S impact during the lifetime of a project. This is an important consideration in the evaluation of unplanned events or accidents.

The impact rating associated with each impact shall be determined by assessing the severity against the likelihood of occurrence as summarized below. Table 1 : Impact rating assessment matrix

Severity of impact

Likelihood of the impact

Unlikely (for example, not expected to occur during the project lifetime)

Low likelihood (for example, may occur once or twice during the project lifetime)

Medium likelihood (for example, may occur after every few years)

High likelihood ( for example, routine, happens several times a year)

Slight Negligible Negligible Negligible Negligible Low Negligible Negligible Negligible to

minor Minor

Medium Minor Minor to moderate

Moderate Major

High Minor to moderate

Moderate to major

Major Major

Definition of impact rating

Negligible Defined as the magnitude of change comparable to natural variation

Minor Defined as detectable but not significant

Moderate Defined as significant, amenable to mitigation,and needs to be mitigated

where practicable

Major Defined as significant, amenable to mitigation, must be mitigated


Based on impact rating, following criterion should be followed to assess the qualitative ESRR:

ESRR Impact ratingLow Negligible, negligible to minor and minor

Medium Minor to moderate and moderate

High Moderate to major and major

Assessment of qualitative ESRR needs to be made for each relevant identified E&S parameter of a transaction without and with an environment and social management plan (ESMP). The E&S parameter needs to be derived based on proposed activities and a site-specific baseline on environment and social status as captured through the general, sector-specific or post-fund disbursal due diligence checklist. The status of the ESMP for each E&S parameter needs to be evaluated based on the details received or collected in areas such as pollution generation, treatment and disposal, relevant labour-specific issues, relevant site-specific E&S issues and mitigation measures, regulatory compliance, E&S management systems, etc. An illustrative template of qualitative ESRR assessment is set out in Table 12 below: Table 2 : Illustrative template for qualitative ESRR Sn Parameters Qualitative impact rating Qualitative

ESRR

Nature Type Duration Area Likelihood Severity Overall

1 Ambient air quality

With ESMP

Reversible or irreversible

Adverseor beneficial

Short-term/ Long-term

Local or regional

Unlikely, low, medium or high

Low, medium or high

Negligible,minor, moderate or major

Low,Medium or high

Without ESMP

2 Emission of GHG

With ESMP

Without ESMP

3 Water resources

With ESMP

Without ESMP

4 Water quality and contamination

With ESMP

Without ESMP

5 Noise level With ESMP

Without ESMP

6 Soil quality and

With ESMP


Sn Parameters Qualitative impact rating Qualitative ESRR


contamination Without ESMP

7 Occupational health and safety of workers

With ESMP

Without ESMP

8 Location and land use pattern

With ESMP

Without ESMP

9 Welfare of labour and related issues

With ESMP

Without ESMP

10 Ecology (terrestrial and aquatic flora and fauna)

With ESMP

Without ESMP

11 Employment and education

With ESMP

Without ESMP

12 Displacement of population (land and house oustee)

With ESMP

Without ESMP

13 Economic benefits

With ESMP

Without ESMP

14 Health and safety of local habitants

With ESMP

Without ESMP

15 Social status (other than those mentioned above)

With ESMP

Without ESMP

16 Culture and heritage

With ESMP

Without ESMP


Sn Parameters Qualitative impact rating Qualitative ESRR


17 Others (if any) With ESMP

Without ESMP

4.2.2 Quantitative assessment of ESRR For quantifying ESSR, guidelines and standards prescribed by the national as well as international agencies need to be considered in addition to these guidelines. Risk due to the proposed activities on the environment and social aspects of the area needs to be ranked on a scale in the order of increasing importance so as to arrive at the PIV. A total of 1,000 marks need to be distributed as per the weightage provided to each parameter considered based on its importance as per an illustrative template provided in Table 13below. The distribution of importance amongst these parameters is to be based on qualitative interpretation of each E&S parameter by the reviewer. Table 33: Illustrative template for PIV Sn Illustrative E&S parameters PIV1 Ambient air quality 2 Emission of GHG 3 Water resources 4 Water quality and contamination5 Noise level 6 Soil quality and contamination 7 Occupational health and safety of workers8 Location and land use pattern 9 Welfare of labour and related issues10 Ecology (terrestrial and aquatic flora and fauna)11 Employment and education 12 Displacement of population (land and house oustee)13 Economic benefits 14 Health and safety of local habitants15 Social status (other than those mentioned above)16 Culture and heritage Others (if any) Total 1,000

The severity of an impact on environmental and social parameter due to each anticipated proposed activity of the project should be graded as per the risk index scale provided in Table 14 below: Table 44: Degree of risk and risk value

Sr no

Overall impact rating* Risk value

1 Negligible 12 Negligible to minor 23 Minor 34 Minor to moderate 45 Moderate 5


6 Moderate to major 67 Major 7*Should be the same as predicted during the qualitative ESRR estimation.

A (+) or (-) sign needs to be assigned to each value depending on its beneficial or detrimental effect. The risk rating for each environmental and social parameter needs to be calculated as follows: ESRRi = PIVi * Ri Where,

PIVi is the PIV of each environmental and social parameter,i Ri is the severity of risk (on a scale of one to seven, positive or negative) due to the effect of the

proposed activity or project on the environmental and social parameter,i Overall score of the ESRR needs to be calculated as: n ESRR = ∑ESRRi i Where, n= Total number of environmental and social parameters under consideration Assessment of quantitative ESRR needs to be made for each relevant identified E&S parameter of a transaction without and with the ESMP. The E&S parameter needs be derived based on the proposed activities and site-specific base line on environment and social status as captured through the general, sector-specific or post fund disbursal due diligence checklist and analysis of the qualitative assessment of ESRR. Status of the ESMP for each E&S parameter needs to be evaluated based on the details received or collected in areas such as pollution generation, treatment and disposal, relevant labour-specific issues, relevant site specific E&S issues and mitigation measures, regulatory compliance, E&S management systems, etc. An illustrative template of quantitative ESRR assessment is set out in 15 below: Table 55: Template for quantitative ESRR # Particulars Quantitative ESRR

Without ESMP With ESMP Post-disbursal monitoring

Risk value

PIV ESRRscore

Risk value

PIV ESRRscore

Risk value

PIV ESRRscore

1 Ambient air quality

2 Emission of GHG

3 Water resources

4 Water quality and contamination

5 Noise level

6 Soil quality and contamination

7 Occupational health and safety of worker

8 Location and land use pattern


9 Welfare of labour and related issues

10 Ecology (terrestrial and aquatic flora and fauna)

11 Employment and education

12 Displacement of population (land and house oustee)

13 Economic benefits

14 Health and safety of local habitants

15 Social status (other than those mentioned above)

16 Culture and heritage

17 Others (if any)

Overall ESRRscore

Based on quantitative assessment of ESRRscore with and without ESMP, following criterion should be followed to make final conclusion: Table 66: Decision-making criteria based on quantitative ESRR Total ESRR score Overall implication Associated

ESRR Way forward for the bank or FI

Up to (-) 1000 No appreciable risk Low No further steps required. Bank or FI may propose appropriate

financing conditions or covenants (-) 1000 to (-) 2000 Significant and

reversible risk However

mitigation measures are important

Medium The bank or FI needs to ask for initial environment and social examination (IESE) study report and carry out an internal review.

Depending on the category and size of investment, the bank or FI may suggest financing conditions or covenants together with an effective action plan for borrowers to act on the financing conditions or covenants, and a monitoring mechanism for the bank or FI, including site visits on a regular basis for verification by the bank or FI personnel.

(-) 2000 to (-) 3000 Significant and irreversible risk

Mitigation measures are crucial

High The bank or FI needs to ask for the environment and social impact assessment (ESIA) study report and get it reviewed by a competent third-party.

The bank or FI needs to evaluate he


Total ESRR score Overall implication Associated ESRR

Way forward for the bank or FI

proposed measures and suggest additional financing conditions and covenants, and ensure an effective action plan for borrowers to act on the financing conditions or covenants.

Onsite inspection by external experts and submission of a performance report by the borrower on regular basis needs to be mandated.

Below (-) 3000

Major risk which is mostly irreversible and permanent

Selection of a

process, raw material and proposed project site are crucial

High(R) The bank or FI needs to ask for an ESIA study report and get it reviewed by a competent third party.

Bank or the FI needs to evaluate the proposed measures and may require the borrower to evaluate options for changes in process, technology, raw materials, shift in plant location, etc. Based on the assessment, it may require the borrower to rework and resubmit the loan proposal.

4.3 Post loandisbursal E&S due diligence checklist General

Name and type of project

Location of project

Approach to site (nearest nationalor state highway, airport orrailway station)

Capacity and type of products and by products

Brief description of production and manufacturing process

Type of raw materials used and respective quantity,including fuel, water and power

Brief description of the type of sources of air pollution and adopted mitigation measures

Brief description of the type of sources of noise pollution and adopted mitigation measures

Brief description of the type of sources of water pollution and adopted mitigation measures

Brief description of the type of sources of hazardous and other solid waste and adopted mitigation measures

Brief description of the type of safety concerns and adopted measures


Total manpower employed

Type Permanent Casual

Skilled

Semi-skilled

Unskilled

Others

Total

Legal status(1)


Category of the project as per ECR 1997

Green

Orange A

Orange B

Red

Is the project compliant to conditions stipulated as a part of the requisite standards and guidelines?

Environment clearance certificate

Licence from the factory inspector

Others, if any

Is the project compliant to financing conditions or covenants raised by the bank from time-to-time?

Resources(2)


Raw materials or products

Capacity utilisation

As per the design capacity

Above the design capacity

Under the design capacity

Has there been any deviation in the manufacturing process from what was originally proposed?

Has there been any deviation in type of raw material used?

Has there been any deviation in the raw material quantity?

Has there been any deviation in the raw material quality?

Are there clearly defined areas for storage of raw materials and products?

If the project consists of captive mining, then has mining being carried out in accordance with financing conditions , covenants or action plan (if any)?

Is the mode of transportation of raw materials and products same as per the declaration?

Water

Is fresh water supply being regularly monitored and documented?

Is fresh water balance established and documented?

Is there any deviation in source(s) of fresh water and its consumption with respect to initially declared quantity?


If yes, then consumption is : Within designed standards

Beyond designed standards

In case of a situation where fresh water consumption has been more than the declared quantity, then whether the required permit has been obtained for the additional quantity?

Has there been any incident of water shortage or a situation where an additional source was used apart from the declared fresh water sources?

Is there any issue(s) with regard to the quality of fresh water?

Is treated waste water being reused or recycled to save the fresh water?

Is any water conservation measure(s) being undertaken or implemented?

Energy

Is the source (s) of energy same as that declared at the initial stage?

Is energy usage being regularly monitored and documented?

Is the energy consumption Within designed standards

Beyond designed standards

Has the company taken any energy-saving initiatives?

Is renewable energy a part of company's overall energy matrix?

Land

Is the land use pattern as per the designed parameters?

Is the green belt area being developed as per the action plan?

Is there any activity posing a threat of land contamination?

Pollution generation and management (3)


Air pollution

Is there appropriate air pollution control equipment in place?

Is there any issue(s) pertaining to the fugitive emission from storage and handling of raw material (s), by-product(s), product(s) waste(s), processes, transportation, etc?

Is adequate monitoring of pollutant(s) being carried out regularly and documented?

Does the outlet air emissions concentration meet the requisite standards?

Local standards

Any other applicable standards

In case of any deviation, is the deviation

Beyond design standards

Within design standards

Is estimation and monitoring of GHG emissions carried out in accordance with internationally recognised methodologies?

If yes, is the GHG emission Beyond design value

Within design value

Is there any measure(s) taken to reduce air and GHG emissions?

Is there any issue pertaining to the emission of ozone depleting substance?


Is the company adhering to regulatory compliance condition(s), financing conditions, covenants or action plan (if any) pertaining to air pollution management?

Is the existing system for air pollution management

Excellent

Satisfactory

Unsatisfactory

Water pollution

Is there appropriate waste water treatment system in place?

Is regular monitoring being carried out for performance evaluation of waste water treatment system?

Is waste water balance established and documented?

Is the quantity of waste water generated within the requisite design values?

Beyond designed value

Within designed value

Is the final effluent discharge quality and quantity within requisite standards?

Design standards

Local standards

Any other applicable standards

Is the company adhering to regulatory compliance condition (s), financing conditions, covenants or action plan (if any) pertaining to waste water management?

Is there reuse or recycle of waste water after treatment?

Is the existing system for waste water management

Excellent

Satisfactory

Unsatisfactory

Solid waste

Is record(s) of inventory of solid waste (hazardous and non-hazardous) available?

Is there a monitoring mechanism to record and document the quantity of solid waste (hazardous and non-hazardous) being generated?

Is the quantity of solid waste (hazardous and non-hazardous) being generated in accordance within the requisite standards?

Local standards

Any other applicable standard

Is the solid waste (hazardous and non-hazardous) being generated?

Beyond designed standard

Within designed standards

Is the company adhering to regulatory compliance condition(s), financing conditions, covenants, action plan (if any) pertaining to solid waste management?

Rate the existing system for collection, storage and disposal of solid waste

Excellent

Satisfactory

Unsatisfactory

Noise pollution Is adequate mitigation measure(s) in place?

Is the regular monitoring of noise level from the source(s) and ambient


noise level being carried out and documented?

Is the noise level meeting within the requisite standards?

Design standard

Local standard

Any other applicable standard

Is the company adhering to regulatory compliance condition(s), financing conditions, covenants or action plan (if any) pertaining to noise level management?

Is existing system for noise level management

Excellent

Satisfactory

Unsatisfactory

Status of compliance

Is there any instance (s) of non-compliance with regard to environmental regulations and standards (including financing conditions or covenants raised by bank)?

Is there any notice (s) served for non-compliance?

If yes, please specify Is it recorded and investigated?

Is corrective measure(s) being taken?

Labour and working conditions(4)


Occupational health and safety

Is compliance with Factory Act and Rules in place?

Does thecompany have in place a system such as OSHA 18000 or any other equivalent?

Is there a system for identification and assessment of occupational hazards and risks in place and are they being documented?

Is the onsite and offsite emergency plan in place, modified and documented?

Is regular training(s) on health and safety issue(s) for workers being conducted and documented?

Is there adequate ventilation around the workplace and is personal protective equipment being provided to workers?

Do pressurised tanks such as boilers, compressors, bullets, cylinders and fire fighting equipment have valid fitness certificate(s) for usages?

Is a work to permit system in place?

Is a regular health surveillance programme for workers in place and documented?

Are there any occupational accident(s), incident(s) and work-related illness(s) and are they documented properly?

If yes, is a full investigation of such incidents being carried out?

Is a mock drill(s) being conducted?

Is material safety data sheet (MSDS) of all hazardous chemicals or materials available and accessible?

Is regular health and safety audit being carried out?

Has the company documented findings of the audit and taken actions on


it?

Rate the level of housekeeping

Excellent

Good

Average

Below average

Child labour

Is regular training being conducted pertaining to the company’s policy on child or forced labour?

Are policies pertaining to child or forced labour appropriately communicated to all the employees on regular basis?

Is there any instance(s) of child labouror forced labour being reported?

Minimum wage

Is there a mechanism to monitor adherence to minimum wage policy (if any)?

Are all workers working under valid contract and employment?

Are wages being paid as per the requirements of the law?

Minimum as per the law

Above the minimum wage

Below the minimum wage

Non-discrimination

Is there a mechanism to monitor adherence to non-discrimination policy (if any)?

Collective bargaining

Are there instances of strikes or lock-outs?

Vulnerable labour Is the system to protect vulnerable labour (third-party labour or workers within the supply chain)

Excellent

Adequate

Inadequate

Grievance mechanism

Is there any grievance(s) registered through an established mechanism?

If yes, is there any outstanding issue(s)?

If yes, is a corrective measure(s) being taken?

Supply chain

Have periodic audits (covering aspects of health and safety of labours, child, forced labour, minimum wages, etc) of primary suppliers and vendors been carried out?

Have periodic audits on environmental practices of its major suppliers and sub-contractors been carried out?

Are the findings of such audits being properly documented?

Has the company taken action(s) based on the findings of such audits (if any)?

Governance(5)


ESG risk Are environment and safety management system (if any) adequately


management implemented?

Are policies pertaining to ESG risk management properly communicated to stakeholders and documented?

Are there processes to periodically assess environmental, safety and social risks and to take corrective actions?

Is there any incident(s) of non-compliances reported and documented?

Nature of reported non-compliance (s)

Routine

Serious and affect reputation

If yes, are corrective measures being undertaken and documented?

Management of grievances of local habitants

Is the grievance mechanism working effectively?

What are the kinds of grievances registered by the local community?

Environment sensitivities such as national park, forest, wild life sanctuary, ecology, river, sea or archaeological structure, etc.

Water-related issues

Land degradation

Pollution generation and management

Health and Safety

Livelihood and social

Cultural heritage

Natural hazards

Others, if any

If yes, has the company taken measures to mitigate reported issues and documented?

If yes, rate these measures

Excellent

Adequate

Inadequate

Corporate governance

Is there a mechanism to prevent engagement of child labour, discrimination and to ensure minimum wages?

Is there a mechanism to identify and implement CSR issues through regular consultation with community?

Has stakeholder consultation been undertaken?

Are there appropriate mechanisms to monitor implementation of various policies (EHS, CSR, etc) and management systems?

Rate the CSR activities undertaken by the company

Excellent

Adequate

Inadequate

Has the company employed local workers?

If yes, what is the percentage? <50%

>50%

Are locals made aware of the emergency response system in case of any


incident?

Has the company carried out any external or internal evaluation of its environment and social performance?

If yes, rate the result

Excellent

Good

Satisfactory

Unsatisfactory

Has the company made any voluntary disclosures on its environmental and social performance?

Note: In case of presence of any issue as defined above, relevant details to the possible extent need to be enclosed as an annexure for consideration for estimation of ESRR.

Documents

Guidelines on Environmental and Social Risk Management