All financial institutions (FIs) are exposed to some level of environmental and social (E&S) risk through their borrowers/investees. If left unmanaged, these risks can lead to a decline in the reputational image, legal liabilities, or loss of revenue for the FI.
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 borrower/investee has control over the E&S issues associated with its operations and can take the necessary steps to manage these risks.
Considering E&S risk in the transaction review process contributes to an FI's overall risk management efforts. The E&S risk associated with an FI's portfolio depends on several factors such as the specific issues associated with a borrower's/investee's operations, the industry sector and the geographic context. By implementing an Environmental and Social Management System (ESMS), an FI can systematically integrate environmental and social considerations into its business processes.
FIRST for Sustainability provides information for financial institutions to learn about the benefits of environmental and social risk management and how to identify and take advantage of environmental business opportunities. The website provides guidance to financial institutions on how to develop and implement an Environmental and Social Management Systems (ESMS), conduct environmental and social due diligence as well as how to create a pipeline of new business and develop product offerings tailored to the environmental needs of their clients/investees.
All IFC FI clients are required to develop an ESMS to identify and manage the environmental and social risks and impacts of their portfolio on an ongoing basis, particularly if transactions involve project finance and long-term corporate loans. Specific guidance on implementing IFC's environmental and social requirements for financial institutions is also available on FIRST for Sustainability.
An online toolkit is also available to help private equity fund managers identify and manage their environmental and social risks and opportunities.
IFC views all these resources as evolving products and would like to receive your feedback to ensure that these meet our clients' and the market's needs.
Opportunities for Consultants
IFC is working to identify qualified consultants that can assist IFC's financial intermediary clients to better manage environmental and social risks in their financing activities, thereby contributing to IFC's overall mission to promote sustainable development. As part of this effort, IFC is encouraging consultants with experience in environmental and social management in financial institutions to send their qualifications to FIconsultant@ifc.org.
Interested consultants should send information (such as CVs, brochures, description of similar assignments, experience in similar conditions, availability of appropriate skills among staff, countries of experience, etc.) to demonstrate their qualifications for supporting financial institutions in creating or enhancing their environmental and social management systems.