With the introduction of our GET approach in 2016, we remain committed to ensuring that the projects we finance are socially and environmentally sustainable, designed and carried out with the principles of good governance and due diligence, and compliant with both relevant laws and international best practice. We also remain committed to transparency and accountability, especially when it comes to risk management and project performance.
Assurance
In this chapter
THE BANK’S POLICIES
All projects are appraised against the Bank’s Environmental and Social Policy and Performance Requirements . The form and extent of the appraisal depends on the project’s size, location and potential environmental and social impacts.
But what happens when a project isn’t fully compliant? In such cases, the EBRD will agree an environmental and social action plan with the client to bring the project up to the required standards within a reasonable timeframe.
Where it is anticipated that a project will not fully meet the performance requirement in a reasonable timeframe – typically because of affordability constraints – but there are compensating environmental or social benefits, the EBRD’s Board may approve derogations from specific parts of the performance requirements. Any approved derogations are detailed in this report.
| Environmental and social category | € million | % by volume | No. of projects | % by no. of projects |
|---|---|---|---|---|
| Category A | 1,036 | 12.3 | 18 | 4.7 |
| Category B | 4,607 | 54.5 | 217 | 56.5 |
| Category C | 466 | 5.5 | 14 | 3.7 |
| Category D | 2,352 | 27.8 | 135 | 35.2 |
In 2016, the EBRD developed and published the first two in its planned series of guidance notes on specific Performance Requirements (PRs) within its Environmental and Social Policy. These comprehensive documents provide advice on interpreting and implementing and , drawing on the EBRD’s relevant experiences and providing practical information for clients.
OPERATIONAL RESULTS IN 2016
The environmental and social category – A, B, C or FI (Financial Intermediary) – reflects the potential impacts associated with a project and determines the nature of the environmental and social appraisal, information disclosure and stakeholder engagement required.
Category A projects: those with potentially significant and diverse environmental and social impacts, requiring a detailed participatory assessment process.
Category B projects: those with environmental and social impacts that are site-specific and which can be readily assessed and managed.
Category C projects: those that are expected to result in minimal adverse environmental or social impacts.
Category FI projects: transactions that involve the provision of financing to a financial intermediary – typically a bank or a fund – which are required to adopt and implement procedures to manage their environmental and social risks.
MEASURING AND MONITORING PERFORMANCE
Throughout the investment cycle, the environmental and social performance of all EBRD projects is closely monitored. This monitoring involves a combination of client reporting, regular site visits by Bank staff and independent audits.
We conducted environmental and social monitoring visits to 50 projects in 2016.
We require each of our clients to provide us with a report, at least annually, on their environmental and social performance and the implementation of applicable Environmental and Social Action Plans (ESAPs). Across our portfolio, 96.9 per cent of projects have fulfilled this environmental and social reporting requirement over the last two years. This is up from 94 per cent last year following a concerted effort by our banking teams.
A lack of environmental and social reporting by a client is usually a signal to the Bank that they need assistance in this regard, so our Environment and Sustainability Department step in with enhanced monitoring, which usually leads to more frequent site visits or assistance with capacity-building initiatives.
The EBRD has introduced a system of performance indicators for direct investment projects. This system assesses and monitors project compliance with the Bank’s Environmental and Social Performance Requirements (PRs) over time. The objectives of this work are:
- More accountability: providing quantified data and enhanced assurance for the Bank’s other stakeholders on how the Bank is implementing its Environmental and Social Policy.
- Improved management of resources: allowing EBRD management to analyse trends and identify issues or sectors that require additional resources. This will inform departmental planning, training, recruitment and use of technical cooperation funds.
- Enhanced reporting: the outputs will be included in future Sustainability Reports and will give a detailed assessment of the environmental and social performance of EBRD projects.
Compliance with the main components of each PR is scored for each project at the time of appraisal. These scores are combined to give an overall performance rating for each project on a five-point scale – “excellent”, “good”, “satisfactory”, “marginal” and “poor”. Projects are rated based on current performance, that is, before the implementation of any future commitments under an Environmental and Social Action Plan (ESAP). The aim is that by tracking projects over time, we will be able to demonstrate changes in performance as EBRD investments and associated ESAPs are implemented.
2016 was the first full year that the system has been in operation; 2015 being a pilot year. The chart below shows the spread of ratings for projects signed last year and the table shows the percentage of applicable projects that have been subject to this new system that have triggered each of the performance requirements.
As the number of projects rated is still relatively low, it is difficult to draw definitive conclusions from the data. As the dataset expands over time it will enable the Bank to identify lessons for sectors, countries or particular environmental and social issues.
| Performance Requirement* | % of projects |
|---|---|
| PR1: Assessment and Management of Environmental and Social Impacts and Issues | 99% |
| PR2: Labour and Working Conditions | 99% |
| PR3: Resource Efficiency and Pollution Prevention Control | 98% |
| PR4: Health and Safety | 99% |
| PR5: Land Acquisition and Involuntary Resettlement and Economic Displacement | 41% |
| PR6: Biodiversity Conservation and Sustainable Management of Living Natural Resources | 46% |
| PR7: Indigenous Peoples | 0% |
| PR8: Cultural Heritage | 34% |
| PR10: Information Disclosure and Stakeholder Engagement | 97% |
| * PR9 applies only to investments made through Financial Intermediaries. These are monitored separately, via the FI Sustainability Index |
DEROGATIONS
Some projects are unable to comply fully with all requirements of the Environmental and Social Policy. The EBRD Board approved derogations from the policy for seven projects or project extensions signed in 2016. The specific derogations for these projects were agreed where affordability or operational constraints made full compliance unachievable but the overall environmental, social and economic benefits of the projects were sufficient to justify our investment. With the exception of the agreed derogations, these projects will meet our policy and performance requirements.
| Project | Derogation | Country | Sector |
|---|---|---|---|
| BEH Bond Issue | Due to the rules for capital market transactions, the Bank was not in a position to undertake detailed environmental and social due diligence. Derogation from the Environmental and Social Policy was required. | Bulgaria | Power and Energy |
| Lviv Wastewater Biogas | Project will not fully comply with EU standards for wastewater discharge due to affordability constraints | Ukraine | Municipal and Environmental Infrastructure |
| 5NCL Eurobond | Due to the rules for capital market transactions, the Bank was not able to fully structure the project to meet EBRD performance requirements. Derogation from the Environmental and Social Policy was required. | Regional | Manufacturing and Services |
| Nurek Water and Wastewater Project | Project will not fully comply with EU standards for water and wastewater discharge due to affordability constraints | Tajikistan | Municipal and Environmental Infrastructure |
| Osh Water II sub-project | Project will not fully comply with EU standards for water and wastewater discharge due to affordability constraints | Kyrgyz Republic | Municipal and Environmental Infrastructure |
| Osh Solid Waste Project | Project will not fully comply with EU standards for landfill design due to affordability constraints | Kyrgyz Republic | Municipal and Environmental Infrastructure |
| Kobuleti Water | Project will not fully comply with EU standards for wastewater discharge due to affordability constraints | Georgia | Municipal and Environmental Infrastructure |
| Country | Project number | Project name | Sector | Date ESIA on EBRD website and in RO | Board or other approval date | Days publicly available (before approval) | Language of ESIA |
|---|---|---|---|---|---|---|---|
| Turkey | 48791 | Zorlu Kizildere III GPP Extension | Private | 08/12/2016 | Not yet scheduled | -- | Turkish and English |
| Jordan | 47412 | Hussein Thermal Power Station Repowering | Private | 18/07/2016 | 19/10/2016 | 94 days | Arabic and English |
| Kazakhstan | 48347 | Shalkiya Zinc: Pre-Privatization Loan | Public | 13/07/2016 | Not yet scheduled | -- | Russian and English |
| Azerbaijan | 43094 | Roads Reconstruction and Upgrading Project | Public | 26/05/2016 | 30/11/2016 (project facility approved 2011) | 189 days | Azeri and English |
| Regional | 47987 | Centerra Global | Private | 19/05/2016 | 26/07/2016 for ESIA in Mongolia (Project facility approved 27/01/2016) | 69 days for Mongolian facility | Mongolian and English |
| Armenia | 48579 | Lydian (Amulsar Gold Mine) Extension | Private | 19/05/2016 | 20/07/2016 | 63 days | Armenian and English |
| Jordan | 48100 | Al Rajef Wind Farm | Private | 17/05/2016 | 07/09/2016 | 114 days | Arabic and English |
| Egypt | 48213 | Egypt Renewable Feed-In-Tariff Framework | Private | 13/05/2016 | Not yet scheduled | -- | Arabic and English |
| Kazakhstan | 47540 | KIPF Equity Investment | Private | 13/05/2016 | 20/07/2016 | 69 days | Russian and English |
| Turkey | 47880 | Centerra Turkey | Private | 08/04/2016 | 20/07/2016 | 104 days | Turkish and English |
| Moldova | 45869 | Ungheni Chisinau Gas Pipeline | Public | 22/03/2016 | N/A Cancelled | -- | English and Romanian |
| Greece | 47822 | Energean | Private | 04/03/2016 | 04/05/2016 | 62 days | Greek and English |
| Tunisia | 46575 | STEG Transmission | Public | 19/02/2016 | 21/09/2016 | 216 days | Arabic and French, some in English |
| Poland | 47932 | Banie Wind Farm - extension | Private | Phase 2: 29 /01/2016 | Phase 2 Board 20/04/2016 | 83 days | Polish and English |
| Slovak Republic | 47107 | D4 Highway/R7 Expressway | Private | 06/11/2015 | 25/05/2016 | 202 days | Slovak and English |
| Turkey | 47081 | Gama Enerji Equity | Private | 15/08/2015 | Not yet scheduled | -- | Turkish and English |
| Serbia | 46892 | Alibunar A Windfarm Project | Private | 13/05/2015 | N/A Cancelled | -- | Serbian and English |
| Serbia | 43764 | Dolovo Cibuk I Wind Farm | Private | 06/02/2015 | Not yet scheduled | -- | Serbian and English |
ENVIRONMENTAL SUSTAINABILITY BONDS
We established the Environmental Sustainability Bond Programme (ESBP) in response to clear investor demand for this type of bond product. The projects financed by the ESBP achieve specific environmental benefits and, collectively, comprise our Green Project Portfolio (GPP).
The ESBP enables the Bank to broaden its sources of funding. Since 2010 we have issued 62 bonds under the programme for a total of €1.74 billion. Of the total issuance, 51 per cent has been placed with retail investors and 49 per cent with institutional investors.
In 2016 we issued 23 Environmental Sustainability Bonds, denominated in Indian rupee, Indonesian rupiah, US dollars and South African rand. Total issuance of green bonds in 2016 amounted to €949 million, of which 62 per cent was placed with institutional investors and 38 per cent with retail investors.
Not only do green bond issues attract a new investor base, but they allow us to highlight the importance placed by the EBRD on environmentally sound and sustainable development to a wider audience while fulfilling core elements of our mandate.
In addition to our ESBP, since 2010 we have also issued social bonds that focus on microfinance loans. The EBRD Microfinance Bond is a use-of-proceeds bond that funds a selected microfinance portfolio of €1.4 billion and has an average individual loan size of below €5,000 (as at 30 June 2016). Both our Environmental Sustainability Bonds and Microfinance Bonds are aligned with the Green Bond Principles (GBP). The EBRD has been a member of the GBP since its inception and we are currently serving on the GBP Executive Committee and on various .
As the EBRD is committed to promoting environmentally and socially sound and sustainable development in all its projects, many socially responsible investors also purchase our generic bonds. With issuance under the 2016 Borrowing Programme of €5.94 billion the EBRD’s medium- to long-term debt outstanding totalled €26.36 billion (equivalent at issuance) as at 31 December 2016.
Bond issues by year (amount)
Bond issues by year (number)
Issued currencies since inception
GREEN PROJECT PORTFOLIO
Our Environmental Sustainability Bond Programme is directly linked to the disbursed amount of the Green Project Portfolio (GPP). This is a replenishing portfolio with strict eligibility criteria (see below) that ensures that the proceeds of our Green Bonds are immediately directed towards projects with positive environmental impacts.
The GPP builds on the environmental strategy of the Bank, which has recently rolled out the Green Economy Transition (GET) approach to increasingly focus on investments that are of benefit to the environment. GET builds on our tried and tested business model of combining investments with technical assistance and policy dialogue, and it recognises that resilience and stability must be built on an integrated and balanced approach between the three dimensions of sustainable development: the economic, environmental and social.
As at 31 December 2016, the GPP comprised 352 loans across 30 countries, totalling €6.1 billion of which €3.9 billion was drawn down.
The average age (from the point of signing to 2016 year-end) of the 75 per cent of the GPP related to energy efficiency and renewable energy is 2.35 years. The remaining 25 per cent of the GPP, which is mainly municipal infrastructure related, has a weighted-average age of 3.47 years. Of the €3.9 billion drawn-down amount, 38 per cent of the underlying projects are in a disbursement phase with the remaining 62 per cent in a grace period or repayment phase.
The average tenor of the projects was 11.9 years and the average remaining life was 9.1 years. The EBRD limits the total amount of ESBs to no more than 70 per cent of the drawn-down amount of the GPP. This ensures that all of the proceeds from these bonds are directed towards supporting our GPP.
Green Project Portfolio sector split
Green Project Portfolio country split
The GPP comprises investments in two main areas:
1. Energy efficiency and renewable energy
The EBRD region has substantial potential for cost-effective improvements in energy efficiency and for the expansion of renewable energy production. The EBRD also provides credit lines to local financial institutions that are seeking to develop sustainable energy financing as part of their business. The Bank provides these credit lines for two key areas: energy efficiency and small-scale renewable energy. Local financial institutions on-lend the funds they have received from the EBRD to their clients, which include SMEs, corporate and residential borrowers, and renewable energy project developers.
2. Environmental infrastructure
The EBRD supports public- and private-sector operators in the delivery of essential urban municipal services nationally and locally. Projects include water and wastewater services, public transport, solid-waste management and district heating.
The EBRD supports improved water efficiency by financing municipal water infrastructure projects, including investments in demand-side water efficiency. We also help corporate clients optimise water management through improved operational efficiency, product design and sustainable manufacturing techniques.
The Bank aims to identify bankable projects that help companies reduce their resource inputs and capture value from their waste. We also help companies find opportunities to reuse or recycle their unavoidable waste generation.
Our sustainability goals within the public transport sector include increasing walking, cycling and usage of public transportation, increasing the energy efficiency of urban transport systems and introducing the use of sustainable renewable energy for urban public transport. We also support municipalities in reducing congestion by financing active traffic management systems.
Examples of projects as part of the GPP
- renewable energy projects, such as photovoltaic installations, installation of wind turbines, construction of mini-hydro cascades, and geothermal and biomass facilities
- the rehabilitation of transmission/distribution facilities to reduce total greenhouse gas (GHG) emissions
- the modernisation of industrial installations to reduce total GHG emissions
- new technologies that result in significant reductions in total GHG emissions, such as smart distribution networks
- greater efficiency in mass transportation, such as investment in fuel-efficiency (fleet replacement) or more energy-efficient infrastructure
- methane capture on waste landfills and wastewater treatment plants
- the rehabilitation of municipal water/wastewater infrastructure to improve drinking water quality and wastewater treatment and to reduce water consumption and wastewater discharges
- improvements to solid waste management (minimisation, collection, recovery, treatment, recycling, storage and disposal)
- energy efficiency investments in existing buildings (insulation, lighting, heating/cooling systems)
- investments to improve efficiency of industrial water use
- sustainable and stress-resilient agriculture, including investments in water-efficient irrigation
- sustainable forest management, reforestation, watershed management, and the prevention of deforestation and soil erosion.
The Green Project Portfolio (GPP) selection criteria and procedure
The GPP is compiled using objective and transparent criteria. These are based on strict exclusion and inclusion principles (see below). These criteria are reviewed regularly to ensure they remain consistent with our own evolving thinking and understanding on sustainability, as well as with investor and market requirements for green investments.
A key criterion in the framework ensures that only projects in which 90 per cent or more of the proceeds are directed to environmental purposes are eligible. The framework allows us to refinance existing projects, as well as finance new commitments that meet the eligibility criteria.
Apart from a positive list of the environmental benefits of certain industry activities (such as Renewable Energy, Energy Efficiency, Water and Waste Infrastructure) there are also various exclusion criteria. We exclude, for example:
- the construction of new large hydropower installations (as defined by the International Commission on Large Dams, ICOLD)
- fossil fuel production and projects with significant consumption of fossil fuels (coal, heating oil, oil shale)
- biofuel production (pending the adoption of internationally recognised sustainability criteria)
- projects requiring a derogation from the Environmental and Social Policy for not being able to meet the Bank’s Environmental and Social Performance Requirements within the term of the EBRD transaction
- projects funded via equity, or projects that are credit impaired.
The process is a combination of automated and manual steps, with every project checked and signed off to ensure compliance with GPP eligibility and exclusion criteria. We review the GPP projects quarterly to ascertain whether they are consistent with the criteria established for the GPP.
General Bank and GPP exclusion criteria
Projects involving the following activities are ineligible for funding by the Bank:
- activities listed on the Exclusion List in Appendix 1 of the EBRD’s Environmental and Social Policy such as
- the production of or trade in any product or activity deemed illegal under host country laws or regulations, or international conventions and agreements, or subject to international phase out or bans (such as production of or trade in products containing PCBs or pharmaceuticals, pesticides/herbicides, and other hazardous substances subject to international phase-outs or bans)
- the shipment of oil or other hazardous substances in tankers, which do not comply with IMO requirements
- nuclear energy generation
- hard liquor production, defence-related activities, the tobacco production industry and gambling facilities.
Use of proceeds
The EBRD’s Legal and Treasury teams have prepared the use-of-proceeds language for bond documentation, and these are reviewed and revised together with the eligibility criteria regularly. The proceeds from all of the EBRD’s environmental sustainability bonds are directed towards the Bank’s GPP. The EBRD also seeks to ensure that the bond proceeds can be directed in full to its GPP by limiting the total amount of ESBs outstanding to 70 per cent of the GPP.
The net proceeds of the EBRD’s environmental sustainability bonds are tracked on a euro equivalent basis and, in the unlikely event that the issued bond amount exceeds the value of the GPP, the excess funds will be invested separately in money market instruments specified in the terms of the bonds until they can be allocated to projects in the GPP.
Tracking the results of GPP projects
We monitor and evaluate the progress and results of all EBRD-financed projects (including the GPP) and compare these with the benefits that were envisaged at the loan approval stage.
Regardless of whether they are subsequently allocated to the GPP, all of the projects we finance are subject to due diligence before approval to assess their compliance with our Environmental and Social Policy and Performance Requirements, and in order to draw up any action plans that may be necessary. Projects are monitored over the lifetime of the Bank’s investment through self-reporting by clients and, where appropriate, site visits by our specialists and consultants. More complex projects may also involve additional mechanisms such as regular reports from independent monitoring consultants or staged disbursements dependent on the attainment of action plan milestones.
Regardless of whether they are subsequently allocated to the GPP, all of the projects we finance are subject to due diligence before approval to assess their compliance with our Environmental and Social Policy and Performance Requirements, and in order to draw up any action plans that may be necessary. Projects are monitored over the lifetime of the Bank’s investment through self-reporting by clients and, where appropriate, site visits by our specialists and consultants. More complex projects may also involve additional mechanisms such as regular reports from independent monitoring consultants or staged disbursements dependent on the attainment of action plan milestones.
To measure the impact of projects specifically associated with the GPP, we carry out a sample check of 5-10 per cent of such projects to gain aggregate and project-level data on the GHG emissions that our projects successfully avoid, as well as energy consumption. We do this to improve transparency and provide the market with a platform for clearer comparison among issuers of green bonds.
Further details on this aspect of portfolio monitoring in 2016 are provided in the Assurance section. Project-specific information (including Environmental and Social Assessment information) is also publicly disclosed, in accordance with our Public Information Policy. Browse our projects by and our .
Projects that we finance under our GET* approach are subject to additional detailed assessments during the development and approval stage, including determination of their potential for energy savings, renewable energy and CO2 emission reductions. This information is publicly reported in a number of ways, including , the EBRD’s and the annual Joint MDB Report on Climate Finance.
These processes extend to the implementation stage of the projects, allowing the Bank to monitor and validate that energy savings and emission reductions are actually achieved. Our monitoring, reporting and verification systems are constantly being developed. In 2014 we began a comprehensive programme of enhancements (see the Project monitoring section) which remains ongoing.
We follow similar practices for our investments in other sectors, in line with the progress measurement and monitoring commitments set out in our relevant sector strategies. Physical indicators are tracked and disclosed on a project-by-project basis. Such indicators can include public transport usage and the number of people benefiting from water and wastewater projects.
Our independent Evaluation Department assesses the performance of our completed projects and programmes against the relevant project objectives and publishes a summary of project outcomes in its Annual Report. Further information is available .
Read more about our socially responsible investments and .
Environmental impacts of the renewable energy and energy efficiency projects in the GPP
Renewable energy (RE) and energy efficiency (EE) projects account for 75per cent of the GPP. In our impact reporting we have only included RE and EE projects from 2011 to 2016 to ensure consistency in the GHG assessment methodology. The projects assessed are expected to have achieved a GHG reduction of 10.3 million tonnes of CO2 equivalent (CO2e) each year. 4.4 million tonnes CO2e of savings came from projects that used financial intermediaries (depository banks, leasing companies and non-bank financial institutions) and 5.8 million tonnes CO2e of savings came from direct investment projects. The EBRD’s portion of funding for the projects with intermediaries amounted to 71 per cent of the total project value, and the corresponding share of funding for direct finance projects amounted to 30 per cent. Note that because of the criteria applied to the GPP, not all of the EBRD’s RE and EE investments are included. Investment amounts and CO2 savings for the GPP are consequently lower than those for the EBRD’s overall investments in these sectors.
The EBRD’s portion of funding for the projects with intermediaries amounted to 71 per cent of the total project value, and the corresponding share of funding for direct finance projects amounted to 30 per cent. Note that because of the criteria applied to the GPP, not all of the EBRD’s RE and EE investments are included. Investment amounts and CO2 savings for the GPP are consequently lower than those for the EBRD’s overall investments in these sectors.
Breakdown of million tonnes CO2 reduction for renewable energy and energy efficiency
Breakdown of CO2 reduction by country
Environmental impacts of the water, waste and environmental infrastructure projects in the GPP
Municipal and environmental infrastructure projects, which include water, waste and public transport projects, account for 24.7 per cent of the GPP. A selection of 42 GPP projects from 2014 to 2016 were included in impact measures to ensure consistency in the assessment methodology. These 42 investments are expected to benefit a total of 13.4 million people in the EBRD region by providing them with improved water services, district heating and solid waste facilities. The EBRD provided approximately 28 per cent of total financing for these projects.
Note that because of the criteria applied to the GPP, not all of the EBRD’s water, waste and public transport investments are included. Investment amounts and project benefits for the GPP are consequently lower than those for the EBRD’s overall investments in these sectors.
| 2014-16 | ||
|---|---|---|
| Total population benefiting from improved solid waste management services | 6,935,000 | 52% |
| Total population benefiting from improved access to tap water | 2,994,643 | 22% |
| Total population benefiting from improved access to wastewater services | 2,391,650 | 18% |
| Total population benefiting from improved district heating | 1,030,961 | 8% |
| Total | 13,352,254 |
| Country | Sum of projected impact by completion | |
|---|---|---|
| JORDAN | 3,978,100 | 29.80% |
| KAZAKHSTAN | 1,785,841 | 13.40% |
| GEORGIA | 1,600,000 | 12.00% |
| ARMENIA | 1,530,000 | 11.50% |
| ROMANIA | 1,178,443 | 8.80% |
| SERBIA | 772,000 | 5.80% |
| MOROCCO | 480,000 | 3.60% |
| EGYPT | 470,000 | 3.50% |
| TUNISIA | 400,000 | 3.00% |
| BELARUS | 358,950 | 2.70% |
| BOSNIA AND HERZEGOVINA | 295,570 | 2.20% |
| MOLDOVA | 190,000 | 1.40% |
| UKRAINE | 171,200 | 1.30% |
| TAJIKISTAN | 60,000 | 0.40% |
| CROATIA | 41,950 | 0.30% |
| KYRGYZ REPUBLIC | 40,200 | 0.30% |
| Grand Total | 13,352,254 |
For interpretation of the above, please note the following: the indicators are tracked on a project-level basis and have not been pro-rated for the portion of the EBRD’s contribution. The EBRD’s GHG Methodology and Climate Related Definitions and Metrics are available . The scope of the expected impact is based on ex ante estimates at the time of project appraisal and mostly focus on direct project effects.
To read the full disclaimer for the indicators supplied in this section of the Sustainability Report, please see our Disclaimer section below.
DISCLAIMER
Impact indicators are typically based on a number of assumptions. While technical experts aim to use sound and conservative assumptions, based on the information available at the time, the actual environmental impact of the projects may diverge from initial projections.
Caution should be taken in comparing projects, sectors or whole portfolios because baselines (and base years) and calculation methods may vary.
Projects will have a wider range of impacts than are captured by the indicators presented in this report. While the EBRD makes efforts to improve the consistency and availability of reported metrics over time, projects cover a wide range of sectors and sub-sectors making complete harmonisation of reporting metrics challenging.
FINANCIAL INTERMEDIARIES
Our environmental and social requirements for financial intermediary (FI) projects are set out in Performance Requirement 9 of our Environmental and Social Policy (ESP). They focus on ensuring that banks, private equity funds and other financial institutions receiving our financing have appropriate environmental and social risk management systems in place.
Sustainability Index
In order to develop a system which allows the EBRD to monitor the Environmental and Social (E&S) risk management performance of individual FIs and the entire portfolio, we produced the Financial Intermediary Sustainability Index (SI) as an alternative to the annual environmental and social reporting system. The SI was first introduced in 2014 – by 2016, we have over 250 partner financial institutions using the SI.
In June 2016, the EBRD conducted a review of the 122 completed responses from 91 FIs since the launch of the Sustainability Index. The 2015-16 data indicates that the respondents are more concerned overall about sustainability issues than they were in 2014. All respondents now “agree” that sustainability is a significant opportunity for their business.
Respondents also tend to “agree” that the influence of sustainability has grown in the past three years or is likely to grow in the next three years.
Of the respondents, three of the 15 lowest scoring FIs have received E&S risk management training, compared with nine out of the 15 highest-scoring FIs. This demonstrates a link between capacity building and higher performance.
There has been some improvement between 2014 and 2015-16 across all areas, with FIs scoring 55 per cent in the Good Practice score in 2015-16 compared with 44 per cent in 2014.
Training and capacity building
During 2016, the EBRD together with Environmental Resources Management (ERM) hosted covering development of E&S Policy and Environmental and Social Management System (ESMS) within EBRD partner banks and private equity houses. The audiences included professionals in compliance, internal audit, sustainability, corporate responsibility, human resources, communications and senior management. The main objective was to assist the organisations to set E&S goals and a strategic direction within their organisations and investment processes in line with the EBRD’s ESP Performance Requirements 2, 4 and 9.
In November 2016, the Bank and PricewaterhouseCoopers (PWC) hosted a on the EBRD’s Sustainability Index for FIs. This webinar provided useful insights on how EBRD partner financial institutions should use and complete the Sustainability Index. The target audience included those involved or interested in the annual reporting process to the EBRD and particularly those responsible for collating the information and completing the Sustainability Index.
One-day E&S due diligence training workshops were delivered to the following partner FIs by ERM, PWC and EBRD staff; Hellenic Bank, Cyprus; Livonia Partners Latvia; QNB Al Ahli Bank, Egypt; BPM Mezzanine Estonia and KKR Private Equity.
The Bank’s E&S continues to be accessed by partner banks and PE houses with 80 new users added in 2016. The e-learning is available free of charge to EBRD partner FIs.
Toolkit update
The EBRD’s was updated in August 2016. The Toolkit has been designed to help FIs meet the requirements of the EBRD E&S Risk Management Procedures for Corporate Loans, Micro and SME and equity investments.
HEALTH AND SAFETY
Inadequate regard to health and safety brings with it huge societal costs to our countries of operations, adding further economic burdens and, more importantly, significant human suffering and community impact.
The EBRD is fully committed to protecting and promoting health and safety within its investments and sets out its expectations within Performance Requirement 4 of the Environmental and Social Policy (ESP, 2014). The policy requires that all projects provide safe and healthy working conditions to keep workers free from the risk of injury and ill health. Projects are also required to introduce prevention and mitigation measures to protect communities from project-related risks where necessary.
All EBRD-financed projects are held to high occupational health and safety (OHS) standards as part of the Bank’s continued due diligence. We monitor and respond to trends across the Bank’s portfolio and take prompt and effective action where necessary.
Our clients are required to notify the EBRD of any serious incidents and fatalities. In 2016, we received reports of serious incidents from 34 clients, which sadly resulted in 80 fatalities, up from a record-low of 56 in 2015.
The main causes of fatalities among workers were confined spaces (nine reported); electrocutions (nine reported); falling from a great height (eight reported); and being caught or struck by a moving object (six reported).
Seen in context, the EBRD’s portfolio collectively involves tens of thousands of people, be they employees or contractors, working across some 1,500 projects at any one time, to say nothing of the millions of customers and end-users who benefit from our projects. Nevertheless, any loss of life is always a very solemn reminder of the risks and challenges that businesses and communities face in the EBRD region, and reaffirms why we are so committed to raising standards and monitoring the OHS aspect of our projects.
Throughout 2016 we continued to work with businesses and communities across the EBRD region to minimise risks associated with our projects, to improve safety standards and raise awareness. For example, in Ukraine, we held a two-day workshop to raise awareness about health and safety issues and standards in the agriculture sector, the third most hazardous sector in the country after mining and steel.
Over 2013-16 we have mobilised over €2 million from the EBRD Shareholder Special Fund for road, occupational health and safety activities, from appraisals to capacity-building for clients in higher-risk sectors.
Road safety
The WHO’s Global Status Report on Road Safety (2015)Transport section of this report.
Strategic objectives
In line with the Bank’s ESP requirements, protecting and promoting the health and safety of those affected by the Bank’s portfolio of investments is of paramount importance. The following strategic objectives were developed in 2016 to support the overall improvement of health and safety within the Bank’s investments:
- Prevention of injury and ill health and risk reduction
- Set and promote international standards/good practice
- Developing capacity and awareness
- Communicate and share experiences.
Key priorities for the EBRD in health and safety for the coming year are:
- movement of objects and work equipment, particularly sectors where workers are exposed to vehicle movement, rolling stock and lifting operations
- working with or in close proximity to electrical equipment in rail, construction and power distribution sectors
- occupational road risks across all sectors
- working at heights with particular focus in the construction, power and rail sectors
- fires and explosion hazards across all sectors.
PROJECT COMPLAINT MECHANISM
The Project Complaint Mechanism (PCM) is the EBRD’s accountability mechanism for assessing and reviewing complaints about projects the Bank finances. It provides a structured method for individuals and local groups who may be directly or adversely affected by an EBRD project, as well as civil society organisations, to raise grievances or complaints with the Bank independently from our banking operations.
The PCM’s functions are to:
- review complaints from parties who are concerned that the Bank has failed to adhere to applicable policies in a particular project, which is conducted through the PCM’s Compliance Review procedure.
- assist members of the affected community in addressing their grievances with the project sponsor, which is carried out through the PCM’s Problem-solving Initiative. Affected parties can have their concerns addressed through one or both of these functions.
In 2016 the PCM registered one new complaint and continued working on different stages of Compliance Review and Problem-Solving for seven ongoing complaints. PCM has been monitoring the implementation of Management Action Plans and issued bi-annual Compliance Review Monitoring Reports on four complaints. One complaint was closed in 2016.
The PCM also conducted two outreach workshops with civil society organisations in Athens and Kiev, in partnership with the accountability mechanisms of other international financial institutions.
PCM assesses all complaints from civil society or individuals in relation to EBRD-funded projects with the help of seven external independent experts.
Details of all complaints and reports, together with PCM Annual Reports, are available on the .