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Depending on the nature of environmental and social risks associated with a client’s/investee’s operations, financial institution staff may develop a corrective action plan with a timeframe for the client/investee to implement appropriate mitigation measures to comply with its environmental and social requirements. The purpose of a corrective action plan is to mitigate potential environmental and social risks in the context of a transaction to an acceptable level for the financial institution.

Financial institution staff should tailor the scope of a corrective action plan to each client/investee according to the specific risks identified during the environmental and social due diligence process or during subsequent transaction monitoring. Corrective action plans range from simple mitigation measures to detailed management plans with actions that can be measured quantitatively or qualitatively. The corrective action plan should include a description of the specific mitigation actions to be taken by the client/investee, a timeframe for implementation and a reporting requirement to inform the financial institution on the status of completion.

Financial institution staff will need to discuss the corrective action plan with the client/investee and agree on its scope and timeframe for completion. If the corrective action plan is developed as part of the transaction appraisal process, it should be included in the legal agreement. The timeframe for implementation of specific mitigation measures will vary according to the environmental and social risk and may range from being a condition of transaction approval to a reasonable timeframe from disbursement or when environmental and social issues were identified during transaction monitoring.

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