Pages

Environmental and Social Due Diligence

Eksfin has a risk-based approach to evaluating transactions; the scope of the assessments and the mitigation measures are dependent on the level of environmental and social risks.

Eksfin expects applicants to systematically identify and assess the sustainability-related risk connected with their activities and value chains. Applicants must adhere to applicable laws and regulations, as well as relevant international conventions in all the countries in which they operate.

Eksfin complies with international frameworks for the evaluation of environmental and social risks, which are largely based on the IFC Performance Standards and the World Bank EHS Guidelines.

Eksfin provides guidance to potential customers on what to expect with regards to the application process and potential environmental and social requirements of Eksfin. Eksfin welcomes early contact to ensure a common understanding and alignment on environmental and social risk management. This may in turn save a potential customer from additional mitigation measures late in the process.

Eksfin undertakes due diligence assessments in relation to the environmental and social risks using the following process:

  1. Assessment of the scope of the due diligence assessment and applicable framework
  2. Risk categorisation of the transaction in the application
  3. Risk management, migration measures, and final assessment of the application
  4. Follow-up during the loan and/or guarantee period

1. Assessment of the scope of the due diligence assessment and applicable framework 

Eksfin has a risk-based approach and adapts the requirements of the due diligence assessment according to risk and the degree of potential negative impact. Eksfin has developed some sector-specific requirements. The main expectations based on risk or sector are outlined below.  For all applications, Eksfin expects a systematic approach to the identification and management of risks related to the environment and social risks. 

In addition, Eksfin will expect that the following information is provided when it is relevant to the application:

  • A project description
  • Information on the value chain and subcontractors
  • Information regarding associated facilities such as roads, pipelines, transmission lines, and the like that must be built in order to facilitate the project
  • An environmental and human rights risk assessment with regard to potential risks associated with the application/project
  • National permits and approvals of the project/facility, where relevant
  • Key policies and guidelines such as codes of conduct, guidelines for procurement and risk management in the supply chain, and policies and guidelines for HSE and labour rights
  • Information on management systems and certification, such as ISO45001 / OHSAS 18001 and/or ISO14001.
  • Information on greenhouse gas emissions, the use of climate-friendly technology, climate risk assessments, etc., where relevant
  • Guidelines and procedures for stakeholder dialogue and redress
  • Contact details of those responsible for the environment and social risks

If you have further questions, please contact the sustainability team at sustainability@eksfin.no.

2. Risk categorisation

Risk in the supply / value chain is a focus area. In transactions that have significant risk with primary or key suppliers, for example in geographies or in sectors where there is a high risk of unacceptable working risks and violations of labour rights, detailed evaluation of suppliers may be required.

Eksfin categorises applications as high, moderate, or low in respect of their sustainability-related risk.

Eksfin’s risk categorisation is based on OECD Common Approaches and the Equator Principles:

A: high potential risk of a negative environmental or social impact

Category A includes projects that involve significant negative, perhaps irreversible, environmental and social consequences. Some of the consequences can be difficult to mitigate and may affect a wider area than just the site or facilities themselves. An illustrative list can be found in Annex 1 to OECD Common Approaches.

B: moderate potential risk of a negative environmental or social impact

Category B projects have a lower potential negative environmental and social impact than those in category A. They typically involve a smaller number of negative consequences, have a defined area of, and generally reversible, impacts and with available mitigating measures .

C: low potential risk of a negative environmental or social impact

Category C projects have a minimal or potentially no negative environmental and social impact.

Further information on Eksfin’s expectations in respect of risks or sectors can be found here:

A: High risk

For applications that fall within OECD Common Approaches and the Equator Principles (in principle, a loan or lender guarantee for a project of > NOK 100 million) and that are categorised as high risk (A), Eksfin will require:

– An environmental and social impact assessment (ESIA) of the project, including any associated facilities, conducted by a third party in accordance with the IFC Performance Standard.

– A climate risk assessment (cf. the Equator Principles)

– An environmental and social management plan (ESMP) for mitigating measures related to the environment and human rights.

– Eksfin and/or an approved representative to carry out a physical inspection of the project.

– A project description with a link to the impact assessment and/or a non-technical summary to be uploaded to Eksfin’s website at least 30 days before Eksfin’s final decision.

Eksfin is happy to provide input on the scope of work required for a project’s ESIA to ensure compliance with the IFC Performance Standards and/or that specific project-related risks are identified and managed in accordance with Eksfin’s expectations. Recommendations on the content of impact assessments are available in Annex II Environmental and Social Impact Assessment (ESIA) Report to OECD Common Approaches. The Equator Principles suggest which risks and impacts an ESIA should assess. This can be found in the Equator Principles (EP4) and Exhibit II: Illustrative List of Potential Environmental and Social Issues to be Addressed in the Environmental and Social Assessment Documentation.

For applications categorised as high risk (A) but that do not fall within OECD Common Approaches and the Equator Principles, Eksfin’s requirements will be in line with applications categorised as moderate risk (B).

B: Moderate risk

For applications categorised as moderate risk (B), regardless of the size of the financing, Eksfin requires documentation of a systematic approach to the identification and management of risks. Based on risk and impact, Eksfin may require:

1. An environmental and social impact assessment (ESIA) of the project, including any associated facilities, conducted by a third party.

2. Especially high risks must be managed in accordance with the IFC Performance Standards.

3. Eksfin or an approved representative to carry out a physical inspection of the project.

4. A project description to be uploaded to Eksfin’s website for applications that fall within OECD Common Approaches and the Equator Principles.

Eksfin is happy to provide input on the scope of work required for a project’s ESIA so that specific project-related risks are identified and managed in accordance with Eksfin’s expectations.

Some general recommendations on the content and assessments to be covered by an impact assessment are available in Annex II Environmental and Social Impact Assessment (ESIA) Report to OECD Common Approaches and in the Equator Principles (EP4) and Exhibit II: Illustrative List of Potential Environmental and Social Issues to be Addressed in the Environmental and Social Assessment Documentation.

C: Low risk

For applications categorised as low risk (C), Eksfin requires a systematic approach to the identification and management of risks. Transactions that are typically low risk are projects in Norway and deliveries to existing facilities.

Existing facilities may be evaluated as having a higher risk if:

– Existing facilities are located in or near protected areas.

– Existing facilities have a significant environmental footprint or are in a country with significant challenges in respect of labour law and working conditions.

– Existing facilities have a poor HSE history and there have been local protests and/or disputes.

– Exports require major changes in terms of resource use, footprint, production, and increased emissions to the air/water/ground and/or a reduction in the number of employees.

If you have further questions, please contact the sustainability team at sustainability@eksfin.no.

Shipping

Eksfin wants to ensure that environmental and social risks are taken into account throughout a ship’s lifecycle. Accordingly, Eksfin has sector-specific requirements.

Shipbuilding, retrofitting, and the shipbuilding industry

Eksfin requires an assessment of working risks (i.e. core HSE risks and workers rights) at foreign shipyards where the latter are key suppliers in a transaction. An assessment will be made in accordance with Eksfin’s Shipyard Labour Audit Guidelines and associated checklists. Mitigation measures to address any shortcomings will be compiled in an Action Plan or Corrective Action Plan. The shipyard’s willingness and ability to co-operate in respect of necessary improvements will be decisive for Eksfin’s ability to contribute financing.

The following are not permitted at shipyards involved in the transaction:

– child labour that is not approved in accordance with ILO conventions,

– forced labour,

– serious and/or systematic HSE violations, or

– serious and/or systematic violations of applicable laws and regulations.

Serious and/or systematic violations or shortcomings in respect of the above must be addressed in an action plan that will be followed up in connection with the financing being paid.

Eksfin will also require information on the use of any hull yards, and it may also require an evaluation of working risks at those yards. This also applies to the use of overseas hull yards as subcontractors to Norwegian shipyards.

In respect of the use of foreign shipyards in connection with retrofits, the assessments that will be made will be tailored according to the case in question. Any shortcomings that must be addressed specific statements related to the management of the environmental and social risks from the shipyard.

– For Eksfin’s Shipyard Labour Audit Guidelines, click here.

– For the Labour Audit Checklist, click here.

– For the Integrated Sustainability Checklist, click here (Similar to labour audit checklist with additional questions related to the environment, local community, worker health & safety and security, and corruption.)

– For the Sustainability Checklist click here. (In some cases a self-assessment may be relevant. This checklist is similar to the integrated sustainability checklist, whilst with some modifications. Scope of the self-assessment is agreed upfront of the exercise.)

Ship operation

Shipping is largely regulated by international conventions adopted by the IMO. Eksfin’s due diligence assessments take this into account. In addition to assessing stakeholders in the construction phase, Eksfin will also assess the owner company and/or operator of the ship. 

Eksfin will require the following for the operations phase of the ship:

– The country of registration must be on the Paris MoU white list and have ratified the IMO conventions SOLAS, MARPOL, STCW, and MLC.

– For ships over 5,000 dwt operating in international waters (deep sea shipping), IMO DCS data must be reported to Eksfin annually (cf. the Poseidon principles).

– Any new charter parties with a duration of two or more years must be reported.

– The recruitment of crew, working conditions, and worker rights must adhere to MLC 2006 and the “employer pays principle”.

Ship recycling

Eksfin adheres to the Responsible Ship Recycling Standards (RSRS) and requires that all ships have the following:

– an Inventory of Hazardous Materials (IHM) and

– a policy to be in place within one year of payment in respect of the scrapping of the ship.

Reder skal bekrefte at enheten eller skipet vil overholde Hong Kong konvensjonen og/eller EUs regulering mht skraping.

The shipowner must confirm that the unit or ship will comply with the Hong Kong Convention and/or EU regulations in respect of scrapping.

If you have further questions, please contact the sustainability team at sustainability@eksfin.no.

Other sectors

Fishing

Shipowners must have management systems that meet the requirements of the FAO Guidelines for the Ecolabeling of Fish and Fishery Products from Marine Capture Fisheries. Fishing must be traceable and take place in well-regulated waters and must be subject to quotas from countries with well-regulated fishing policies. Eksfin has a special focus on areas where the rights over the control of fishing are disputed.

– Eksfin must be given information on the vessel’s quotas, as well as on other ships and quotas that the shipping company has at its disposal.

– Foreign fishing boats must be able to document a system that meets the authorities’ reporting requirements regarding quotas and traceability of the catch. 

– The country of registration must have ratified the ILO 188 convention, also known as the Work in Fishing Convention (WFC).

– Fishing boats 24 metres in length or longer must adhere to the STCW-F convention from 1995.

– The boat must have an Inventory of Hazardous Materials (IHM).

– The shipping company must report any significant changes in quotas to Eksfin during the loan and guarantee period, such as changes in location and type of catch.

Energy-intensive activities

In accordance with the Equator Principles, projects/activities with greenhouse gas emissions of > 100,000 tonnes of CO2 per year must have a Climate Change Risk Assessment (CCRA) drafted by a third party that includes a reference measurement of the greenhouse gas profile of the project. A guide for CCRAs has been developed in line with the Equator Principles and can be found here.

For projects/activities estimated to emit > 100,000 tonnes of CO2 per year, Eksfin will require annual public reporting of green gas emissions in scope 1 and 2 in accordance with the GHG Protocol and, if appropriate, of greenhouse gas efficiency in the operational phase. In addition, all customers with greenhouse gas emissions of > 25,000 tonnes of CO2 per year will be encouraged to submit public reports, which will be submitted to the OECD.

Eksfin conducts due diligence assessments of mobile offshore units associated with the production of oil and gas, such as FPSO and FSRU . The due diligence assessment will include the environment and social risks for the development of the field itself and an associated impact assessment for where the unit is to be operated. Management systems will also be assessed. It is likely that these units’ greenhouse gas emissions will trigger Eksfin to require a Climate Change Risk Assessment (CCRA) in accordance with the Equator Principles.

If you have further questions, please contact the sustainability team at sustainability@eksfin.no.

3. Risk management, measures, and final assessment

Sustainability in a new transaction is considered adequately managed when:

  1. The project and/or assessed stakeholders associated with the transaction comply with Eksfin’s sustainability policy
  2. The following does not occur within the customer’s or key suppliers’ activities:
    • child labour that is not in accordance with ILO conventions
    • forced labour
    • serious and/or systematic HSE violations
    • serious and/or systematic violations of applicable laws and regulations
  3. Other shortcomings identified as per Eksfin’s policy and guidelines must equally be addressed in an action plan accepted by Eksfin, the applicant, and any other relevant parties.

If you have further questions, please contact the sustainability team at sustainability@eksfin.no.

4. Follow-up during the loan and/or guarantee period

Depending on the nature of the transaction,there may be various reporting requirements on environmental and social risks during the loan and/or guarantee period. Activities or projects associated with considerable GHG emissions will be asked to regularly report on emissions to Eksfin, whilst encouraged to also report on GHG emissions publicly.

Action Plans will be followed up during the loan and guarantee period, often through regular reporting. However, follow-up inspections may also be required.

Projects/activities that have a significant impact on biodiversity are encouraged to share information related to biodiversity with national and regional databanks, as well as with the Global Biodiversity Information Facility (GBIF).

If you have further questions, please contact the sustainability team at sustainability@eksfin.no.