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Adoption and adherence to the Equator Principles, a risk management framework to determine, assess and manage environmental and social risks and impacts in projects

Bank of Tokyo-Mitsubishi UFJ supports its clients' environmental and social risk management and contributes toward a sustainable world by adoption of and adherence to the Equator Principles, a risk management framework for determining, assessing and managing environmental and social risks and impacts for large-scale projects.

Environmental and social impact assessment and risk management through the Equator PrinciplesBank

Bank of Tokyo-Mitsubishi UFJ (the Bank) recognizes that large-scale infrastructure and natural resources development projects may have adverse impacts on local environment and surrounding communities.

The Bank, as a financier and/or a financial advisor, works in partnership with its clients to determine, assess and manage environmental and social risks and impacts related to the projects.

The Bank adopted the Equator Principles in 2005 to ensure that the projects it finances and advises on are developed in a socially responsible manner and establish good environmental management practices to minimize, mitigate, and/or offset environmental and social risks and impacts.

The Bank supports its clients' environmental and social risk management and contributes toward a sustainable world through implementation of the Equator Principles, a risk management framework for determining, assessing and managing environmental and social risks and impacts for large-scale projects.

About the Equator Principles

The Equator Principles is a financial industry benchmark for determining, assessing and managing environmental and social risk and impacts in projects, which is intended to serve as a common baseline and framework for all the financial institutions adopting the Equator Principles (EPFIs). EPFIs ensure that the projects they finance and advise on are developed in a manner that is socially responsible and reflects sound environmental management practices.

There are 90 EPFIs globally as of May 31, 2017.

The most recent (third) version of the Equator Principles, effective June 4, 2013, introduced to its scope Project-Related Corporate Loans and Bridge Loans in addition to Project Finances and Project Finance Advisory Services.

EPFIs commit to implementing the Equator Principles in their internal environmental and social policies, procedures and standards for financing projects. EPFIs will not provide loans to projects where the client will not, or is unable to, comply with the Equator Principles.

EQUATOR PRINCIPLES

(Please refer to DThe Equator Principle Association's official website for more details on the Equator Principles.)

The Bank is a Steering Committee member of the Equator Principles Association, an unincorporated association of EPFIs.

A practitioners' guidebook on the Equator Principles in Japanese, the first publication on the Equator Principles in Japan, was published in March 2016. The book was co-authored by the three Japanese mega banks with the Bank playing an initiative role. The book illustrates the Equator Principles and its implementation, as well as the Equator Principles Association and its activities, and overview of environmental and social guidelines of multilateral development financial institutions.

Environmental and Social Risk Assessment

Implementation Guidelines for the Equator Principles

Bank of Tokyo-Mitsubishi UFJ confirms environmental and social considerations by the clients according to "Implementation Guidelines for the Equator Principles".

Confirmation of Environmental and Social Considerations by Social & Environmental Risk Assessment Office

At Bank of Tokyo-Mitsubishi UFJ, Social & Environmental Risk Assessment Office (SERAO) is responsible for environmental and social considerations and other relevant activities.

Process for Confirmation of Environmental and Social Considerations

Principle 1 of The Equator Principles requires EPFIs to categorize the projects proposed for financing based on the magnitude of their potential environmental and social risks and impacts. Clients are required to comply with The Environmental and Social requirements in accordance with the assigned categories.

Principle 1 Definition of the Categories
Category A Projects with potential significant adverse environmental and social risks and/or impacts that are diverse, irreversible or unprecedented
Category B Projects with potential limited adverse environmental and social risks and/or impacts that are few in number, generally site-specific, largely reversible and readily addressed through mitigation measures
Category C Projects with minimal or no adverse environmental and social risks and/or impacts

For example, a Category A project requires us to confirm with the client if it complies with all the requirements stipulated in the Equator Principles 2 through 10.

e.g. Requirements for Category A projects
Principle 2 Conduct an Environmental and Social Assessment
Conduct an alternatives analysis to evaluate less Greenhouse Gas (GHG) intensive alternatives if GHG emissions levels are expected to be more than 100,000 tonnes of CO2 equivalent annually
Principle 3 Applicable Environmental and Social Standards
Principle 4 Develop or maintain an Environmental and Social Management System(ESMS)
Prepare an Environmental and Social Management Plan (ESMP) and, where necessary, an Equator Principles Action Plan(EPAP)
Principle 5 Demonstrate effective Stakeholder Engagement with Affected Communities and, where relevant, Other Stakeholders
Principle 6 Establish a grievance mechanism designed to receive and facilitate resolution of concerns and grievances from Affected Communities
Principle 7 An Independent Environmental and Social Consultant to carry out an independent review of the Assessment Documentation
Principle 8 Incorporate covenants linked to compliance with The Equator Principles
Principle 9 An Independent Environmental and Social Consultant to verify monitoring information to ensure ongoing monitoring and reporting after Financial Close and over the life of the loan
Principle 10 Disclose online, at a minimum, a summary of the ESIA
Publicly report of GHG emission levels during the operational phase for Projects emitting over 100,000 tonnes of CO2 equivalent annually

Principle 3 of the Equator Principles introduces 2 groups of project host countries; namely " Designated Countries" and "Non-Designated Countries". The applicable Environmental and Social standards differ according to the group the project host country belongs to.

  • For Designated Countries, the Assessment process evaluates compliance with relevant host country laws, regulations and permits that pertain to environmental and social issues.
  • For Non-Designated Countries, besides evaluation of compliance with relevant host country laws, regulations and permits that pertain to environmental and social issues, the Assessment process evaluates compliance with the then applicable IFC Performance Standards on Environmental and Social Sustainability (Performance Standards) and the World Bank Group Environmental, Health, and Safety Guidelines (EHS Guidelines).
1. IFC's Performance Standards

IFC's Performance Standards are applied by IFC to all its investment and advisory clients whose projects go through IFC's initial credit review process. The Performance Standards provide guidance on how to identify environmental and social risks and impacts.

The parties developing and operating projects are required to address various matters including conservation of Natural environment, protection of local communities, preservation of cultural heritages, and respect for Human Rights of projects' workers, Affected Communities and indigenous peoples.

The eight Performance Standards establish standards that the client is to meet throughout the life of an investment by IFC:

  • Assessment and Management of Environmental and Social Risks and Impacts

  • Labor and Working Conditions

  • Resource Efficiency and Pollution Prevention

  • Community Health, Safety and Security

  • Land Acquisition and Involuntary Resettlement

  • Biodiversity Conservation and Sustainable Management of Living Natural Resources

  • Indigenous Peoples

  • Cultural Heritage

(Please refer to IFC's official website for more details on Dthe Performance Standards.)

2.The General EHS Guideline

The World Bank Group Environmental, Health and Safety Guidelines (EHS Guidelines) are technical reference documents with general and industry-specific examples of good international industry practice. The EHS Guidelines contain the performance levels and measures that are generally considered to be achievable in new facilities at reasonable costs by existing technology.

These General EHS Guidelines are designed to be used together with the relevant Industry Sector EHS Guidelines. The Industry Sector Guidelines provide guidance to users on EHS issues in specific industry sectors consisting of 62 industry sectors under 8 industrial categories (Agribusiness/Food Production, Chemicals, Forestry, General Manufacturing, Infrastructures, Mining, Oil and Gas, and Power).

Following the 2012 update of IFC's Policy and Performance Standards on Environmental and Social Sustainability, updates of the 2007 EHS Guidelines of both general and industry sectors are processing. As of now, 8 new guideline documents In 6 industrial sectors have already been available at IFC's website.

  • A)The General EHS Guideline
    The General EHS Guidelines contains information on cross-cutting environmental, health, and safety issues potentially applicable to all industry sectors. It should be used together with the relevant industry sector guideline(s).

The General EHS Guidelines are organized as follows:

  • Environmental (Air Emissions and Ambient Air Quality, Energy Conservation, Wastewater and Ambient Water Quality, Water Conservation, Hazardous Materials Management, Waste Management, Noise, Contaminated Land)

  • Occupational Health and Safety(General Facility Design and Operation, Communication and Training, Physical Hazards, Chemical Hazards, Biological Hazards, Radiological Hazards, Personal Protective Equipment,Special Hazard Environments, Monitoring)

  • Community Health and Safety (Water Quality and Availability, Structural Safety of Project Infrastructure, Life and Fire Safety, Traffic Safety, Transport of Hazardous Materials, Disease Prevention, Emergency Preparedness and Response)

  • Construction and Decommissioning (Environment, Occupational Health & Safety, Community Health & Safety)

  • B)Industry Sector Guidelines
    It contains sector specific impacts and environmental and social standards of 62 industry sectors in 8 industrial categories, such as Agribusiness/Food Production, Chemicals, Forestry, General Manufacturing, Infrastructures, Mining and Power.

(Please refer to IFC's official website for more details on Dthe EHS guidelines.)

Incorporation of covenants linked to compliance is an important strength of the Equator Principles. Equator Principle 8 requires the clients to covenant in the financing documents to comply with all relevant host country environmental and social laws, regulations and permits. In the case of projects located in Non-Designated Countries, the clients are furthermore required to covenant in the financing documents to comply with the relevant applicable Environmental and Social standards.

Site Visits

SERAO will conduct site visits, as appropriate, to assess social and environmental aspects on the project sites over the world.

  • Europe and Commonwealth Independent States (CIS)

    Europe and Commonwealth Independent States (CIS)

  • Central and South America

    Central and South America

  • Southeast Asia

    Southeast Asia

  • Africa

    Africa

Financial Advisory Service Support

When Bank of Tokyo-Mitsubishi UFJ provides financial advisory services to clients who seek project finance, SERAO assists clients, as appropriate, on the application of the requirements under EP from an early stage of the deal.

Education and Training

Education and Training

Education and Training

Bank of Tokyo-Mitsubishi UFJ (the Bank) conducts training for its employees, with the objective of deepening their understanding of environmental and social considerations, and thereby proliferating the philosophy and practices of EP.
The training is targeted at employees in charge of domestic and overseas project finance; CSR, planning, and credit; and relationship managers for large corporations. The Bank utilizes internal communication measures to promote better understanding of social and environmental considerations by all employees. The Bank also provides training for customers at their request.

Dialog with Stakeholders

Through dialog with stakeholders, including NGOs, we receive a wide range of information and proposals on social and environmental initiatives. We take such information into consideration when making decisions on project financing.

Voice

Bank of Tokyo-Mitsubishi UFJ, as a member of the Equator Principles Association's Steering Committee which represents over 80 member banks, coordinates the administration and operation of the association. Among the working groups (WG) established under the Steering Committee to discuss and provide guidance to EPFIs, we co-lead the Consistency WG (supports EP application and implementation) and the Social WG (a discussion forum that focuses on social risk management).

We also take part in conferences and discussion groups on environmental and social risk management organized by practitioners and international institutions to share our experiences and to learn from the practices of our peers and stakeholders.

Maki Shibatsuchi Manager
Social & Environmental Risk Assessment Office
Structured Finance Division
Bank of Tokyo-Mitsubishi UFJ

Maki Shibatuchi

Data ReportingBank

[FY 2016 (April 1, 2016 to March 31, 2017)]
For FY 2016, Bank of Tokyo-Mitsubishi UFJ (the Bank)'s EP data and implementation reporting covers project finance transactions (see Note) and project-related corporate loans that applied EP and were financially closed between April 1, 2016 and March 31, 2017, and project finance advisory services where the Bank was mandated between April 1, 2016 and March 31, 2017.

Selected information reviewed and assured is marked with ().

Project Finance Advisory Services

Mandated in the specified period

  FY 2016
# Projects
12
By Sector # Projects
Mining 1
Infrastructure 4
Oil and Gas 1
Power 2
Others 4
 (Petrochemical) 2
 (excluding Petrochemical) 2
By Region # Projects
Americas 3
Europe, Middle East and Africa 1
Asia Pacific 8

Project Finance

EP-applicable Project Finance transactions reached financial close within the specified

  FY 2016
A B C Total
13 35 8 56
By Sector A B C Total
Mining - - - -
Infrastructure 1 12 2 15
Oil and Gas 3 - - 3
Power 8 22 3 33
Others 1 1 3 5
 (Petrochemical) 1 - - 1
 (excluding Petrochemical) - 1 3 4
By Region A B C Total
Americas 3 14 - 17
Europe, Middle East and Africa 3 11 3 17
Asia Pacific 7 10 5 22
Designated and Non-Designated Countries A B C Total
Designated Countries 4 28 8 40
Non-Designated Countries 9 7 - 16
Independent Review A B C Total
Yes 13 35 6 54
No - - 2 2

Project-Related Corporate Loans

EP-applicable Project-Related Corporate Loans that reached financial close in the specified period

  FY 2016
A B C Total
3 5 3 11
By Sector A B C Total
Mining - - - -
Infrastructure - - - -
Oil and Gas 2 - - 2
Power 1 2 - 3
Others - 3 3 6
 (Petrochemical) - - - -
 (excluding Petrochemical) - 3 3 6
By Region A B C Total
Americas - 2 1 3
Europe, Middle East and Africa 3 2 - 5
Asia Pacific - 1 2 3
Designated and Non-Designated Countries A B C Total
Designated Countries - 4 2 6
Non-Designated Countries 3 1 1 5
Independent Review A B C Total
Yes 3 2 - 5
No - 3 3 6

(Reference: THE EQUATOR PRINCIPLES iJUNE 2013j-EXHIBITS: SUPPORTING INFORMATION, Exhibit I: DGlossary of TermsPDF)

Glossary of Terms

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(As of November 2017)

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