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Roles, Responsibilities and Decision-Making
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Typically, the following staff of a financial institution are involved with implementing different aspects of the ESMS, although each financial institution should assign responsibilities in the manner that makes most sense according to its own structure:

    • Senior Management, for example one or more representatives from upper management (for example a member of the Executive Board or the Fund Manager) should be responsible for the financial institution’s overall commitment to environmental and social objectives. Senior Management establishes the financial institution’s environmental and social requirements and conditions for clients/investees. In cases of unresolved environmental and social issues or non-compliance associated with a transaction that cannot be resolved by the Loan Officers/Relationship Managers, Senior Management determines the appropriate course of action to follow to reduce the financial institution’s potential exposure to environmental and social risk, which may include taking legal action against the client/investee.
    • ESMS Officer is responsible for leading the financial institution’s effort to develop the ESMS as well as for communicating with senior management on environmental and social issues and concerns.
    • ESMS Coordinator is responsible for developing and updating the procedures and documents that are part of the financial institution’s ESMS. This person also evaluates the environmental and social risks at the portfolio level and provides assistance to Loan Officers/Relationship Managers and Credit/Investment Analysts in evaluating and monitoring the environmental and social performance of clients/investees.
    • Loan Officers/Relationship Managers are responsible for following the procedures of the ESMS at the transaction level. They discuss and negotiate possible environmental and social mitigation measures with the client/investee.
    • Credit/Investment Analysts are responsible for evaluating the environmental and social risks at the level of individual transactions and make a recommendation to the Credit/Investment Committee on whether to proceed with a transaction.
    • Credit/Investment Committee is responsible for deciding if E&S risks are acceptable to the financial institution’s overall exposure to risk before proceeding with a transaction.
    • Legal Department ensures that the financial institution’s environmental and social requirements are incorporated in legal agreements for each transaction. The Legal Department may advise if a client’s/investee’s non-compliance with environmental and social clauses constitutes a breach of contract and is considered an Event of Default under the terms of the legal agreement that requires follow up by Senior Management.

Staff responsible for environmental and social risk management are encouraged to complete the Sustainability Training and E-learning Program (STEP), designed for managers and staff of financial institutions. This free, online training provides an understanding of sustainable finance and outlines how financial institutions can identify and manage environmental and social risks and environmental business opportunities.

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