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As part of its environmental and social due diligence process, a financial institution may verify how its commercial clients/investees comply with applicable environmental and social laws, which vary by country.

To do so, the financial institution needs to be knowledgeable of the environmental and social laws of the country in which it operates, in particular the requirements for conducting an Environmental Impact Assessment. This may also include the requirements, if any, of the international conventions, agreements and international bans of which a country might be a signatory. A good understanding of the applicable environmental and social laws ensures that the financial institution will effectively identify and assess the key environmental and social risks that might be associated with a financial transaction.

To be effective, the Environmental and Social Management System should reflect the most current requirements of the environmental and social laws that apply to a financial institution’s clients/investees. The Legal Department typically reviews the regulatory framework of the country in which a financial institution operates and should review requirements in the following areas:

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