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As necessary or as identified during the review and continuous improvement process of the ESMS, a financial institution may decide to prepare guidance documents on the following:

  • Risk categorization. Guidance should explain what factors such as a client’s/investee’s business activities, scale and location, sensitivity of surroundings and magnitude of potential environmental and social impacts are considered in assigning a environmental and social risk category for a proposed transaction. Guidance for Credit/Investment Analysts will ensure that the risk categorization for all transactions is systematic and consistent across the financial institution.
  • Industry sector guidelines. Industry sector guidelines provide a brief overview of the key environmental and social risks associated with a specific industry sector, issues to identify during the due diligence process, proposed mitigation measures, as well as environmental business opportunities. A financial institution can develop industry sector guidelines for Credit/Investment Analysts for those industry sectors to which it has the largest exposure.
  • Decision-making on environmental and social risk. Guidance should explain how environmental and social risk is factored into the decision-making process of a financial institution to approve or reject a transaction. This will help ensure that there is a consistent approach by the Credit/Investment Committee for all transactions.

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