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The procedures and tools for conducting environmental and social due diligence for leasing activities 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:

  • Screening of client’s activities against a list of excluded activities adopted by the financial institution;
  • Review of potential environmental and social issues that are typically associated with the client’s industry sector and the activities for which the leased equipment and assets will be used, including operation and periodic maintenance;
  • Review of client’s capacity and resources to ensure proper use and maintenance of leased equipment and assets;
  • If the client’s operations are in a sensitive sector with potentially significant environmental and social risks (such as mining and oil production), review of the client’s track record on environmental and social issues, in terms of potential non-compliance with national regulations or negative publicity; and
  • 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 and 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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