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The procedures and tools for conducting environmental and social due diligence for an insurance transaction are described in a financial institution’s Environmental and Social Management System and should include the following steps as part of a desktop review and a site visit if necessary:

  • Screen client’s activities against a list of excluded activities adopted by the financial institution;
  • Apply a reputational risk screen to identify projects with potentially high environmental and social risks;
  • Review of the client’s performance on environmental and social issues, in particular their safety record and accident rates, in terms of potential non-compliance with national regulations or international standards;
  • Review of the client’s actions (if any) to mitigate potential environmental and social issues associated with operations.

The financial institution should document all findings from the due diligence, which will be considered during the decision-making process before proceeding with a transaction. In the event that environmental and social issues are identified should be mitigated through corrective actions, the financial institution can stipulate these in the legal agreement with the client and monitor on-going progress toward completion.

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