Updated PCTP SBP 23

ACCESS BANK PLC
PROFESSIONAL CONTINUOUS
TRAINING PROGRAMME
(PCTP)
SUSTAINABLE BANKING PRACTICES

Course Timetable
Day 1 Topic 1. Fundamentals of Sustainable Banking
Day 2 Topic 2. Business Case for Environmental & Social Risk

Management
Topic 3. Local Environmental & Social Principles,

Regulations and Standards
Day 3 Topic 3 Contd. Local Environmental & Social Principles,

Regulations and Standards
Topic 4. Sustainable Banking Practices

FUNDAMENTALS OF
SUSTAINABLE BANKING
Overview of Sustainable Banking (SB)
• It was widely accepted that profiting through financial
transactions is the guiding principle of Commercial Banking
Systems worldwide.
• Sustainable Banking involves a shift in thinking from how much
money we can make no matter the social and environmental
impacts to recognizing that social and environmental costs must
be factored into the design of financial policies and products.
The shift toward sustainable banking affects all commerce and
industry since money fuels the industrial complex. Three significant
considerations that influence the movement towards sustainability
in the banking sector are:
• The environment,
• Ethical values, and,
• Community involvement
• Consequently, it is common to consider the phrases “Ethical Banking”
and “Social Banking” as interchangeable with “Sustainable Banking”.
• The hallmarks of Sustainable Banking are:
• Transparency of policies and operations.
• Support of community banks as well as big banks.
• Implementation of banking policies that promote responsibility
and sustainability in the production and distribution of goods
and services.
Objectives of Sustainable Banking
• Profit at all costs ceases to be the primary objective of Sustainable
Banking. While a healthy bottom line continues to be a goal, other
objectives that will encompass environmental and social criteria
start being significant considerations in selecting investments and
formulating policies.
The objectives of Sustainable Banking include:
• Quality of Life Considerations: These include investments that directly improve the
standard of living. Investments in improving access to education, affordable housing,
public transportation, and low-cost healthcare get priority over investments in financial
instruments.
• Promotion of Clean Energy: Actively pursue and promoted investments in alternative
energy instead of investments in coal, gas, and oil. They will also invest in the
development and popularization of vehicles utilizing electricity and natural gas.
Concurrently, invest in technologies to lower the emissions and improve the mileage of
gasoline-powered vehicles.
• Financial Inclusivity: Support responsible banking initiatives like microloans that help
family-owned businesses and small businesses in economically disadvantaged
communities. While returns on such initiatives are not as high as on investments in big
business, the track record of Grameen Bank and similar institutions worldwide have
demonstrated that microloans are indeed profitable investments.
• Sustainable Agriculture: Support Green Banking policies that
encourage investments in pollution-free and toxin-free agriculture.
Since the production, processing, and distribution of food are
foundational to human society’s health and well-being, sustainable
banking objectives must include sustainable agriculture.
The well-being of the community has to be

front and center among the considerations
of Sustainable Banking.
Pillars of SB and Socially Responsible
Investing (SRI)
• Corporate sustainability is a growing concern among investors who seek
not only economic profit but also social good.
• Sustainability has three main pillars: economic, environmental, and
social. These three pillars are informally referred to as people, planet,
and profits.
The Environmental Pillar
• The environmental pillar often gets the most attention. Many companies
are focused on reducing their carbon footprints, packaging waste, water
usage, or other damage to the environment. Besides helping the planet,
these practices can also have a positive financial impact. For example,
reducing the use of packaging materials means lower spending, and
improved fuel efficiency also helps with the company's budget.
Pillars of SB and Socially Responsible Investing
(SRI)
The Social Pillar
• The social pillar ties back into another poorly defined
concept: social license. A sustainable business should have the
support and approval of its employees, stakeholders, and the
community it operates in. The approaches to securing and
maintaining this support are various, but it comes down to
treating employees fairly and being a good neighbor and
community member, both locally and globally.
Pillars of SB and Socially Responsible Investing
(SRI)
The Economic Pillar
• The economic pillar of sustainability is where most businesses feel they are
on firm ground. To be sustainable, a business must be profitable. That said,
profit cannot trump the other two pillars. In fact, profit at any cost is not at
all what the economic pillar is about.
• Activities that fit under the economic pillar include compliance,
proper governance, and risk management. While these are already table
stakes for most North American companies, they are not the global
standard.
• Sometimes, this pillar is referred to as the governance pillar, referring to
good corporate governance. This means that boards of directors and
management align with shareholders' interests as well as that of the
company's community, value chains, and end-user customers.
Measurement Framework for SB
The three key elements used for measurement of sustainable
banking are:
• Environmental Impact Assessment
• Green Finance
• Enabling environment.
The Measurement Framework is based on three intersecting themes in
sustainable finance. For each theme, it assesses regulatory guidance,
supervision strategies, disclosure requirements, and voluntary industry
approaches.
• EIA - ESG Integration refers to the management of environmental, social,
and governance (ESG) risks in the governance, operations, lending, and
investment activities of financial institutions.
• Enabling Environment- Refers to new corporate governance, risk
management, and disclosure practices that financial institutions can use
to mitigate and adapt to climate change. The enabling environment
essentially consists of “rules of the game” that are laid out to achieve a
sustainable balance between the social, economic and environmental
goals.
• Green Finance – Refers to Financing Sustainability initiatives by
regulators and financial institutions to unlock capital flows for
activities that support climate, green economy, and social goals. In
other words Green Finance is any structured financial activity that’s
been created to ensure a better environmental outcome. This
includes new products like green bonds and sustainability-linked
loans. Initiatives include definitions, guidance, taxonomies,
monitoring, and incentives. The top three green bond issuers are the
US, China and France.
History of Sustainability
• Sustainability is a societal goal that broadly aims for
humans to safely co-exist on planet Earth over a long time.
Specific definitions of sustainability are difficult to agree on
and therefore vary in the literature and over time.
• Sustainability is commonly described
• along the lines of three dimensions
• (also called pillars): environmental,
• economic and social. This concept
• can be used to guide decisions at the
• global, national and at the individual
• level (e.g. sustainable living).
History of Sustainability
• In everyday usage, sustainability is often focused mostly on the
environmental aspects so that "sustainability" becomes the same as
"environmental sustainability". Consideration of human impacts on
the environment and work to reduce negative impacts are linked to
improving environmental sustainability.
• The most dominant environmental issues since about the year 2000
have been climate change, loss of biodiversity, loss of ecosystem
services, land degradation, and air and water pollution.
History of Sustainability – UN Conventions &
Charters
• The history of sustainable development in the United Nations dates
back to the United Nations Conference on the Human Environment,
held in Stockholm, Sweden, in 1972.
• The United Nations Conference on the Human Environment was the
UN's first major conference on the issue of the environment.
• The conference adopted the Stockholm Declaration and Plan of
Action which set out principles for the preservation and
enhancement of the human environment, with recommendations
for international environmental action.
• The Conference also created the United Nations Environment
Programme (UNEP), the first UN programme focused
solely on environmental issues.
Charters
• 20 years later, at the historic Earth Summit in Rio de Janeiro,
Brazil in 1992, the United Nations sought to help
Governments rethink economic development and find ways
to stop polluting the planet and depleting it's natural
resources.
• The two-week "Earth Summit" was the climax of a process
that had begun in December 1989, of planning, education
and negotiations among all Member States of the United
Nations, leading to the adoption of Agenda 21, an official
global consensus on development and environmental
cooperation.
Charters
• Basic to Agenda 21 was the acknowledgement that
protecting the environment required collaboration across
boundaries.
• Agenda 21 was meant to reflect an international consensus
to support and supplement national strategies and plans for
sustainable development.
• It called for all States to participate in improving, protecting
and better managing ecosystems, and taking common
responsibility for the future.
Charters
• The Earth Summit also produced the Rio Declaration, which had 27
principles, on new and equitable partnerships and development
through cooperation among States, social sectors and individuals.
• They reflected human beings’ responsibility for sustainable
development; the right of States to use their own resources for their
environmental and development policies; and the need for State
cooperation in poverty eradication and environmental protection.
• The idea was that States must act in a spirit of global partnership to
conserve, protect and restore the integrity of the Earth’s ecosystem
Charters
• In 1997, a Special Session of the General Assembly devoted to the
environment, also known as 'Earth Summit + 5' examined the
implementation of Agenda 21 and proposed a programme for
further implementation
• Three years later, in 2000, the Millennium Summit established
the eight Millennium Development Goals (MDGs)
• In 2002, the World Summit on Sustainable Development in
Johannesburg gave birth to a new Action Plan.
• In 2005, 2008, and 2010 the Millenium Development Goals were
reviewed at high level meetings in New York.
Charters
• This was followed in 2012, in Rio, by the United Nations Conference on
Sustainable Development, also called Rio + 20. After this event, the United
Nations Environment Assembly was established, becoming the world’s
high-level decision-making body on the environment. The Environment
Assembly meets to set priorities for global environmental policies and
develop international environmental law.
• In 2013, two years before the deadline which had been set to meet the
Millenium Development Goals, a Special Event was held in New York,
at which Member States agreed to convene a High-level Summit in
September 2015 to adopt a new set of goals which would build on the
foundations laid by the Millennium Development Goals.
• Two years later, in 2015, the United Nations Summit on Sustainable
Development gave birth to Agenda 2030 and its seventeen sustainable
development goals.
Charters
THE SUSTAINABLE DEVELOPMENT GOALS (SDGS) AND THE
ENVIRONMENT
• Since the landmark 1972 Stockholm Conference on the Human
Environment, the issue of the environment has been placed within
the framework of sustainable development.
• All of the UN's Sustainable Development Goals (SDGs) have some
connection to the environment.
• The SDGs with a direct connection are Goal 6 (Clean Water and
Sanitation), Goal 7 (Affordable and Clean Energy), Goal 11
(Sustainable Cities and Communities), Goal 12 (Responsible
Consumption and Production), Goal 13 (Climate Action), Goal 14 (Life
Below Water), and Goal 15, (Life on Land).
Financial Sustainability Initiatives
• Sustainable businesses deliver financial returns in the short and long term
while generating positive value for society and operating within
environmental constraints. Organizations that fail to address
environmental and social risks will be less resilient to these challenges,
and so put their own existence at risk.
“It is not necessarily a choice between making
money on the one hand and ‘doing the right thing’
on the other. On the contrary, once it is recognized that
‘business as usual’ is unsustainable it follows
naturally that those organizations which start to develop resilient
business models will be the ones that succeed.”
Financial Sustainability Initiatives
HRH The Prince of Wales
“A healthy society and environment must underpin our economies.
The future of business, and our planet, depends on our ability to
rethink and evolve our business models. Simply put, investing in
sustainability makes good business sense.”
Mark Hawkins, President and CFO, Salesforce; Chair,
USA Chapter of the A4S CFO Leadership Network
Financial Sustainability Initiatives – UN Global
Compact
• A UN initiative for companies to align strategies and operations with
universal principles on human rights, labour, environment and anti-
corruption, and take actions that advance societal goals.
• To make this happen, the UN Global Compact supports companies
to:
1.Do business responsibly by aligning their strategies and
operations with 10 Principles on human rights, labour,
environment and anti-corruption; and
2.Take strategic actions to advance broader societal goals, such as
the UN Sustainable Development Goals, with an emphasis on
collaboration and innovation.
Compact
❖Human Rights
Principle 1: Businesses should support and respect the protection of
internationally proclaimed human rights; and
Principle 2: make sure that they are not complicit in human rights
abuses.
❖Labour
Principle 3: Businesses should uphold the freedom of association and
the effective recognition of the right to collective bargaining;
Principle 4: the elimination of all forms of forced and compulsory
labour;
Compact
Principle 5: the effective abolition of child labour; and
Principle 6: the elimination of discrimination in respect of employment
and occupation.
❖Environment
Principle 7: Businesses should support a precautionary approach to
environmental challenges;
Principle 8: undertake initiatives to promote greater environmental
responsibility; and
Principle 9: encourage the development and diffusion of
environmentally friendly technologies.
Compact
❖Anti-Corruption
Principle 10: Businesses should work against corruption in all its
forms, including extortion and bribery.
Financial Sustainability Initiatives – Principles
for Responsible Investment
• The UN Principles for Responsible Investment (PRI) is an
international organization that works to promote the
incorporation of environmental, social, and corporate governance
factors (ESG) into investment decision-making.
• The Principles for Responsible Investment were developed by an
international group of institutional investors reflecting the
increasing relevance of environmental, social and corporate
governance issues to investment practices. The process was
convened by the United Nations Secretary-General.
Financial Sustainability Initiatives – Principles for
Responsible Investment
• Modern responsible investment encompasses three distinct activities:
alignment of portfolios with client values, using exclusions;
integration of environmental, social, and governance (ESG) factors
into the investment process, often with a focus on financial
materiality; and impact, which in public markets is usually sought
through engagement with corporate management.
• Principle 1: We will incorporate ESG issues into investment analysis and decision-making processes.
• Principle 2: We will be active owners and incorporate ESG issues into our ownership policies and
practices.
• Principle 3: We will seek appropriate disclosure on ESG issues by the entities in which we invest.
• Principle 4: We will promote acceptance and implementation of the Principles within the
investment industry.
• Principle 5: We will work together to enhance our effectiveness in implementing the Principles.
• Principle 6: We will each report on our activities and progress towards implementing the Principles
Financial Sustainability Initiatives – Global
Reporting Initiative
• GRI (Global Reporting Initiative) is an independent, international
organization that helps businesses and other organizations take
responsibility for their impacts, by providing them with the global
common language to communicate those impacts. It provides the
world’s most widely used standards for sustainability reporting –
the GRI Standards.
• The GRI Secretariat is headquartered in Amsterdam, the
Netherlands, and we have a network of seven regional offices to
help ensure we can support organizations and stakeholders
worldwide.
• The GRI Standards enable any organization – large or small, private or
public – to understand and report on their impacts on the
economy, environment and people in a comparable and credible way,
thereby increasing transparency on their contribution to sustainable
development. In addition to reporting companies, the Standards are
highly relevant to many stakeholders - including investors,
policymakers, capital markets, and civil society.
• The Standards are designed as an easy-to-use modular set, delivering
an inclusive picture of an organization's material topics, their related
impacts, and how they are managed.
• The Universal Standards - now revised to incorporate reporting on
human rights and environmental due diligence, in line with
intergovernmental expectations - apply to all organizations;
• The new Sector Standards enable more consistent reporting on
sector-specific impacts;
• The Topic Standards - adapted to be used with the revised Universal
Standards - then list disclosures relevant to a particular topic.
Financial Sustainability Initiatives – Nigeria’s
Sustainable Banking Principles
• The Principles have been developed by and for the banking sector in
Nigeria by the CBN to signal her commitment to economic growth
that is environmentally responsible and socially relevant.
• The business activities of the clients that Banks fund can have
potentially negative impacts on the environment or local
communities where their clients operate.
• These negative impacts can include air or water pollution,
destruction of biodiversity, threats to human health and safety,
violations of labour rights, or displacement of livelihoods.
• Each of these issues may have hidden external costs which in turn
hinder the overall growth prospects of the economy and society.
• When Banks provide financial products and services to clients with
poor E&S performance, they not only enable such clients to impose
these negative impacts on the environment and society, but expose
themselves to risk in the form of credit risk, reputational risk, and
legal risk. In addition, a Bank’s Business Operations may potentially
have negative impacts on the environment or local community in
which it operates.
• The Principles are based on leading international sustainable finance
standards and established industry best practice, but they are
developed in line with the Nigerian context and development needs.
Principle 1 | Our Business Activities1 : Environmental and Social Risk
Management
• We will integrate environmental and social considerations into decision-
making processes relating to our Business Activities to avoid, minimise or
offset negative impacts.
Principle 2 | Our Business Operations2 : Environmental and Social Footprint
• We will avoid, minimise or offset the negative impacts of our Business
Operations on the environment and local communities in which we operate
and, where possible, promote positive impacts.
Principle 3 | Human Rights
• We will respect human rights in our Business Operations and Business
Activities.
Principle 4 | Women’s Economic Empowerment
• We will promote women’s economic empowerment through a gender
inclusive workplace culture in our Business Operations and seek to provide
products and services designed specifically for women through our Business
Activities.
Principle 5 | Financial Inclusion
• We will promote financial inclusion, seeking to provide financial services to
individuals and communities that traditionally have had limited or no access to
the formal financial sector.
Principle 6 | E&S Governance
• We will implement robust and transparent E&S governance practices in our
respective institutions and assess the E&S governance practices of our clients.
Principle 7 | Capacity Building
• We will develop individual institutional and sector capacity necessary to identify,
assess and manage the environmental and social risks and opportunities
associated with our Business Activities and Business Operations.
Principle 8 | Collaborative Partnerships
• We will collaborate across the sector and leverage international partnerships to
accelerate our collective progress and move the sector as one, ensuring our
approach is consistent with international standards and Nigerian development
needs.
Principle 9 | Reporting
• We will regularly review and report on our progress in meeting these Principles
at the individual institution and sector level.
Sustainable Business of Banking (Products &
Services) – Green Finance
• Green finance is one of a number of terms used to label activities related to the
two-way interaction between the environment and finance and investment.
Related terms include: responsible investment (RI), environmental, social and
governance (ESG), sustainable finance and climate finance.
• In summary, green finance can be considered as the finance sector’s strategic
approach to meeting the challenges of climate change and the transition to a
low-carbon world. And, for the purposes of this course, green finance is defined
as, “any financial initiative, process, product or service
that is either designed to protect the natural environment
or to manage how the environment impacts finance and
investment”.
• Green finance covers a wide range of financial products and
services, which can be broadly divided into banking, investment
and insurance products. Examples of these include green bonds,
green-tagged loans, green investment funds and climate risk
insurance.
• But what makes a financial product ‘green’? In many cases the ‘green’
aspect of the product relates to the asset – such as investments in clean
energy projects or reforestation. In other cases, the features of the
product are designed to encourage or reward environmentally-friendly
activity – such as mortgages which are discounted in line with a property’s
energy efficiency, or investment which links the sustainable management
of resources with funding limits or collateral requirements.
• Other products that are labelled as ‘green’ may include financial
products (e.g. credit cards) which offer a donation to environmental
protection work in reward for a certain level of spend, financial
products, which respond to an environmental issue (such as flood
insurance) but do not seek to address the causes of this issue (such as
climate change), financial products which minimise the
environmental impacts of the provider’s operations (such as using
recycled paper) or which offset the customer’s normal activities (such
as the carbon emissions generated by air travel).
Services) – Social Finance
• Social finance is a category of financial

services which aims to leverage private capital to
address challenges in areas of social and
environmental need. Having gained popularity in the
aftermath of the 2008 Global Financial Crisis, it is
notable for its public benefit focus.
• It is any investment activity that generates financial
returns for investors and has a positive societal and
environmental impact .
• Unlike philanthropy, which has a similar mission-motive, social
finance secures its own sustainability by being profitable for
investors. Capital providers lend to social enterprises who in turn,
by investing borrowed funds in socially beneficial initiatives,
deliver investors measurable social returns in addition to
traditional financial returns on their investment. Notable
examples of social finance instruments are Social Impact
Bonds and Social Impact Funds.
• Since the 2008 Financial Crisis the social finance industry has been
experiencing a period of accelerated growth as shifts in investor sentiment
has led to greater demand for ethically responsible investment alternatives
by retail investors. Mainstream sources of capital have entered the market
as a result including Deutsche Bank which, in 2011, became the first
commercial bank to raise a social investment fund.
• New research in the field calls for increasing the role of government in
social finance to help overcome the challenges which the industry
currently faces including the struggle to produce desirable returns for
investors, high start-up and regulatory costs, neglect from mainstream
banks and lacking access to retail investors. Proponents of social finance
argue that until these gaps are addressed, mass participation in social
finance will be prevented.
Sustainable Business of Banking (Products & Services) –
Social Finance
WHY DO INVESTORS ADOPT SOCIAL FINANCE STRATEGIES?
Decisions to explore or adopt social finance strategies are not
necessarily driven by charitable intent, nor do those decisions always
stem from a desire to earn attractive investment returns. These
decisions are often based on the following motivations:
1. Personal Values
• For some individuals, deciding to invest in a socially-responsible
manner stems from strongly held personal beliefs. Their primary focus
is to avoid advancing the interests of organizations or industries that
go against those beliefs. For example, some investors are drawn to
mutual funds that will not invest in tobacco, firearms or gambling
enterprises because these industries are contrary to the investor's
values.
2. Fiduciary Obligations
• Trustees for non-profit organizations, retirement plan sponsors or others investing in a
fiduciary capacity may search for investments that meet ESG criteria as part of their risk
management strategies and fiduciary obligations.
• Generally speaking, these individual and fiduciary investors seek competitive investment
returns while investing in a manner consistent with their personal values or fiduciary
mandate. Potential social or environmental change is not a primary focus.
3. Environmental, Social and Governance (ESG) Goals
• Some social finance investors want to incorporate values-based investing with altruistic
intent, seeking competitive returns from investments with a broad focus on ESG
opportunities. Others may want to narrow that focus, selecting investments that further
very specific environmental or social goals. One such example is a mutual fund that invests
in emerging markets infrastructure or in clean-energy initiatives.
• For investors who care deeply about an investment's societal or environmental goal,
investment returns may become a secondary consideration to the charitable mission.
Social Finance
4. Competitive Investment Returns
• In addition to using social finance for personal or fiduciary-driven motives, many investors also seek
competitive investment returns. Fortunately, achieving competitive performance and even
outperforming non-social finance investments seem to be realistic goals.
• According to a 2015 study by the Global Impact Investing Network, investors reported that their
portfolio performance overwhelmingly met or exceeded their expectations for social and
environmental impact and financial return.3
• Of course, past performance is never a guarantee of future results, and the performance of one social
finance strategy is not necessarily correlated to another. Still, the data indicates that investing
responsibly and outperforming the market are not mutually exclusive objectives.
5. Connection to the Next Generation
• Social finance allows investors and their families to clearly identify shared values and goals and align
them across areas of mutual interest. Because younger generations may want to put a greater focus
on sustainable investing to achieve social and environmental impact, social finance is also a great way
to bridge the gap between generations.
Financial Inclusion Products
Financial inclusion means that individuals and businesses have access
to useful and affordable financial products and services that meet
their needs – transactions, payments, savings, credit and
insurance – delivered in a responsible and sustainable way.
• Financial inclusion has been identified as an enabler for 7 of the
17 Sustainable Development Goals.
• The G20 committed to advance financial inclusion worldwide and
reaffirmed its commitment to implement the G20 High-Level
Principles for Digital Financial Inclusion.
• The World Bank Group considers financial inclusion a key enabler to
reduce extreme poverty and boost shared prosperity.
Sustainable Business of Banking (Products & Services) – Financial
Inclusion Products
• The ongoing COVID-19 crisis has also reinforced the need for increased digital financial
inclusion. Digital financial inclusion involves the deployment of the cost-saving digital
means to reach currently financially excluded and underserved populations with a range of
formal financial services suited to their needs that are responsibly delivered at a cost
affordable to customers and sustainable for providers.
• Great strides have been made toward financial inclusion and 1.2 billion adults worldwide
have gotten access to an account between 2011 and 2017. As of 2017, 69% of the world’s
adults had an account. Digital financial services — including those involving the use of
mobile phones — have now been launched in more than 80 countries, with some reaching
significant scale. As a result, millions of formerly excluded and underserved poor
customers are moving from exclusively cash-based transactions to formal financial services
using a mobile phone or other digital technology to access these services.
• However, close to one-third of adults – 1.7 billion – were still unbanked in 2017, according
to the latest Findex data (2021 data forthcoming).About half of unbanked people included
women poor households in rural areas or out of the workforce.
Financial Inclusion Products
• The financial inclusion products in the banking and other financial institutions sector are mainly
savings, credit, payments and remittance channels.
• The CBN issued the Three Tiered Know-Your-Customer guideline3 which provides simplified
customer identification process for low and medium value savings accounts. These are savings
accounts that have been assessed to pose lower ML/TF risks.
• All deposit taking institutions (especially deposit money banks, microfinance banks and primary
mortgage institutions) are required to comply with the guidelines. The agent banking serves as
a delivery channel for offering banking services in a cost effective manner.
• The agent banking guideline issued by the CBN provides a framework for the use of non-bank
businesses, such as supermarkets and retail outlets, by licensed deposit-taking Financial
Institutions to deliver services to their clients.
• Most of the FI products allows for non-face-to-face account opening. This is done through
online banking and mobile phones. However, there is a national requirement for all SIM cards
to be registered with a minimal KYC and a centralized database is maintained by the Regulator
of the telecommunication industry (NCC). In addition FI products allow for non-face-to-face
transactions. These transactions are mainly done through ATMs and e-channels.
Services) – Women Empowerment Products
• Includes account opening, educational loans, credit schemes,
business advisory, training,
Services) – Carbon Finance/Trading
• Carbon finance is a branch of environmental finance that covers
financial tools such as carbon emission trading to reduce the impact
of greenhouse gases (GHG) on the environment by giving carbon
emissions a price.
• The general term is applied to investments in GHG emission
reduction projects and the creation (origination) of financial
instruments that are tradeable on the carbon market.
• Carbon trading is the process of buying and selling permits and
credits that allow the permit holder to emit carbon dioxide. It has
been a central pillar of the EU's efforts to slow climate change. The
world's biggest carbon trading system is the European Union
Emissions Trading System (EU ETS).
• Carbon trade is the buying and selling of credits that permit a
company or other entity to emit a certain amount of carbon
dioxide or other greenhouse gases. The carbon credits and the carbon
trade are authorized by governments with the goal of gradually
reducing overall carbon emissions and mitigating their contribution to
climate change.
• A carbon credit is a tradable permit or certificate that provides the
holder of the credit the right to emit one ton of carbon dioxide or an
equivalent of another greenhouse gas – it’s essentially an offset for
producers of such gases. The main goal for the creation of carbon
credits is the reduction of emissions of carbon dioxide and other
greenhouse gases from industrial activities to reduce the effects of
global warming.
• Carbon credits are market mechanisms for the minimization of
greenhouse gases emission. Governments or regulatory authorities
set the caps on greenhouse gas emissions. For some companies, the
immediate reduction of the emission is not economically viable.
Therefore, they can purchase carbon credits to comply with the
emission cap.
• Companies that achieve the carbon offsets (reducing the emissions of
greenhouse gases) are usually rewarded with additional carbon
credits. The sale of credit surpluses may be used to subsidize future
projects for the reduction of emissions.
• The introduction of such credits was ratified in the Kyoto Protocol. The Paris
Agreement validates the application of carbon credits and sets the provisions
for the further facilitation of the carbon credits markets.
• Carbon trading is based on the cap and trade regulations that successfully
reduced sulfur pollution during the 1990s. This regulation introduced market-
based incentives to reduce pollution: rather than mandating specific
measures, the policy rewarded companies that cut their emissions and
imposed financial costs on those that could not.
• The idea of applying a cap-and-trade solution to carbon emissions originated
with the Kyoto Protocol, a United Nations treaty to mitigate climate change
that took effect in 2005. At the time, the measure devised was intended to
reduce overall carbon dioxide emissions to roughly 5% below 1990 levels
by 2012. The Kyoto Protocol achieved mixed results and an extension to its
terms has not yet been ratified.
BUSINESS CASE FOR
ENVIRONMENTAL AND SOCIAL
RISK MANAGEMENT
Introduction to Environmental & Social Risks
for the Financial Sector
" The financial sector holds a key function in society, being as
it is at the core of all savings, investment and lending activities,
whether for individuals, companies, government or other entities.
As a result, financial institutions need to consider and define their
objectives in the broader context of society, and as a member of
the community they serve. Responsible finance further requires
financial institutions to be keenly aware of the constant changes
around them, so as to be able to meet societies expectations.“
-Banco Gelicia,
Argentina, Sustainability Report,2010
Introduction to Environmental & Social Risks
for the Financial Sector
• E&S risks are the potential negative consequences to a business
that result from its impacts (or perceived impacts) on the natural
environment (i.e. air, water, soil) or communities of people (e.g.
employees, customers, local residents).
• Social risk for a business includes actions that affect the
communities around them. Examples include labor issues,
human rights violations within the workforce, and corruption by
company officials. Public health issues can also be a concern as
they can impact absenteeism and worker morale.
Introduction to Environmental & Social Risks for the Financial
Sector
• There is no business without risk, but encountering risks shouldn't
mean the end of operations. Discover the social, cultural, and
environmental risks in business, along with the consulting services
that help with risk preparation and remediation.
Business Risk Pitfalls
• An oil company's drilling platform in the Gulf of Mexico is damaged
by a hurricane and sprouts a leak.
• A major clothing manufacturer finds out one of its trading partners
is using underage child labor.
• A marketing firm opens a call center in a foreign country, but quickly
offends the workforce by ignoring an important religious holiday.
Sector
• There are many types of business risks, and the larger the business, the
more risk exposure it has on multiple fronts. If you have a multinational
company, there can be cultural differences due to your footprint.
• With a larger workforce, there are more chances for social risk such as
labor unrest. And companies with multiple locations have increased
risk of environmental issues just because there's more facilities to keep
track of.
• Companies can even be affected indirectly by risk issues that occur to
trading partners within their supply chain.
• For example, if one of your suppliers has a labor strike and doesn't
send your supplies, it can affect your ability to manufacture product.
Sector
• Social risk for a business includes actions that affect the communities
around them. Examples include labor issues, human rights violations
within the workforce, and corruption by company officials. Public
health issues can also be a concern as they can impact absenteeism
and worker morale.
• Political uncertainty can be a social risk if the company doesn't have a
good understanding of the local power structure and who the power
brokers are. Land use is another politically related stumbling block.
For example, a business trying to open a new location can run into
zoning issues with the local community planning board.
• Companies that have problems with social risk face political backlash,
public outcry, and a damaged legal standing and may not be
sustainable in the long term.
Sector
• The type, quantity and severity of environmental and social issues

that present a risk to a financial institution for any given
transaction depend on a variety of factors, including geographic
context, industry sector, and the type of transaction: corporate,
housing, insurance, leasing, microfinance, project finance, retail,
short-term finance, small and medium enterprise, and trade.
Sector
• For FIs the major risk considerations are:

• Liability Risk
• Financial Risk
• Reputational Risk
• Credit Risk
• Market Risk
Business Case for E & S Risk Management by
FIs
Business Case for Managing Environmental and Social Risk
• Considering environmental and social risks as part of the risk appraisal
process for transactions helps a financial institution to decrease its exposure
to overall risk and contributes to its long-term financial viability.
• A financial institution can do so by developing a Environmental and Social
Management System, which can be integrated into its existing risk
management framework including the risk appraisal process for
transactions.
• A well-developed Environmental and Social Management System can lead
to decreased exposure to environmental and social risks, increased market
opportunities, and enhanced reputation, which help contribute to the long-
term financial viability of financial institution.
Business Case for E & S Risk Management by FIs
• There is a clear business case for financial institutions to establish a management
system that incorporates environmental and social risks into their overall approach to
risk management.
• If environmental and social risks are considered too high or cannot be mitigated to an
acceptable level, financial institutions can decide not to engage in a financial
transaction, even if otherwise it is projected to have a good financial return.
• Similarly, financial institutions can add value to their clients or investees by helping
identify and mitigate E&S risks that could threaten the viability or profitability of
their business.
• An increasing number of financial institutions are voluntarily adopting international
environmental and social standards to identify and mitigate E&S risks, also creating
opportunities and harmonizing the requirements for environmental and social
sustainability for their clients/investees.
• These standards facilitate the unique role that financial institutions can play in
promoting sustainable development outcomes.
External Initiatives
• Concerned non-governmental organizations (NGOs) are turning more
attention to financial institutions, increasingly seeking to collaborate and
advocate change in their environmental and social policies and practices.
• To manage environmental and social risks, especially in large projects they
finance, an increasing number of financial institutions in emerging markets
is turning to various international standards, considered as best practice.
• In recent years, voluntary industry frameworks such as the Equator
Principles have helped build an international consensus around the need
for and benefits of environmental and social standards.
• Adherence to such standards is gradually becoming standard business
practice.
Correlation Between Financial and E & S Performance

• Demonstrating financial gains from sustainable financing is also a
way to enhance shareholder value.
• Good public reporting can improve a financial institution’s access
to capital and to international markets.
• This requires engaging in clearer, more open and more
transparent public reporting on environmental, social, and
economic performance.
• Leadership in reporting can help financial institutions develop
their brand and differentiate themselves in the marketplace. It
can also generate positive relationships with external
stakeholders.
Business Case for E & S Risk Management by Fis – Correlation
Between Financial & E & S Performance
Business Case for E & S Risk Management by
FIs
Adding Value Through E & S improvements
• Environmental and social risk management benefits a financial institution by improving overall risk
management, identifying new environmental business opportunities, and adding value to clients
and investees, thus gaining a competitive advantage.
• More and more financial institutions are now convinced that environmental and social risks of
clients need to be considered and that this can be done effectively by incorporating environmental
and social risk into risk management processes.
• In recent years, financial institutions – in particular those that are operating at the international
level or have positioned themselves as “sustainable” or “green” – have developed a ESMS and
associated policies and procedures because they see the strong business case for E&S risk
management.
• Regardless of the size or type of financial institution, the type of financial transactions involved and
the market in which it operates, a financial institution can benefit from environmental and social
risk management by using it to improve its overall risk management, identify new environmental
business opportunities, and add value to their clients and investees, thus gaining a competitive
advantage.
Overview of Good E & S Risk Management Practices by FIs
• Environmental and social risk to a financial institution (FI) stems from the environmental
and social issues that are related to a client's/investee's operations.
• A financial institution’s transaction with a client/investee can represent a financial, legal
and/or reputational risk to the financial institution. Because environmental and social
issues are inherent in client/investee operations, almost all transactions are exposed to
some degree of environmental and social risk.
• The environmental and social risks inherent in a transaction depend on several factors
such as the specific issues associated with a client’s/investee’s operations, the industry
sector and the geographic context. E&S issues typically include environmental pollution,
hazards to human health, safety and security, impacts on communities and threats to a
region’s biodiversity and cultural heritage. In most cases, a client/investee has control
over the E&S issues associated with the operation and can take the necessary steps to
mitigate these risks.
• By implementing a Environmental and Social Management System, a financial institution
can enhance its understanding of E&S risks associated with each transaction, which can
be included in the decision-making process for proceeding with a transaction.
Overview of Good E & S Risk Management
Practices by FIs
• A financial institution can manage its exposure to environmental and social (E&S) risks
by developing a Environmental and Social Management System (ESMS). This helps a
financial institution to decrease its exposure to overall risk.
• By developing procedures, E&S assessment tools and internal capacity to identify and
manage environmental and social risks as part of the risk appraisal process for
financial transactions – a Environmental and Social Management System or ESMS – a
financial institution can manage its exposure to overall risk.
• An ESMS consists of several components, including a financial institution’s E&S policy,
procedures and designated staff with responsibility for implementation. It should be
designed to manage the level of environmental and social risk that the financial
institution is exposed to through its portfolio.
• Developing an ESMS is most effective and efficient if it is supported by senior
management and integrated with a financial institution’s existing risk management
framework. Once approved by senior management, the ESMS can
be implemented across the financial institution.
Practices by FIs
• Through the financing of their clients or investments in enterprises,
financial institutions play a vital role in the development of
economies and are in a unique position to promote socially and
environmentally sustainable development outcomes.
• If clients/investees engage in activities that present a
potential environmental and social risk, financial institutions can
encourage their clients/investees to identify and mitigate these risks.
• Understanding the environmental and social challenges the world is
facing and capturing the opportunities that can be derived from
them can prove to be a defining aspect of the success of today’s
financial institutions.
Practices by FIs
Developing and implementing an effective Environmental and Social Risk Management System in a Financial
Institution entails managing the risks in a systematic way with the help of the following activities:
•Top management motivation
•defining the objectives of the ESMS
•Reviewing current portfolio with regard to E&S risks
•Suggesting E&S procedures / tools / policies
•Assignment of roles, responsibilities & authorities,
•Documentation requirements, assessing the ESMS Gap, taking Environment & Social Action Plan ( ESAP),
•Integration of E&S procedures into credit procedures
•Training of E&S officers – including field visits
•Providing training on latest E&S management practices including IFC Performance Standards
•Monitoring success of E&S management system based on performance indicators
•Periodical review of ESMS, reporting methodology & verification of corrective action plans & their effectiveness.
•Integration of corporate governance, environmental and social issues into one single management process
Practices by FIs - Key Aways
General principles of good management systems:
• Know what needs to be done – they have a Purpose
• Know why to do it – they have Motivation and Commitment
• Have the skill to do it – they have the Capability
• Have the desire to continuously improve – they want to Learn
• Can put all the other principles and elements together – they take
Action
Key E & S Issues/Trends in Nigeria
Key E&S issues/trends in Nigeria and globally related to business activity
• Community relations
• Ground and water pollution - Hazardous materials
• Public safety
• Climate change impacts and opportunities
• Sustainable supply chains
What are the main environmental problems in Nigeria?
• Air pollution - Daily, millions of vehicles run throughout the country:
they consume plenty of fuel and produce exhaust fumes. Old
equipment and a lack of modernization contribute to the air pollution.
• Water pollution - It is not a secret that Nigeria has a deficit of drinking
water. In addition the state of currently available water in the country
is said to have a high likelihood of contamination.
• Desertification.
• Industrial waste – In Nigeria many residents settle close to the
industrial areas. As a result, they have to consume water, which may
contain chemicals, breathe polluted air and eat food with increased
nitrates.
• Solid waste - Nigeria generally has a history of poor management of sanitary
infrastructure.
• Oil spills – Particularly prevalent in the Niger Delta, oil spills are a common yearly
phenomenon. Has had profound adverse effects on the surrounding communities.
• Deforestation - The high rate of urbanization, the industrial development, and
agricultural processes led to deforestation and placed many flora and fauna on the
brink of extinction.
• Wind erosion – Prevalent in the northern part of Nigeria due to the dry harmattan
winds.
• Climate change.
• Soil degradation - Pesticides and chemicals often used by people for different
purposes. However, they often forget about soil renovation and drawing a balance of
minerals back to its original state.
• Floods and Erosion.
Key E & S Issues/Trends in Nigeria – Impact of
Climate Change
• Nigeria is Africa’s largest economy and home to significant natural resources, including oil and
natural gas reserves. However, over half of Nigeria’s population still lives below the poverty line.
• Sectors key to diversified and broader growth, including agriculture and hydropower, are
particularly vulnerable to increased temperatures and more variable rainfall which can disrupt
crop and livestock production and reduce the predictability of water flow volumes.
• While rising temperatures are expected to reduce the area of endemic malaria, extreme heat
events will create additional health risks for urban populations and for vulnerable populations in
other areas.
• Rising sea levels threaten coastal populations, and oil and gas production with increased risk of
flooding, infrastructure loss, and salinization of surface and coastal aquifers.
• Nigeria’s climate has been changing, evident in: increases in temperature; variable rainfall; rise in
sea level and flooding; drought and desertification; land degradation; more frequent extreme
weather events; affected fresh water resources and loss of biodiversity. The durations and
intensities of rainfall have increased, producing large runoffs and flooding in many places in
Nigeria.
Key E & S Issues/Trends in Nigeria – Impact of
Climate Change
• Rainfall variation is projected to continue to increase. Precipitation in southern
areas is expected to rise and rising sea levels are expected to exacerbate
flooding and submersion of coastal lands.
• Droughts have also become a constant in Nigeria, and are expected to
continue in Northern Nigeria, arising from a decline in precipitation and rise in
temperature. Lake Chad and other lakes in the country are drying up and at
risk of disappearing.
• Temperature has risen significantly since the 1980s. Climate projections for the
coming decades reveal a significant increase in temperature over all the
ecological zones.
• This rapid review synthesises evidence on the impact of climate change in
Nigeria (geographic, sectoral, demographic and security impacts) and
responses to address it (i.e. climate change mitigation and adaptation,
adaptive capacity and capacity development).
Introduction to E & S Management Systems (ESMS) in
Assessing E & S Risks and Opportunities
• There is increasing awareness that environmental and social (E&S) issues
associated with customers’ business activities can create risks to financial
institutions themselves.
• E&S impacts caused, or perceived to have been caused, by a business can result
in consequences such as production delays, negative publicity, threats to
operating licences and unforeseen expenditures. These impacts can, in turn,
result in risks for FIs that invest in, or lend to, these businesses.
• E&S risks are the potential negative consequences to a business that result from
its impacts (or perceived impacts) on the natural environment (i.e. air, water,
soil) or communities of people (e.g. employees, customers, local residents).
• Failure to effectively manage E&S issues in a business can lead to a range of
financial, legal and reputational consequences for the company, examples of
which can be found below:
Introduction to E & S Management Systems
(ESMS) in Assessing E & S Risks and
Opportunities
• Although FIs have their own direct E&S impacts, e.g. energy use,
their principal exposure to E&S risk arises – indirectly through
lending or investing – from their corporate customers’ business
activities. As outlined above, a company’s management of
environmental or social issues can impact its business.
• This can, in turn, impact FIs. For instance, a customer may be unable
to service a loan due to E&S-related cash-flow problems, or the FI
may face reputational damage through association with a client’s
E&S impacts.
Financial Impact
• E&S issues can create financial pressures on a client that impact its performance, which may
reduce the value of the business or ability to service a loan, resulting in the loan being
restructured or written off (in the case of a borrowing client).
• Where FIs take collateral or own assets (e.g. during security enforcement procedures) that
become associated with poor E&S performance, they may also face costs related to the
impairment of the saleability or value of that collateral.
Legal Impact
• In some cases, FIs may be held legally liable where they are deemed to be the legal owner of
assets or a business that caused, or is causing, damage to the environment, human health or
property.
Reputational Impact
• Where a customer or investee company has been involved in E&S incidents, the FI may also
face negative media and stakeholder attention due to its association with the company. This
can result in stakeholder campaigns against the FI, loss of retail and/or business customers, and
may even impact its market value.
• FIs are expected to implement E&S management systems (ESMS) in order to identify,
assess, manage and monitor E&S risks in their business activities, as well as in their
own operations.
• An ESMS should utilise a risk appraisal process in order to:
• make an informed decision on whether the E&S risk associated with the
transaction is acceptable;
• control E&S risks associated with the transaction; and
• realise any potential E&S benefit associated with the transaction.
• It is important to note that there may be E&S opportunities for FIs, e.g. providing
financial services to support customers in putting energy efficiency measures in place
or accessing markets for sustainable products.
• Overall an ESMS should be driven by a well-thought out strategy and policy
commitments and have a clear governance framework. It should be supported by
management information, the technology to meet its objectives and communication
with relevant stakeholders.
Assessing E & S Risks and Opportunities – ISO 14001
• ISO 14001 has become the international standard for designing and implementing an
environmental management system. The standard is published by ISO (the International
Organization for Standardization), an international body that creates and distributes standards
that are accepted worldwide.
• The most recent version of the environmental management system requirements was published in
2015, and is referred to as “ISO 14001:2015.”
• The standard was agreed upon by a majority of member countries before being released and
updated, and as such it has become an internationally recognized standard accepted by a majority
of countries around the world.
• An environmental management system, often called an EMS, is comprised of the policies,
processes, plans, practices and records that define the rules governing how your company
interacts with the environment.
• This system needs to be tailored to your particular company, because only your company will have
the exact legal requirements and environmental interactions that match your specific business
processes.
• However, the ISO 14001 requirements provide a framework and
guidelines for creating your environmental management system so that
you do not miss important elements needed for an EMS to be
successful.
• Along with the good public image, many companies can save money
through the implementation of an environmental management system.
• This can be achieved through reducing incidents that can result in
liability costs, being able to obtain insurance at a more reasonable cost,
and conserving input materials and energy through reduction efforts.
• This improvement in cost control is a benefit that cannot be overlooked
when making the decision to implement an environmental
management system.
• The ISO 14001 structure is split into ten sections. The first three are
introductory, with the last seven containing the requirements for the
environmental management system. These critical requirements are about:
• Section 4: Context of the organization
• Section 5: Leadership
• Section 6: Planning
• Section 7: Support
• Section 8: Operation
• Section 9: Performance Evaluation
• Section 10: Improvement
• These sections are based on a Plan-Do-Check-Act cycle, which uses these
elements to implement change within the processes of the organization in order
to drive and maintain improvements within the processes.
Drafting an ESRM Improvement Plan
Should include but not limited to the following:
• Environmental & Social (E&S) Policy of the Bank
• Identification of E&S Risks arising from the Bank’s lending operations
• Risk Assessment Procedure by the Bank
• Credit Risk Management Process of the Bank
• Revisions introduced for Risk Adequate Credit Appraisal Procedure
• ESMS Proposed Institutional Structure
• Management Capacity & Training Needs
• Environmental & Social Review Procedure (ESRP)
• Initial Screening of loan applications
Drafting an ESRM Improvement Plan
• E&S Risk Categorization
• Risk Categorization Tool Deployed
• How to Dealing with loans under different risk categories
• Environmental & Social Due Diligence (ESDD)
• Environmental & Social Risk Mitigation Ptactices
• Alignment with IFC PS and Process Involved in Compliance
• Scope of work for the Bank‘s external Consultant during E&S due
diligence
• Credit Approval & Legal Documentation
• Environmental & Social Monitoring Report
Background and Introduction to Nigerian Sustainable
Banking Principles
• The Central Bank of Nigeria released a circular in
September 2012 to all Banks, Discount Houses and
Development Finance Institutions in Nigeria with nine(9)
principles.
• These principles are to be Adopted, Implemented and
Adhered to. Financial Institutions are expected to submit
regular reports to CBN in line with reporting requirements
made available to the industry
• These principles and guidelines include:
Banking Principles
• Principle 1|Our Business Activities1:Environmental and Social Risk Management
We will integrate environmental and social considerations into decision--‐making processes relating to our
Business Activities to avoid, minimize or offset negative impacts.
• Principle 2| Our Business Operations2: Environmental and Social Footprint
We will avoid, minimize or offset the negative impacts of our Business Operations on the environment and local
Communities in which we operate and, where possible, promote positive impacts.
• Principle 3| Human Rights
We will respect human rights in our Business Operations and Business Activities.
• Principle 4|Women’s Economic Empowerment
We will promote women’s economic empowerment through a gender inclusive workplace culture in our
Business Operations and seek to provide products and services designed specifically for women through our
Business Activities.
• Principle 5| Financial Inclusion
We will promote financial inclusion, seeking to provide financial services to individuals and communities that
traditionally have had limited or no access to the formal financial sector.
Banking Principles
• Principle 6 |E&S Governance
We will implement robust and transparent E&S governance practices in our respective institutions and
assess the E&S governance practices of our clients.
• Principle 7 |Capacity Building
We will develop individual institutional and sector capacity necessary to identify, assess and manage
the environmental and social risks and opportunities associated with our Business Activities and
Business Operations.
• Principle 8 | Collaborative Partnerships
We will collaborate across the sector and leverage international partnerships to accelerate our
collective progress and move the sector as one, ensuring our approach is consistent with international
standards and Nigerian development needs.
• Principle 9|Reporting
We will regularly review and report on our progress in meeting these Principles at the individual
institution and sector level.
Sustainable Banking Approach
Wholesale Banking
Responsibility and
Reputational Risk
Committee
The Focus of Sustainable Banking in
Nigeria
Agriculture Power
Oil and Gas

LOCAL ENVIRONMENT AND
SOCIAL
PRINCIPLES,REGULATIONS AND
STANDARDS
Environmental and Social Legislations in
Nigeria
Environmental and Social Legislations in Nigeria – The
Constitution
• The constitution, as the national legal order, recognizes the importance of
improving and protecting the environment and makes provision for it.
• Various liabilities are prescribed in the Constitution of the Federal
Republic of Nigeria for various offences.
• Section 20 makes it an objective of the Nigerian State to improve and
protect the air, land, water, forest and wildlife of Nigeria.
• Section 12 establishes, though impliedly, that international treaties
(including environmental treaties) ratified by the National Assembly
should be implemented as law in Nigeria.
• Section 33 and 34 which guarantee fundamental human rights to life and
human dignity respectively, have also being argued to be linked to the
need for a healthy and safe environment to give these rights effect.
Environmental and Social Legislations in Nigeria – National
Environmental Standards And Regulation Enforcement Agency
(NESREA) Act 2007
• Administered by the Ministry of Environment, the National Environment Standards and
Regulation Enforcement Agency (NESREA) Act of 2007 replaced the Federal Environmental
Protection Agency (FEPA) Act. It is the embodiment of laws and regulations focused on the
protection and sustainable development of the environment and its natural resources.
• Section 27 prohibits, without lawful authority, the discharge of hazardous substances (solid,
liquid or gas, as defined by the regulations) into the environment. This offence is punishable
under this section, with a fine not exceeding, N1,000,000 (One Million Naira) and an
imprisonment term of 5 years. In the case of a company, there is an additional fine of
N50,000, for every day the offence persists.
• Section 7 provides authority to ensure compliance with environmental laws, local and
international, on environmental sanitation and pollution prevention and control through
monitory and regulatory measures.
• Section 8 (1)(K) empowers the Agency to make and review regulations on air and water
quality, effluent limitations, control of harmful substances and other forms of environmental
pollution and sanitation
Environmental and Social Legislations in Nigeria –
Environmental Impact Assessment Act 2004
• An Environmental Impact Assessment (EIA) is an assessment of the potential
impacts whether positive or negative, of a proposed project on the natural
environment
• The E.I.A Act, as it is informally called, deals with the considerations of
environmental impact in respect of public and private projects. Sections relevant
to environmental emergency prevention under the EIA include:-
• Section 2 (1) requires an assessment of public or private projects likely to have a
significant (negative) impact on the environment.
• Section 2 (4) requires an application in writing to the Agency before embarking on
projects for their environmental assessment to determine approval.
• Section 13 establishes cases where an EIA is required and
• Section 60 creates a legal liability for contravention of any provision.
Environmental and Social Legislations in Nigeria – Nigerian
Urban and Regional Planning Act 2004
• The Urban and Regional Planning Act is aimed at overseeing a realistic,
purposeful planning of the country to avoid overcrowding and poor
environmental conditions.
• Section 59 makes it an offence to disobey a stop-work order. The
punishment under this section, is a fine not exceeding N10, 000 (Ten
thousand naira) and in the case of a company, a fine not exceeding N50, 000.
• Section 30 (3) requires a building plan to be drawn by a registered architect
or town planner.
• Section 39 (7) establishes that an application for land development would be
rejected if such development would harm the environment or constitute a
nuisance to the community.
• Section 72 provides for the preservation and planting of trees for
environmental conservation
Environmental and Social Legislations in Nigeria – Harmful
Waste (Special Criminal Provisions) Act 2004
• The Harmful Waste Act prohibits, without lawful authority, the carrying, dumping or
depositing of harmful waste in the air, land or waters of Nigeria.
• Any person found guilty of a crime under sections 1 to 5 of this Act shall on conviction be
sentenced to imprisonment for life, and in addition:
• (a) any carrier, including aircraft, vehicle, container and any other thing whatsoever
used in the transportation or importation of the harmful waste; and;
• (b) any land on which the harmful waste was deposited or dumped, shall be
forfeited to and vest in the Federal Government without any further assurance other
than this Act.
• Section 6 provides for a punishment of life imprisonment for offenders as well as the
forfeiture of land or anything used to commit the offence.
• Section 7 makes provision for the punishment accordingly, of any conniving, consenting or
negligent officer where the offence is committed by a company.
• Section 12 defines the civil liability of any offender. He would be liable to persons who
have suffered injury as a result of his offending act.
Nigeria – Oil in Navigable Waters Act 2004
• The Oil in Navigable Waters Act is concerned with the discharge of oil
from ships.
• Section 6 makes punishable such discharge with a fine of N2, 000
(Two thousand naira)
• Section 1 (1) prohibits the discharge of oil from a ship into territorial
waters or shorelines.
• Section 3 makes it an offence for a ship master, occupier of land, or
operator of apparatus for transferring oil to discharge oil into
Nigerian Waters. It also requires the installation of anti-pollution
equipment in ships
• Section 7 requires the records of occasions of oil discharge.
Nigeria – Water Resources Act 2004
• The Water Resources Act is targeted at developing and improving the
quantity and quality of water resources.
• Section 18 makes offenders liable, under this Act, to be punished
with a fine not exceeding N2000 or an imprisonment term of six
months. He would also pay an additional fine of N100 for everyday
the offence continues.
• Section 5 and 6 provide authority to make pollution prevention plans
and regulations for the protection of fisheries, flora and fauna.
Nigeria – Other Acts and Regulations
1.Land Use Act, CAP 202, LFN 2004
2.Hydrocarbon Oil Refineries Act, CAP H5, LFN 2004
3.The Endangered Species Act , CAP E9, LFN 2004
4.Sea Fisheries Act, CAP S4, LFN 2004
5.Exclusive Economic Zone Act, CAP E11, LFN 2004
6.Oil Pipelines Act, CAP 07, LFN 2004.
7.Oil Pipelines Regulations (Under Oil Pipelines Act)
8.Petroleum Act, CAP P10, LFN 2004
9.Factories Act, CAP F1, LFN 2004
10.The Federal National Parks Act, CAP N65, LFN 2004
Environmental and Social Legislations in Nigeria –
Other Acts and Regulations
11. Criminal Code Act
12. National Environmental (Permitting and Licensing System) Regulations,
2009. S. I. No. 29
13. National Environmental (Mining and Processing of Coal, Ores and
Industrial Minerals) Regulations, 2009. S. I. No. 31
14. National Environmental (Noise Standards and Control) Regulations,
2009. S. I. No. 35
15. National Environmental (Control of Bush/Forest Fire and Open Burning)
Regulations, 2010. S. I. No. 15.
16. National Environmental (Protection of Endangered Species in
International Trade) Regulations, 2010. S. I. No. 16.
17. National Environmental (Energy Sector) Regulations, 2014.
NSBP Sector Guidelines/Standards - Power
Potential E&S risks associated with the Power Sector
Environmental
• Increased GHG emissions; air pollutant emissions, or locations where existing air
quality is already poor due to cumulative impacts from combined pollution
sources.
• Not deploying best available control technologies for emissions and waste (e.g.
hazardous pollutant deposits in water bodies and land).
• High water extraction for cooling operations and which will affect water flow and
quality to other ecosystem services that require water.
• Habitat defragmentation with the construction of roads, transmission pylons and
distribution lines, increasing access to previously remote areas and natural
habitats.
Social
• People and economic displacement (e.g. loss of assets such as land, crops,
fisheries, agricultural land etc.). •
• Conflict with local communities as a result of the siting of plant or storage
facilities due to the real and perceived risk of explosion, plants and storage
facilities that are situated near populated areas may be of particular concern to
local stakeholders.
• Damaged cultural heritage including UNESCO sites, objects of religious,
archaeological, natural significance.
• Operations in areas subject to natural hazard (e.g. earthquake, extreme
weather), which could affect the structural integrity of the plant (e.g.
hydropower station/dam).
• Infringement of labour and human rights.
Banking Requirements for Power Sector Financing
For all activities that fall within the scope of this Guideline a Bank shall:
1. Undertake appropriate E&S due diligence on power sector clients and activities to identify and
assess potential E&S risks, as well as, determine a client’s ability to effectively manage
identified risks. For new power developments, a Bank will require a client to provide a detailed
E&S impact assessment and for existing developments require a recent E&S audit.
2. Require power sector clients to comply with Nigerian laws governing E&S issues.
3. Encourage power sector clients to meet the requirements of the IFC’s Performance Standards
and relevant Environmental, Health and Safety guidelines that represent the minimum
internationally accepted good practice.
4. Refer to key sustainability initiatives and good practices relevant for power projects during E&S
due diligence. Where relevant, Banks will request their clients to work toward enhanced
performance consistent with such initiatives, standards, and good practice.
5. Promote and encourage the uptake of opportunities relating to energy efficiency, clean
technology, and renewable energy as appropriate.
E&S Risk Categorisation of Power Sector Investments
• The following information serves to illustrate and support the categorisation of E&S
risks for different power transactions.
• Typically a transaction will be categorised as high, medium or low risk but in the
power sector, most transactions carry either a high or medium level of risk.
• The purpose of categorising the risk of a potential transaction is to guide Banks on
the degree of E&S due diligence required to inform credit risk approval or
underwriting decisionmaking and the appropriate level of E&S risk management and
monitoring oversight that should be applied to the transaction.
• A high-risk transaction involves activities that carry potential significant adverse E&S
risks and/or impacts that are diverse, irreversible, or unprecedented. Examples of
the types of power transactions that would fall into this category of risk would
include:
• Large thermal power stations and other combustion installations;
• Hydropower schemes involving large/medium scale dams;
• Associated facilities such as pipelines, terminals, and associated facilities for large-
scale transport of gas and oil, activities involving surface or underground storage of
combustible gases and fuels;
• Transmission lines in populated/urban areas.
• A medium-risk transaction involves activities which carry potential limited adverse E&S
risks and/or impacts that are few in number, generally site-specific, largely reversible
and readily addressed through mitigation measures. Examples of the types of power
investments that would fall into this category of risk would include:
• Small combustion facilities (3 – 50MWth);
• 10MW or 50MW run of the river hydropower plants without additional up or
downstream power projects;
• Medium or small scale wind and solar power projects.
NSBP Sector Guidelines/Standards – Oil & Gas
• This Guideline covers the provision of financial products and services for the oil and gas sector which
include, but is not limited to, the exploration, extraction, production, processing and transport of Nigerian
oil and gas.
• It covers Upstream, Downstream and Servicing activities of the sector including:
• Upstream
• Exploration activities – aerial and seismic operations
• Appraisal drilling
• Development and production (including processing and initial storage)
• Transportation
• Decommissioning and rehabilitation
• Downstream
• Product refining
• Transportation and distribution activities - via pipelines, roads (trucks) and sea vessels
• Marketing – including product importation and storage
• Servicing
• Provision of technical support services for the upstream and downstream segments in the areas of drilling, well
completion, well simulation, logistics, equipment supplies, etc
Oil and Gas Sector E&S Issues
The E&S issues related to the oil and gas sector are particularly salient and complex.
E&S risks vary greatly depending on the scale and type of oil and gas activity being
financed. Some of the main E&S risks that may be encountered include:
• Environmental and Ecosystem Damage: Air, soil and water pollution from industry
operations – especially from oil spills and gas flaring - has devastated the Niger Delta
for more than half a century.
• Climate Change Impacts: Nigeria’s oil and gas industry significantly contributes to
the country’s GHG emissions; coastal areas of Nigeria are particularly vulnerable to
climate change impacts. The combination of climate change, deforestation, pollution
and the failures associated with Nigeria’s dependency on the oil industry have
deepened its exposure to the devastating risks of water shortages, drought, and
floods, especially in the Niger Delta region.
• Revenue Management: The oil and gas sector has fuelled Nigeria’s economic growth,
accounting for 15.8% of Nigeria’s GDP, 65% of government revenues and 95% of the country’s
export earnings. Despite this, a large proportion of the Nigerian people are without access to
electricity, burning waste and biomass for home heating and energy use.
• Community Conflict and Social Unrest: The extractive industry is particularly prone to
problems with local communities. Contributing causes include lack of development benefits,
damaging impacts from industry operations, and lack of opportunity for meaningful
engagement with sector operators to resolve issues that are important to the community.
• Health and Safety Issues: Oil and gas exploration and production operations are known to be
risky, and workplace accidents have resulted in injuries and fatalities in the sector. According to
the IFC, occupational health and safety issues should be considered as part of a comprehensive
hazard or risk assessment.
• Local Employment Issues: Given the need to create employment opportunities especially
among young people and eliminate poverty, the oil and gas sector is expected to play a major
role in creating jobs and 5 engaging local businesses.
Banking Requirements for Oil and Gas Sector Financing
1. Undertake appropriate E&S due diligence on oil and gas sector clients and activities
to identify and assess potential E&S risks, as well as, determine a client’s ability to
effectively manage identified risks.
2. Require oil and gas sector clients to comply with Nigerian laws governing E&S
issues.
3. Encourage oil and gas sector clients to meet the requirements of the IFC’s
Performance Standards and relevant Environmental, Health and Safety (EHS)
guidelines that represent the minimum internationally accepted good practice. A
Bank should refer to key sustainability initiatives and good practices relevant for Oil
and Gas projects during E&S due diligence and request their clients to work
towards enhanced performance consistent with such initiatives, standards and
good practice including (but not limited to):
1. Human Rights
2. Biodiversity
3. Transparency - the Extractive Industries Transparency Initiative through the
Nigerian Extractive Industries Transparency Initiative; •
4. Gas Flaring - the Global Gas Flaring and Venting Reduction Voluntary
Standards;
5. Emergency Response – For maritime operations, the IMO Convention on Oil
Pollution Preparedness, Response and Co-operation (OPRC, 1990);
6. Marine Pollution
1. Explore opportunities in the sector reform initiatives (e.g. the Nigerian Oil & Gas
Industry Content Development Act of 2010, The Nigerian Gas Master Plan, the
Petroleum Industry Bill, ‘green funds’, etc.) for innovative sustainability-promoting
products and services.
NSBP Sector Guidelines/Standards –
Agriculture
• This Guideline covers the provision of financial products and services for the
agriculture sector including, but not limited to, Business Activities relating to the
agribusiness value chain contained in the approved NIRSAL framework.
• The Guideline applies to all lending instruments, project and structured
commodity finance, equity and debt capital market activities, retail banking and
advisory services provided to new and existing clients in the agricultural sector.
• The extent to which the Principles apply will depend on the level and nature of
agriculture sector Business Activities financed by a Bank. Retroactive application
of E&S requirements under this Guideline is not required for existing clients.
• The Guideline and its E&S requirements will, however, apply to any additional
new facilities or services for existing clients
NSBP Sector Guidelines/Standards – Agriculture
Banking Requirements for Agriculture Sector Financing
1. Conduct E&S risk analysis and assessment of agricultural clients and activities, and
ensure that identified risks are adequately monitored and managed.
2. Adhere to local E&S laws, and where possible encourage other internationally
agreed standards.
3. In addition, and consistent with NIRSAL, a Bank shall:
1. Lend towards the establishment and efficient distribution of fertiliser by
supporting fertiliser manufacturing companies in Nigeria that produce/procure
and distribute fertiliser, as well as a transparent market-driven fertiliser
distribution model.
2. Finance the manufacture and distribution of improved and high quality seeds,
by lending to indigenous seed companies and importers of seed varieties.
1. Strive to ensure that farmers are able to procure seeds directly from seed
manufacturers, by availing them with adequate finance.
2. With support from industry stakeholders, strive for the establishment of an
Agricultural Value Chain Research Development Fund that produces high
quality research on the needs of the value chain.
3. Encourage and finance providers of storage facilities for seeds, produce and
other value-added products provided that they take into consideration energy
efficiency issues.
4. Encourage and finance processors that add value to local products, whilst
taking into consideration the E&S impacts of processing operations.
5. Endeavour to lend to farmers whose products have off takers and whose
farming practices protect the environment e.g. minimise the use of harmful
chemicals/pesticides, efficient use of water resources, adoption of
conservation farming technologies etc.
1. While waiting for the reform of the Land Use Act, lend based on short and
long leases that do not displace and/or negatively impact on the livelihoods
of local communities.
2. Encourage the creation of public-private marketing corporations that
provide adequate support to local products.
3. Support the decentralisation of agricultural insurance and encourage the
development of a vibrant and competitive market for agricultural insurance
by a range of companies.
SUSTAINABLE BANKING
PRACTICES
Sustainability Banking & Equator
Principles
Sustainability banking - believes that long-term profit and viability
must go hand in hand with enduring economic and social impact.
▪ They invest with the motive that ESG – sustainable
environmental, social and governance business practices – are
the solution in a world facing a surging population and increased
consumption.
▪ And only team up with clients and partners willing to share this
vision.
▪ Businesses incorporating sustainable environmental, social and
governance best practices enjoy stronger financial results and
long-term viability.
Sustainability Banking & Equator
Principles
Environmental, Social & Corporate governance (ESG) policy- strives to achieve
positive sustainable development outcomes through lender’s investments.
It views its clients as important partners in achieving its development mandate and
only teams up with clients and partners who share the vision and commitment to
sustainable development and who wish to improve their ability to manage ESG
issues within their business activities, which at the same time provides them with
the potential opportunity to enhance their own competitive advantage.
Environmental and Social Policy, further elaborate on the rights and responsibilities
of 'the other stakeholders': employees, the environment, local communities,
vendors, contractors and (ultimate) clients.
The Equator Principles
• A voluntary set of nine principles adopted by banks and other financial
institutions (EPFI) for sustainable project finance.
• A framework based on World Bank and International Finance Corporation (IFC)

standards, for assessing environmental and social impacts of projects by way of
assessment (ESIA) which are to be financed by project finance.
• Objective – ensuring the projects that EPFI finance are developed and operated
in a manner which:
• Is socially responsible.
• Reflects sound environmental management practices.
Development of the Principles
• EP1 – Original principles:
• Conceived in 2002.
• Launched in 2003.
• Adopted by banks and other financial institutions between 2003
and 2006.
• EP2 – Revised EP1 which have been open for adoption from July
2006 onwards.
• Revisions following IFC consultation to reflect:
• New IFC’s Performance Standards.
• Feedback from stakeholders over past three years.
Project Categorisation
Categorisation of projects, based on International Finance Corporation
(IFC’s) environmental and social screening criteria, to reflect the
magnitude of prospective impacts and risks Category to:
• Category A – Projects with potential significant adverse social or
environmental impacts that diverse, irreversible or unprecedented;
• Category B – Projects with potential limited adverse social or
environmental impacts that are few in number, generally site-
specific, largely reversible and readily addressed through mitigation
measures; and
• Category C – Projects with minimal or no social or environmental
impacts.
What are the EP2 Principles
• ESIA in accordance with compliance with applicable host country
laws, regulations and permits and, in non-high income OECD
countries, reference to IFC Performance Standards and applicable
industry EHS guidelines (P2 & 3).
• Mitigation and management measures to be addressed in the

ESIA (P2).
• Preparation of an Action Plan and Management System for all

Category A and B projects in non OECD and non-high income
OECD countries (P4).
What are the EP2 Principles…
• Grievance Procedures for all Category A and, if appropriate,
Category B projects located in non-OECD or non-high income
OECD countries (P6).
• Independent Expert Review for all Category A and, if appropriate,

Category B projects, (P7).
• Independent monitoring of all Category A projects and, if

appropriate, Category B projects (P9).
• Limited Public Reporting Obligations (P10).

Adopters
• Over 70 financial institutions have adopted the Equator Principles,
which have become the de facto standard for banks and investors
on how to assess major development projects around the world. –
90 % Project Financing
• Once adopted by banks and other financial institutions, the Equator

Principles commit the adoptee not to finance projects that fail to
follow the processes defined by the Principles.
The Equator Principle – 10 Principles
• Principle 1: Review and Categorization
• Principle 2: Social and Environmental Assessment (Process)
• Principle 3: Applicable Social and Environmental Standards
• High-income OECD countries vs. Emerging Markets
• Principle 4: Action Plan and Management System
• Principle 5: Consultation and Disclosure
• Principle 7: Grievance Mechanism
• Principle 8: Independent Review
• Principle 9: Covenants
• Principle 10: EPFI Implementation Reporting
Equator Principle – Work Flow
Equator Principles
Equator Principles- (EPs) is a risk management framework, adopted by
financial institutions, for determining, assessing and managing
environmental and social risk in projects.
It is primarily intended to provide a minimum standard for due diligence
to support responsible risk decision-making.
The EP apply globally, to all industry sectors and to four financial
products in particular;
1. Project Finance Advisory Services 4. Bridge Loans.
2. Project Finance
3. Project-Related Corporate Loans and
Equator Principles
• The relevant thresholds and criteria for application is described in detail in the
Scope section of the EP.
• 80 Equator Principles Financial Institutions (EPFIs) in 34 countries have officially

adopted the EPs, covering over 70 percent of international Project Finance
debt in emerging markets.
• EPFIs commit to implementing the EP in their internal environmental and social

policies, procedures and standards for financing projects and will not
provide Project Finance or Project-Related Corporate Loans to projects where
the client will not, or is unable to, comply with the EP.
• There are 10 Principles and there is some overlap wit the IFC performance
standards
Equator Principles
Principle 1: Review and Categorization:
When a Project is proposed for financing, the EPFI will, as part of its internal
environmental and social review and due diligence, categorize it based on the
magnitude of its potential environmental and social risks and impacts.
• Category A – Projects with potential significant adverse environmental and
social risks and/or impacts that are diverse, irreversible or unprecedented;
• Category B – Projects with potential limited adverse environmental and
social risks and/or impacts that are few in number, generally site-specific,
largely reversible and readily addressed through mitigation measures; and
• Category C – Projects with minimal or no adverse environmental and social
risks and/or impacts.
Equator Principles
Principle 2: Environmental and Social Assessment
• For all Category A and Category B Projects, the EPFI will require the client to
conduct an Assessment process to address, to the EPFI’s satisfaction, the
relevant environmental and social risks and impacts of the proposed Project
(which may include the illustrative list of issues found in Exhibit II).
• The Assessment Documentation should propose measures to minimize,

mitigate, and offset adverse impacts in a manner relevant and appropriate to
the nature and scale of the proposed Project.
• For Category A, and as appropriate, Category B Projects, the Assessment

Documentation includes an Environmental and Social Impact Assessment
(ESIA) and if necessary, a human rights due diligence report.
Equator Principles
Principle 3: Applicable Environmental and Social Standards
• The Assessment process should, in the first instance, address
compliance with relevant host country laws, regulations and
permits that pertain to environmental and social issues. The
evaluation is as follows;
• For Projects located in Non-Designated Countries, the Assessment
process evaluates compliance with the applicable IFC Performance
Standards on Environmental and Social Sustainability
(Performance Standards) and the World Bank Group
Environmental, Health and Safety Guidelines (EHS Guidelines)
(Exhibit III). Or
Equator Principles
Principle 3: Applicable Environmental and Social Standards
• For Projects located in Designated Countries, the Assessment process evaluates

compliance with relevant host country laws, regulations and permits that pertain
to environmental and social issues.
• Host country laws meet the requirements of environmental and/or social

assessments (Principle 2), management systems and plans (Principle4),
Stakeholder Engagement (Principle 5) and, grievance mechanisms (Principle 6).
• The Assessment process will establish to the EPFI’s satisfaction the Project's
overall compliance with, or justified deviation from, the applicable standards.
Equator Principles
Principle 4: Environmental and Social Management System and Equator Principles
Action Plan
develop or maintain an Environmental and Social Management System (ESMS).
• Further, an Environmental and Social Management Plan (ESMP) will be prepared

by the client to address issues raised in the Assessment process and incorporate
actions required to comply with the applicable standards.
• Where the applicable standards are not met to the EPFI’s satisfaction, the client
and the EPFI will agree an Equator Principles Action Plan (AP). The AP is intended
to outline gaps and commitments to meet EPFI requirements in line with the
applicable standards.
Equator Principles
Principle 5: Stakeholder Engagement
demonstrate effective Stakeholder Engagement as an ongoing process in a
structured and culturally appropriate manner with Affected Communities
and, where relevant, Other Stakeholders.
• For Projects with potentially significant adverse impacts on Affected

Communities, the client will conduct an Informed Consultation and
Participation process. The client will tailor its consultation process to: the
risks and impacts of the Project; the Project’s phase of development; the
language preferences of the Affected Communities; their decision-making
processes; and the needs of disadvantaged and vulnerable groups.
Equator Principles
Principle 5: Stakeholder Engagement (Cont’d)
• To facilitate Stakeholder Engagement, the client will, commensurate to

the Project’s risks and impacts, make the appropriate Assessment
Documentation readily available to the Affected Communities, and where
relevant Other Stakeholders, in the local language and in a culturally
appropriate manner.
• For Projects with environmental or social risks and adverse impacts,

disclosure should occur early in the Assessment process, in any event
before the Project construction commences, and on an ongoing basis.
• Projects with adverse impacts on indigenous people will require their

Free, Prior and Informed Consent
Equator Principles
Principle 6: Grievance Mechanism
• For all Category A and, as appropriate, Category B Projects, the EPFI

will require the client, as part of the ESMS, to establish a grievance
mechanism designed to receive and facilitate resolution of concerns
and grievances about the Project’s environmental and social
performance.
• The grievance mechanism is required to be scaled to the risks and

impacts of the Project and have Affected Communities as its primary
user.
Equator Principles
Principle 6: Grievance Mechanism (Cont’d)
• It will seek to resolve concerns promptly, using an understandable

and transparent consultative process that is culturally appropriate,
readily accessible, at no cost, and without retribution to the party
that originated the issue or concern.
• The mechanism should not impede access to judicial or

administrative remedies.
• The client will inform the Affected Communities about the

mechanism in the course of the Stakeholder Engagement process.
Equator Principles
Principle 7: Independent Review
• Project Finance-For all Category A and, as appropriate, Category B

Projects, an Independent Environmental and Social Consultant, not
directly associated with the client, will carry out an Independent Review
of the Assessment Documentation including the ESMPs, the ESMS, and
the Stakeholder Engagement process documentation in order to assist
the EPFI's due diligence, and assess Equator Principles compliance.
• The Independent Environmental and Social Consultant will also propose

or opine on a suitable Equator Principles AP capable of bringing the
Project into compliance with the Equator Principles, or indicate when
compliance is not possible.
Equator Principles
Principle 7: Independent Review (Cont’d)
Project-Related Corporate Loans -An Independent Review by an Independent

Environmental and Social Consultant is required for Projects with potential high
risk impacts including, but not limited to, any of the following:
adverse impacts on indigenous peoples
1. Critical Habitat impacts
2. significant cultural heritage impacts
3. large-scale resettlement
Equator Principles
Principle 7: Independent Review (Cont’d)
Project-Related Corporate Loans
In other Category A, and as appropriate Category B, Project-Related

Corporate Loans, the EPFI may determine whether an Independent
Review is appropriate or if internal review by the EPFI is sufficient.
This may take into account the due diligence performed by a
multilateral or bilateral financial institution or an OECD Export Credit
Agency, if relevant.
Equator Principles
Principle 8: Covenants
An important strength of the Equator Principles is the incorporation of
covenants linked to compliance.
For all Projects, the client will covenant in the financing documentation
to comply with all relevant host country environmental and social laws,
regulations and permits in all material respects.
Furthermore for all Category A and Category B Projects, the client will
covenant within the loan documentation:
a) to comply with the ESMPs and Equator Principles AP (where
applicable) during the construction and operation of the Project in
all material respects; and
Equator Principles
Principle 8: Covenants contd.
b) to provide periodic reports in a format agreed with the EPFI (with the frequency of these
reports proportionate to the severity of impacts, or as required by law, but not less than
annually), prepared by in-house staff or third party experts, that
i. document compliance with the ESMPs and Equator Principles AP(where applicable)
and
ii. provide representation of compliance with relevant local, state and host country
environmental and social laws, regulations and permits; and
c) to decommission the facilities, where applicable and appropriate, in accordance with an
agreed decommissioning plan.
Where a client is not in compliance with its environmental and social covenants, the EPFI will
work with the client on remedial actions to bring the Project back into compliance to the
extent feasible.
If the client fails to re-establish compliance within an agreed grace period, the EPFI reserves
the right to exercise remedies, as considered appropriate.
Equator Principles
Principle 9: Independent Monitoring and Reporting
• Project Finance
• To assess Project compliance with the Equator Principles and ensure

ongoing monitoring and reporting after Financial Close and over the
life of the loan, the EPFI will, for all Category A and, as appropriate,
Category B Projects, require the appointment of an Independent
Environmental and Social Consultant, or require that the client retain
qualified and experienced external experts to verify its monitoring
information which would be shared with the EPFI.
Equator Principles
Principle 9: Independent Monitoring and Reporting (Cont’d)
• Project-Related Corporate Loans
• For Projects where an Independent Review is required under

Principle 7, the EPFI will require the appointment of an
Independent Environmental and Social Consultant after Financial
Close, or require that the client retain qualified and experienced
external experts to verify its monitoring information which would
be shared with the EPFI.
Equator Principles
Principle 10: Reporting and Transparency
Client Reporting Requirements, these are in addition to the disclosure
requirements in Principle 5.
For all Category A and, as appropriate, Category B Projects:
• The client will ensure that, at a minimum, a summary of the ESIA is

accessible and available online.
• The client will publicly report GHG emission levels (combined Scope
1 and Scope 2 Emissions) during the operational phase for Projects
emitting over 100,000 tonnes of CO2 equivalent annually.
Equator Principles
Principle 10: Reporting and Transparency
EPFI Reporting Requirements
The EPFI will report publicly, at least annually, on transactions that

have reached Financial Close and on its Equator Principles
implementation processes and experience, taking into account
appropriate confidentiality considerations.
The Purpose of Adopting these Principles
✓ The banking sector is uniquely positioned to further economic growth and
development in Nigeria through its lending and investment activities.
✓ The context in which business decisions are made is, however, characterized by
complex and growing challenges relating to
• population growth,
• urban migration,
• poverty,
• destruction of biodiversity and ecosystems,
• pressure on food sources,
• prices and security,
• lack of energy and infrastructure and
• potential climate change legislation from our trade partners
The Purpose of Adopting these Principles
The adoption and implementation of these Principles will require
financial institutions to:
Develop a managerial approach that balances the environmental
and social risks identified and opportunities to be exploited through
business activities
• Enhance financial success over the longer term while ensuring that
banks remain environmentally and socially responsible
• Deliver positive development impacts to society while protecting
the communities and environment in which financial institutions
and their client operate
Why should Bank adopt and Implement the
Principles?
• Reputation, reputation, • Political risk.
reputation.
• Brand protection.
• Damage to retail banking.
• Level playing field.
• Access to cheaper funds.
• Damaging project affecting
• Regulatory risk. PR.
• Financial risk. • Leadership values.
• Business as usual.

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ACCESS BANK PLC

SUSTAINABLE BANKING PRACTICES

Day 2 Topic 2. Business Case for Environmental & Social Risk

Topic 3. Local Environmental & Social Principles,

Day 3 Topic 3 Contd. Local Environmental & Social Principles,

Topic 4. Sustainable Banking Practices

The well-being of the community has to be

• Social finance is a category of financial

• The type, quantity and severity of environmental and social issues

• For FIs the major risk considerations are:

Correlation Between Financial and E & S Performance

Oil and Gas

• A framework based on World Bank and International Finance Corporation (IFC)

• Mitigation and management measures to be addressed in the

• Preparation of an Action Plan and Management System for all

• Independent Expert Review for all Category A and, if appropriate,

• Independent monitoring of all Category A projects and, if

• Limited Public Reporting Obligations (P10).

• Once adopted by banks and other financial institutions, the Equator

• 80 Equator Principles Financial Institutions (EPFIs) in 34 countries have officially

• EPFIs commit to implementing the EP in their internal environmental and social

• The Assessment Documentation should propose measures to minimize,

• For Category A, and as appropriate, Category B Projects, the Assessment

• For Projects located in Designated Countries, the Assessment process evaluates

• Host country laws meet the requirements of environmental and/or social

• Further, an Environmental and Social Management Plan (ESMP) will be prepared

• For Projects with potentially significant adverse impacts on Affected

• To facilitate Stakeholder Engagement, the client will, commensurate to

• For Projects with environmental or social risks and adverse impacts,

• Projects with adverse impacts on indigenous people will require their

• For all Category A and, as appropriate, Category B Projects, the EPFI

• The grievance mechanism is required to be scaled to the risks and

• It will seek to resolve concerns promptly, using an understandable

• The mechanism should not impede access to judicial or

• The client will inform the Affected Communities about the

• Project Finance-For all Category A and, as appropriate, Category B

• The Independent Environmental and Social Consultant will also propose

Project-Related Corporate Loans -An Independent Review by an Independent

adverse impacts on indigenous peoples

1. Critical Habitat impacts

2. significant cultural heritage impacts

Project-Related Corporate Loans

In other Category A, and as appropriate Category B, Project-Related

• To assess Project compliance with the Equator Principles and ensure

• Project-Related Corporate Loans

• For Projects where an Independent Review is required under

For all Category A and, as appropriate, Category B Projects:

• The client will ensure that, at a minimum, a summary of the ESIA is

Principle 10: Reporting and Transparency

EPFI Reporting Requirements

The EPFI will report publicly, at least annually, on transactions that

• Financial risk. • Leadership values.

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