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Our approach and progress

The greatest impact we have on the environment and society is through the business we finance. We have stringent environmental and social policies for all our lending, debt, capital markets activities, project finance, principal finance and advisory work.

We seek to challenge the way our clients operate by ensuring the projects we finance, across all markets, meet international environmental and social standards such as the Environmental, Health and Social (EHS) guidelines developed by International Finance Corporation (IFC).

We introduced a formal environmental and social (E&S) risk policy to govern our lending activities in 1997 and have been a signatory to the Equator Principles (EP) since 2003. We apply the Equator Principles to all project finance and project advisory transactions irrespective of value.

We are a founding signatory and adopter of the Climate Principles, and since 2009 have developed and implemented 14 position statements setting out our approach and standards on specific issues and industry sectors.

Our E&S risk management process

Frontline staff are provided with specific guidelines to identify E&S risks, known as Environmental and Social Risk Assessment (ESRA) tools, and are supported by Standard Chartered’s Sustainable Finance team, who provide technical advice and assistance to ensure compliance with our E&S standards.

Transactions with significant E&S risks are escalated to our Wholesale Banking Responsibility and Reputational Risk Committee (WBRRRC). Chaired by Mike Rees, Group Executive Director and Chief Executive of Wholesale Banking, the Committee includes representatives from the Wholesale Banking Leadership Team and the Group Head of Sustainability. The WBRRRC meets on a monthly basis and on an ad hoc basis where necessary.

E&S risk management is an integral part of our credit process. There are four distinct stages to our lending and E&S risks management processes:

  1. Preliminary screening: Transactions are assessed against our position statements and clients are benchmarked against IFC standards and relevant industry best practice guidelines. All project finance transactions are categorised and assessed against the Equator Principles
  2. Due diligence: Our Sustainable Finance team identifies E&S reputational risks, while our credit department assesses specific credit risks. Client relationships and specific transactions that require further scrutiny are escalated to the WBRRRC. Where necessary, an external consultant may be required to perform due diligence to identify the E&S impact of a project and recommend an action plan to mitigate any associated risks. Throughout this process, our Sustainable Finance team works closely with the relevant client teams
  3. Approval: All transactions require approval from our credit department and, depending on the level of risk, the WBRRRC
  4. Monitoring: If necessary, E&S and governance conditions are included in the loan documentation, and clients are required to comply with a time-bound action plan to meet these conditions. For project finance, our portfolio monitoring team is responsible for ensuring client compliance with any agreed action plans. Any material deviation against the action plan is referred back to the WBRRRC

E&S-risks-management

Figure 1: Our E&S risk management process
Annual Report and Accounts 2010