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The Business of

Risk

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Standards Organisation of Nigeria (SON) and her Knowledge Partner,

ThistlePraxis Consulting announces the

Adoption Ceremony of NIS: ISO26000

Date: July 11, 2013 Venue: | Southern Sun, Ikoyi, Lagos, Nigeria Time: 10:00am|

ISO 26000 is an International Standard (by the International Organisation for Standardisation (ISO) elaborated to guide organisations

on Social Responsibility. It is a consensus guidance document that provides support or a reference for all kinds of organisations in both

private and public sectors both in developed and developing countries, as well as those who may be referred to as ‘being in transition’.

Instead of a law or index, this document provides a mere guide (not for certification) to complement the diverse efforts of organisations

ISO 26000 Guidance Standard on Social Responsibility Nigeria Adoption Process

(ISO26000: NAP)

all over the world in attaining social responsibility.

Lead Sponsor: Knowledge Partner:Brand Support:

42

ContentsContents

COVER STORYGLOSSARY

Events

ERSM Terminologies

Environmental Performance and Market Development (EPMD) Program

Feature11

Verbatim

OPINION

ONLINE RESOURCESSC Portal, & First Sustainability

Beyond an E.I.A.

How important is Risk Management to your Organisation?

Implementing Environmental & Social Management Systems

17

21

44

45

20

FAQS 08

column14

Legal Convenanting

30

cover story

3

9 QUESTIONS

4

Publisher�s Note

It is almost impossible to pick up a newspaper or magazine and not see an article that makes a reference to sustainability. It seems to be the new buzz word. From the number of write-ups devoted to the topic, it is clear that s o m e t h i n g i s h a p p e n i n g i n organizations around Africa. The drive for sustainable performance has also put pressure on C-Suite Executives to do more and disclose more about the r e l a t i o n s h i p s b e t w e e n t h e o rgan iza t ions they l ead and stakeholders regarding responsible behavior.

For risk managers, sustainability presents both chal lenges and opportunities. New areas of risk greatly enlarge their responsibilities, and this is not made light in any way as the lack of traditional solutions in some emerging risk areas will require risk managers to develop new approaches involving non-insurance strategies.

Sustainability embraces a wide range of issues, from renewable resources to social and employment practices. Justifiably, many organizations find addressing this broad set of issues challenging. Questions such as how to reconcile long-term with short-term goals, global expansion with local objectives, workplace and community issues, must be answered while not losing sight of the basic goals of ensuring profitable operations and increasing shareholder value.

Organizations that are looking at the broader risk management implications of sustainability have to reconsider their approaches to address intangible and long-term risks as well as more tradit ional tangible r isks . Top organizations that have implemented formal sustainability programmes are embracing these concepts as a part of their overall business strategies, and are developing new techniques to

address emerging risks associated with sustainability issues.

In this edition, we look at various Environmental and Social Risk Management issues and how it relates to various sizes of organizations.Why is environmental and social r isk m a n a g e m e n t necessary?Organizations, especially industrial enterprises, carry out activities which may present a hazard t o h u m a n h e a l t h o r c a u s e e n v i r o n m e n t a l d a m a g e t o communities. In addition, a company's physical assets, especially property or land, may be contaminated due to current or historical activities. As a result, the financial institutions which deal with those companies, whether as b a n k e r s , i n v e s t o r s o r o t h e r involvement, face a variety of potential environmental and social risks. This applies even when a company complies, or appears to comply, with current environmental and social legislation.

It is important to recognize that, in addition to creating risk, consideration of environmental issues can also provide opportunities for companies to improve their competitive position through improved operat ional performance and efficiency by developing new products and services. Sometimes these environmental and social opportunities will result in new business opportunities for the financiers. It is therefore in a financial ins t i tu t ion's in te res t s tha t i t understands how environmental and social concerns affect it and its business partners. This speaks not only to financial institutions, but all other sectors need to key in sooner than later.

I sincerely hope you will find this edition engaging as usual. Do stay in touch.

Sustainably yours,

Ini Onuk

5

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conversation

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you would like to share with Africa?

Contribute to CSR Files�, the leading resource on CSR

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PUBLISHERIni Onuk

EDITOR-IN-CHIEFEmilia Asim�Ita

CONTRIBUTORSCarey Bohjanen Joy Ngozi Ugorji

Swe ThantUnique Venture Capital Limited

�Tayo Adedeji

RESEARCHDamilola Famakinwa

DESIGN�Dare Onadeinde

ADMINISTRATIONIfeoluwa Aderoju Emmanuel Udoh

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Copyright © 2013 by ThistlePraxis Consulting Limited.

Volume 2, Issue 3March, 2013Published in the Federal Republic of Nigeria............................................................................................................................Cover Image: istock library.

CONTRIBUTING EDITORAnwuli Ojogwu

Ngozi Joy Ugorji

6

Emilia

EDITORIAL

The Business of Risk is a Risky Business�Prior to the renewed emphasis on Risk Management in Africa, especially for financial institutions in Africa; the position of ThistlePraxis had long been that institutions must demonstrate responsibility not only in the way they spend their profit, but also in the way the profit is derived. This includes financial institutions and the businesses they fund.

Hence, it was a welcome development when 22 Nigerian Banks signed on to the Nigerian Sustainable Banking Principles (NSBP) in July 2012. We were pretty pleased and eager to see the principles take effect. Nevertheless, we worried, and still do, about the capacity of the apex bank to monitor, enforce and administer punitive measures for defaulting institutions. Meanwhile, we can only play our role in the best way possible as a support institution to assist these institutions with challenges envisaged in attaining compliance.

This informs our focus for this edition on The Business of Risk. Due to the slightly technical nature of Environmental and Social Risk Management, we have simplified the information in very short and crisp pieces. Carey Bohjanen, Managing Director of Sustainable Finance Advisory and consultant to the strategic sustainability work group, which developed the Nigerian Sustainable Banking Principles, contributed the cover story on Risk Management. It is an insightful article, and our shortest cover article, ever. And if most of the information and 'gospels of applicable standards' sound too taxing, then the case study contributed by Unique Venture Capital Limited on applying and implementing the E&S Management system should illuminate (and sum up, if I may add) what the edition is about.

The business of risk is indeed risky. Due to the nature of Environmental and Social risks, no management system is full proof, and the existence of standards and thorough due diligence may not mitigate unprecedented risks in a fast changing world that we currently live in. However, by creating a process whereby these undesired outcomes can be envisaged and prepared for, makes Environmental and Social Risk Management an imperative for all organizations � not only financial institutions.

In the last couple of months, a group of consultants (including us at ThistlePraxis) from supporting institutions, and representatives from many banks, have attended an Africa-wide workshop programme � starting from Lagos�organized by the International Finance Corporation on Environmental Performance and Market Development, which is their support programme to facilitate the implementation of environmental and social management frameworks for financial institutions. During the programme, we discussed in-depth risk management issues with case studies in Nigeria and Africa. The consultants worked with the banking representatives to develop or strengthen their framework for their E&S Management System. It is an enlightening programme (it is on-going till November), and I must thank the IFC EPMD Team (especially Emiola Abass and Christina Wood) for their assistance and handling the workshops with such commitment and passion. You will find details of the workshop in our Event Feature section.

The statistics around climatic changes make the future highly uncertain. How will the business environment accommodate and with stand these changes with innovative strategies? Who will take responsibility? Who foots the costs? These are questions to be answered.

Let's journey down the risky lane� we hope you have a plan in case you run into many speed bumps!

8

What does Environmental & Social Risk mean?

Environmental & Social Risk can be described as potential hazard that may arise from environmental and social problems through human activities. These activities may present a threat, and irreparable damage to human welfare and health, environment and communities. In the case of social issues, they may emerge in the workplace of an FI's client's operations and may also impact surrounding c o m m u n i t i e s . T h e a d v e r s e consequences of these activities could lead to unforeseen negative exposure and significant loss of investment.

What Environmental & Social issues create problems for a Financial Institution?

All financial institutions are exposed to different levels of environmental and social risks through the nature of the businesses they transact with clients. The degree of environmental and social impacts potentially associated with an FI's clients' operations depends on the industry sector. These risks are further categorized into low, medium or high risk. However, environmental and social issues that create problems for financial institutions include activities that obstruct or destroy air emissions and air quality; energy use and conservation; wastewater and water qual ity; water use and conservation; wastes; biodiversity and natural resources; labor and working conditions; occupational health and safety; community health, safety, and security; land acquisit ion and resettlement; indigenous peoples and

cultural heritage

When should E & S Risk analysis be applied in a Financial Institution?

Environmental and social risk analysis is traditionally applied at the early stage of considering a project of a client. This process is to enable the financial institution determine the extent of environmental and social due diligence that will be required for a particular transaction, and the p o t e n t i a l i m p a c t s f r o m t h e i n v e s t m e n t s . D u r i n g t h e environmental and social risk analysis, an initial assessment is carried out on the project to determine whether it falls in the low, medium or high risk category.

What then are Low, Medium and High risk transactions? Low risk transactions involve business activities that result in minimal or no adverse environmental and social i m p a c t s , w h i l e m e d i u m r i s k transactions involve business activities with potential adverse environmental impacts, but which are less adverse if mi t igated , and the h igh r i sk transactions involve business activities with significant adverse environmental and social impacts that may be irreversible. Along with other assessments carried out as part of the due di l igence procedure, this environmental and social risk category can be incorporated into the overall risk assessment of a transaction and factored into the decision-making process.

FAQS

'Understanding E & S Risks

for Financial Institutions'

The degree of

environmental and social impacts

potentially associated with an FI's clients'

operations depend on the industry sectorThese risks are

further categorized

into low, medium or

high risk

9

What is an Environmental and Social Risk Management System?

An Environmental and Socia l Management System provides the pre-requisite steps to manage a financial institutions environmental and social management process. The system�s contents enable the f inancial institutions create procedures for identifying, assessing and managing environmental and social r isk transactions. It also helps to define the d e c i s i o n - m a k i n g p r o c e s s , responsibilities and capacity needs of staff and guidance on how to screen transactions, categorize transactions based on their environmental and social risk, conduct environmental and social due diligence and monitor the clients environmental and social performance.

What kinds of Risks can Financial Institutions be exposed to without an E&S Management System?

Without E&S management procedural guide l ines to ass is t f inancia l institutions mitigate risks, financial institutions can be exposed to Liability Risk, Credit Risk and Reputational Risk.

What is the difference between Reputational Risk and Credit Risk?

Credit risk implies the inability of the client to fulfill contractual obligations, which may result in default in repaying i n v e s t m e n t a s a r e s u l t o f environmental and social issues; while Reputational risk is a situation whereby the financial institution faces negative publicity associated with clients' poor environmental and social practices, which can harms its brand value and image in the media, with the public.

And what does Liability Risk entail?

Liability risk implies that the financial institution may be held liable for damages caused by their client�s operations and may pay fines and penalties due to their clients' n e g l i g e n c e i n m a n a g i n g environmental and social risks .

To guide financial institutions and business to mitigate E&S risk exposure, the Central Bank of Nigeria has developed the Nigerian Sustainable Banking Principles, the IFC has developed Performance Standards on E n v i r o n m e n t a l a n d S o c i a l Sustainability, in addition to the Equator Principles.

FAQS

An Environmental

and Social Management

System provides the pre-requisite

steps to manage a financial

institutions environmental

and social management

process

11

FEATURE

Unique Venture Capital (UVC) and West African Venture Fund (WAVF) are fund/investment management f i r m s , w h i c h c o m m e n c e d investment operations in 2005 and 2010, respectively. Whilst UVC c o n d u c t s a n d m a n a g e s investments in Nigeria, WAVF conducts similar activities in Sierra Leone and Liberia. Through the SMEEIS (Small and Medium Enterprises Equity Investment Scheme) Fund managed for Union and Main Street banks, UVC makes investments in various interests, whilst the West African Venture Fund is managed on behalf of the International Finance Corporation. Investment instruments used by both organisations in investment operations include equity (ordinary shares), preference shares, financial lease, debt (loans), among others.

Original Driver Prior to winning the mandate to m a n a g e t h e I F C ' s W A V F, Environmental and Social Risk Management was not central to UVC operations, at best it was an ad-hoc activity rather than a business strategy that could be positioned to generate returns.

However, Corporate Governance (the 'G' in ESG) was very central as a risk control measure continuously deployed by UVC to protect its invested capital and achieve set returns. Therefore, the development and implementation of an ESMS was part of the process of mainstreaming WAVF's operations and complying with an IFC directive. Hence, from the fund, this operational strategy was introduced to the parent company, UVC.

Lessons Learnt The lessons learnt are best described as milestones and challenges. The milestones summarise the strategies that worked and proved to be successful, whilst the challenges are aspects of investee relations that also pose pitfalls to be considered carefully when implementing an ESMS.

Milestones Management buy-in both at Portfolio and Investee Company levels was very crucial to the success of integrating an Environmental & Risk Management framework. It made implementation smoother from top to bottom.

Having an ESMS manual for the fund, and having a brief project specific

ESMS manual for the Fund Investee Companies, has helped curb the challenge of administering the same governance framework for al l investments.

Offering investee companies trained p e r s o n n e l t o s u p p o r t t h e implementation (and compliance) to ESMS standards is very important to ensuring a smooth process. Here, entrepreneurs can get the needed support through each phase of the system.

In addition, rather than have separate procedures for credit and then ESG issues, main streaming ESG into the credit/investment process is a more effective way to implement an ESMS. This way, there is no duplication of reviews and procedures.

Creation of ESG awareness and interest (benef i ts to investee companies) prior to and after disbursement through training workshops, site visits and periodic liaison etc; is very crucial. In addition, it provides case studies for building capacity and convincing more organisations to implement same.

It is very useful to keep the communication lines open. Frequent

Environmental & Social Management Systems By UNIQUE Venture Capital Limited

IMPLEMENTING

12

FEATURE

one-on-one contact and relationships with senior management and staff of investee firms help both to build awareness and manage risks all through the project cycle. This helps to bridge the gap and address challenges before periodic audits and report reviews.

Interaction with al l relevant stakeholders, which includes residents of the host community, staff of the investee companies and customers, etc, is very vital to getting access to vital information that constitute risks to the venture.

Unders tand ing the Inves tee Companies' Operation Module and Value Chain is the fundamental approach to providing support b e c a u s e w i t h o u t a c l e a r understanding of the business, risk management is futile.

Challenges Having uninformed, generalized requirements for everyone, instead of giving room for situation-specific occurrences, remains a challenge. This also proves that risk management

procedures are best tailored to the specific business venture for desired impact. The failure to link ESMS with benefits such as cost reduction, increase in turnover, and increased staf f morale/productivity remains a challenge for would-be venture owners. This is because ESMS is still largely seen as a cost-intensive exercise.

Implementing an ESMS should not be a strictly audit/compliance activity at the beginning. Instructing the Promoters/Clients on the procedures (trying to lord it over them), instead of knowledge and ideas sharing and contributions; always poses a challenge. In some cases, the promoters often suggest ways to make ESMS procedures even more valuable to the business.

It is not encouraged to begin with making suggestions that are complex and costly to implement such as time-consuming audits and reviews, Human Resource-dependent activities and expensive purchases. To start with the simple things always work better than handing down a l ist of deliverables and then attempting to enforce compliance.

Key OutcomesThe following outcomes have been recorded in the investee companies as a result of the implementation of an integrated risk management system:

There has been a record of deepened client relationships through frequent one-on-one contact with clients. These have also been positive for effective monitoring and periodic reviews.

Value adds to the Portfolio, such as 'Waste to Wealth' approaches to business have improved the client's ability to deliver return on investments.

In addition, new business ventures have been generated such as Zeri Limited, a portfolio Company that deals in converting brewery waste (spent grain) into animal feed.

B e t te r s e n s e o f ove ra l l r i s k management that has positively impacted cashflow, turnover and profits. For instance, a planned programme of energy from waste (biogas production), which will lower electricity/energy use and cost has been implemented and this shows applicability of E&S Risk Management

not only to Corporate Clients but also to SMEs.

MSME ClientsSince most portfolio companies are SMEs implement ing ESG r i sk management measures, it was glaring that risks threaten all organisations � both big and small � because they operate in similar environments and may affect the ability to repay loans.

Consequently, MSMEs produce goods and services that impact the environment, employ people and are mostly located in communities, and these may give rise to human resource and social issues. MSMEs need to be well managed and governed by policies, procedures and systems in addit ion to internal controls , segregation of duties and boards in order to accomplish cash flow, revenue, profit, among others.

ESG management should therefore not be expensive for MSMEs in order to ensure feasibility in corporate budgets. This is often considered after pre-requisite permits from appropriate regulatory agencies.

Unexpected Positive OutcomesAn Investee Company, a logistic services firm was selected for a partnership opportunity with a global firm by reason of an effective ESMS i m p l e m e n t a t i o n . A l s o , s o m e procedures necessitated by the ESMS were reiterated by the larger corporations as conditions for partnership and client services. Hence, this Investee Company has now been appointed as a representative in Liberia.

Feedback from ClientsSince the integration of ESG factors into lending activities, client feedback has been very positive. Initially, it seemed like a task or insurmountable challenge; however, the clients now maximise benefits and improve productivity as a result of integrating an ESMS.

Corporate Governance

(the 'G' in ESG) was very

central as a risk control

measure continuously deployed by

UVC to protect its invested capital and achieve set

returns

14

COLUMN

The term legal covenanting is used in the drafting of Environmental and Social Covenants. It often becomes necessary when drawing up an E n v i r o n m e n t a l a n d S o c i a l Management System (ESMS) to incorporate necessary clauses into legal agreements. These clauses are best discussed and agreed upon by all parties prior to the agreement drafting in order to ensure understanding and compliance at the set time line.

The definite language will depend on the type of transaction and potential environmental and social risks identified during the due diligence process. It is advisable that all loan agreements should contain covenants ensuring that cl ients are in compliance with the applicable requirements such as relevant national l e g i s l a t i o n p e r t a i n i n g t o environmental protection, labour, health and safety of workforce and community and as well as industry specific regulations and frameworks such as the Nigeria Sustainable Banking Principle (NSBP), Equator Principles and IFC Performance Standards.

Covenants are also risk mitigation strategies or techniques employed to ensure investee companies comply with certain standards and more

importantly, that the exposure to the risks identified are substantially reduced. It also helps a financial institution reduce this exposure throughout the l i fet ime of a transaction and gives the financial institution legal recourse in the case of a client is unable or refuses to adhere accordingly.

In addition to covenants at the commencement of the transaction relationship, the stipulated conditions to be met must be revisited and reviewed during site visits and periodic evaluation of the transaction. This ensures that the risks envisaged are not ignored in the course of client operations and activities. After this review, a periodic environmental and social performance report for the financial institution should be prepared to consider issues of non-compliance with the environmental and social clauses as a breach of contract, which constitutes an Event of Default under the terms of the legal agreement.

In case of such an event, financial institution staff need to work with clients/investees to resolve non-compliance issues in order to ensure that any potential exposure of the f i n a n c i a l i n s t i t u t i o n t o t h e client's/investee's environmental and social risks is mitigated. Where resolving the non-compliance issue is not possible, the financial institution may be required to take legal action against the client/investee to reduce its exposure to the environmental and social risks associated with the transaction.

Nonetheless, before loans are disbursed, the following covenants

LEGAL COVENANTING

The term legal covenanting is

often used in the drafting of

Environmental & Social Covenants. It

often becomes necessary when drawing up an

Environmental and Social Management

System (ESMS) to incorporate

necessary clauses into legal

agreements

15

COLUMN

must be clearly understood by the client:

Positive Covenants: Measures or a c t i o n s to b e ta ke n by th e client/investee. These may include the requirement for compliance with national, environmental and social regulat ions and internat iona l standards, and periodic reporting on e n v i r o n m e n t a l a n d s o c i a l performance. In the event of significant accidents and incidents, w i t h p o t e n t i a l l y a d v e r s e environmental and social effects such as spills or workplace accidents resulting in death, serious or multiple injuries or major pollution, the client/investee is required to notify the financial institution in a timely manner such as within 3 days.

Negative Covenants: Actions that the client/investee should refrain from undertaking. These include the financial institution's environmental and social requirements.

Conditions Precedent: Conditions a n d r e q u i r e m e n t s t h a t t h e client/investee has to fulfill prior to

disbursement of funds by the financial institution. These may include proof of valid permits and licenses, preparation of government-requested reports and delivery of completion of mitigation actions stipulated in the corrective action plan.

Event of Default: An event that entitles the financial institution to cancel a transaction and declare all amounts owed by the client/investee to become immediately due and payable. For transactions that involve complex environmental and social issues, this may include specifying a time period such as 30 days during which the client/investee can resolve the issue after notification by the financial institution.

Corrective Action Plan: The Plan is typically included as an annex to the legal agreement, outlining the specific mitigation actions to be taken by the client/investee according to an agreed time frame for implementation.

Covenants are also risk mitigation

strategies or techniques

employed to ensure investee

companies comply with

certain standards and more

importantly, that the exposure to

the risks identified are substantially

reduced

Now, the conversations can begin…..

www.sustainableconvos.comTHOUGHT. ACTION. CHANGE. IMPACT.

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17

OPINION

Sustainable Development is a term that is often used but rarely practiced during the whole of project lifecycle. In practice, within the Nigerian context and also in the wider African sphere, we find that people's understanding of this term is limited to the EIA, the only document within the legislation of most African countries relating to the environment. A compulsory step in getting project approval, has the EIA clouded people's thinking on sustainability?

Everyone knows what an EIA is. Scratch that, everyone who has tried to undertake a major development or rehabilitation project (be it in the oil and gas, transportation, power or manufacturing industry) knows what an EIA is.

T h e E n v i r o n m e n t a l I m p a c t Assessment (EIA) is officially the process by which an organisation identifies its likely environmental impacts, assesses their magnitude and then puts a plan in place to mitigate said impacts. On paper, it's a fantastic way of looking at the whole life-cycle of a project and identifying areas in which things could not just go wrong, but perhaps even identify advantages to the environment. It also has that amazing thing, and Environmental

Management Plan (EMP) tacked on to the end of it, giving people a blueprint for on-going operational activities that will help then continue in a sustainable manner.

It sounds like a very good plan, a sound way of implementing change. However, on this continent it seems that the EIA is not generally seen as a process. It doesn't appear to be used to guide any behaviour or project design. It just seems to act as a document or hurdle to be surpassed. There are quite a few reasons for this, many of which are not uniquely African, although some would appear to be so.

How an EIA is done in practiceI t i s of ten the case that an env i ronmenta l a ssessment i s commissioned after a project has been decided on, and when investment has been secured. However, the legislation dictates that a more forward-thinking approach should be adopted, stating that the process is intended �� to establish before a decision taken by any person, authority corporate body or unincorporated body including the Government of the Federation, State or

Local Government intending to u n d e r t a k e o r a u t h o r i s e t h e undertaking of any activity that may likely or to a significant extent affect t h e e n v i r o n m e n t o r h a v e environmental effects on those activities shall first be taken into account�.

While the EIA is used as the holy grail of environmental management, there are in practice other processes that would allow for the issue of sustainable development to be considered within the process of project design or �first�. T h e S t ra te g i c E nv i ro n m e n ta l Assessment (SEA) is one such document that is used at project inception to consider and include the need for environmental management activities, before significant design input has been made. It would allow the principles of eco-design to be applied in a given project, delivering a blueprint of considerations to technical staff for inclusion in the design process. At this stage, environmental impacts are not only mitigated but perhaps provided with an engineering solution that allows for favourable project design alternatives

beyond an E.I.A.Sustainable development, for a whole project lifecycle.BY TAYO ADEDEJI

international standard or practice blindly, these structures allow organisations to practice in a manner that can be compared to performance anywhere else in the world. We are yet to p ro d u c e o r ow n s p e c i f i c frameworks, so these, I think, can do for now.

There is, however, one area in which organisations, consultants and legislators are agreed.

The EIA regulations state plainly that the EIA process should be used:

��to encourage the development of p r o c e d u r e s f o r i n f o r m a t i o n e x c h a n g e , n o t i f i c a t i o n a n d consultation between organs and persons when proposed activities are likely to have significant environmental effects on boundary or trans-state or on the environment of bordering towns and villages.��

The need to properly assess, involve and manage impacts to people cannot be scrimped upon. Nigeria has been, and is still being taught a painful lesson in people management (otherwise known as the socioeconomic a s s e s s m e n t a n d s t a k e h o l d e r management section of the EIA) and the need for the corporate and social responsibility that invariably results from this process.

Making the EIA work for sustainable developmentSo what should we really like to see? In my opinion, we should demand that some more thought be put into

18

OPINION

to be incorporated.

Where the International Finance Corporation are providing funds for a development project, the EIA is a compulsory step that has been deemed important enough to be provided with detailed guidelines for execution. There is indeed a high cost associated with fieldwork and expertise when an EIA is done to suitable standards. However, where the EIA is not an actual condition for approval, it can be seen as a drain on project finance. While it can be argued that the potential cost, should environmental impacts actually occur (BP can of course, explain this to all), one must acknowledge that the cost of registrations and notifications, which appear to be far in excess of any administrative costs for processing documents and which fall outside of the cost of the EIA consultants expertise, can be considered to be prohibitive.

It can often be found that EIA is seen as a gateway to project completion, rather than as a process that needs to be continued for the lifetime of the project. It can be argued that that is the job of the EIA. In actual fact, I agree that its usefulness is limited to that time.

However, its essentiality as a means of producing change in environmental considerations can never be fulfilled in a system that does not compel anyone to take that magical conclusion, the EMP, into the operational phase of the development. Management practices, means o f impact mi t iga t ion , monitoring plans and changes in behaviour simply cannot be of use if they are trapped in a document that is not referred to when a project is in operation.

For this purpose, the international s t a n d a rd s fo r e nv i ro n m e n ta l management (such as the ISO14001 Standard) are a much more suitable means of producing an organisation or project that works sustainably. The p r o c e s s o f a t t a i n i n g t h e s e certifications involves a �plan-do-act and improve� cycle that compels an organisation to think about making changes that result in benefits to the environment, and also document them.

Most importantly, the charge to continually improve on each year's performance results in real thought going into the processes and procedures that could lead to unwanted impacts. While I am not an advocate for adopt ing ever y

implementing the ideals of sustainable management, which actually involves

The Strategic Environmental

Assessment (SEA) is one such

document that is used at project

inception to consider and

include the need for environmental

management activities, before

significant design input has been

made.

20

VERBATIM

how important is Risk

management to your organisation?

For us, Environmental and social risks is key to every management decision and direction. It transcends beyond the environment, community impacts and labour standards to taking advantage of business opportunities and leveraging on these risks as assessed. This is important especially in our company where environmental problems do create some risk to the company. However these environmental and social risks/opportunities do sometimes result in new business opportunities. They also play a definitive role in funds access

Olisa Onu, Havifarm Ventures

I represent Pama Logistics Limited, a company involved in trucking & haulage within the Free Zone Region in the Niger Delta Environ. For us Risk Management and Operational Risk Management is a continual cyclic process which includes risk assessment, risk decision making and implementation of risk controls. Every employee has been trained to perform a thorough risk assessment before commencing any operation. This usually involves identifying and painstakingly selecting cost effective approaches for minimizing the effect of menace realization to the social ecosystem. Risks when identified are quantifiable and measurable in financial terms. The good thing is all risks can never be fully avoided or mitigated! All organizations have to accept some level of residual risks and proffer requisite solutions: Assess the situation, Balance the organisation resources, communicate risk and intentions, do (take relevant actions) and debrief

HavifKelechi Chukwu, Pama Logistics Limitedarm Ventures

The prevalence of social and environmental risks in the world calls for the development of resilience. In the face of actual or likely crises, are we prepared? Can we adapt? Can we endure? There are many helpful risk assessment and risk management tools that organisations can and should use. However, there is also a danger that we get caught up in the risk mindset; that we fail to see the opportunities, the possibilities for entrepreneurial solutions, for social and environmental innovation. Of course, we must anticipate and protect ourselves from risks, but let us

also invest in R&D, technology, education, culture and leadership that can turn risks into markets and solutions

Wayner Visser

�At NLI, we are in 'people's businesses through the enhancement and development of values-based leaders to drive positive change. For us, values are the means to achieve the end of a �good society�. The biggest risk, for what we do, resides in what optimal mix of values is required to achieve a good society. There are, sometimes, tensions in balancing the means and ends to develop a nation; our risk management strategy is, therefore, to assist public and corporate leaders to lead ethically by encouraging them to turn their *success to significance* while also nudging them to move from thought to action."

Yinka Oyinlola

ESRM means having the fortitude organizationally to go above and beyond the requirements of regulations and industry standards to ensure that best practices are being championed. Also, having the foresight to put into practice measures that can obligate sustainability through predictable and unpredictable shocks. The ability to recognize the antecedents of catastrophes can aid in ensuring a high level of resiliency within the organization and prevent idiosyncrasies from becoming an acceptable behavior when encountering ruinous situations

Armond Sinclair, PhD Student at University of Toledo - College of Business and Innovation

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ESMS- ENVIRONMENTAL AND SOCIAL MANAGEMENT SYSTEM Environmental and Social Management Systems (ESMS) are a set of management processes and procedures that allows an organisation to analyse, control and reduce the environmental and social impacts of its activities, products and services. Key areas of ESMS are human resources management, environmental management, and occupational health and safety management.

PS-PERFORMANCE STANDARDS Performance Standards are benchmarks adopted by many organizations as a key component of their environmental and social risk management for identifying and managing their environmental and social risk. Performance Standards help companies identify and guard against interruptions in project execution, legal claims, brand protection, and accessing international markets.

ESIA- ENVIRONMENTAL AND SOCIAL IMPACT ASSESSMENTSAn Environmental and Social Impact Assessment (ESIA) is a voluntary assessment conducted to identify, evaluate and develop management measures for environmental and social impacts associated with the construction and operation of a project.

EDD- ENVIRONMENTAL DUE DILIGENCE Environmental due diligence is simply making sure that the land being purchased or utilised for a particular project does not pose any potential risks or environmental hazards that may affect the area's development or its future occupants.

EAP- ENVIRONMENTAL ACTION PLAN An Environmental Action Plan (EAP) consists of the actions required to implement a given project in accordance with the Environmental Report (ER) that has been prepared following an Environment Agency guidance. It sets out specific objectives and targets defining the way in which we wish the ER and its findings to be addressed during the implementation phase of the project (e.g. detailed design, construction and post-construction phases). It also details roles and responsibilities of those involved in the proposal and refers to all temporary and permanent works.

EA- ENVIRONMENTAL AUDIT Environmental audit is a general term that can reflect various types or evaluations intended to identify environmental compliance and management system implementation gaps, along with related corrective actions. In this way they perform an analogous (similar) function to financial audits. There are generally two different types of environmental audits: compliance audits and management systems audits.

EC- ENVIRONMENTAL CONSULTANT An environmental consultant is someone who works with a company on environmental issues that it may face. They are responsible for assuring that companies follow environmental regulations. They also suggest ways for a company to do their business in an environmentally friendly way.

CP- CONDITION PRECEDENT A legal term describing a condition or event that must come to pass before a specific contract is considered in effect or any obligations are expected of either party. ESP- ENVIRONMENTAL AND SOCIAL PROCEDURES The Environmental and Social Procedures outlines the process by which organisation's staff process and monitor projects in accordance with the overall ESP framework. The Procedures apply to the full range of the organisations activities and operations.

SVG- SITE VISIT GUIDANCE This is a step by step approach to carrying out a site visit to a company or organisation with a view to gaining an understanding of the environmental and social issues affecting it. The guidance helps those embarking on the site and have no specialist understanding of environmental and social issues.

ES- ENVIRONMENTAL SUSTAINABILITY Environmental sustainability is about making responsible decisions that will reduce a business' negative impact on the environment. It is not simply about reducing the amount of waste you produce or using less energy, but is concerned with developing processes that will lead to businesses becoming completely sustainable in the future.

GLOSSARY

rISK

CATEGORIZATION

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In credi t approval processes , transaction screenings are imperative to assess whether the potential deal complies with the financial institution's basic requirements. The projects have to be screened thoroughly to ascertain if it involves an excluded activity or if it contradicts with the f inancial institution's policy or sector. Hence, the nature of the project, industry sector and size of the project vis-à-vis the requested value of credit must be thoroughly reviewed and then categorized by the environmental and social risks involved.

Risks can be classified according to their impact on the financial institution and the investee company and/or business transaction. For the financial institutions (often called lenders), there are mainly three categories of risks involved in any transaction, namely:

Credit RiskThis is also termed 'default probability' or 'loss given default'. It involves the uncertainty of a client's ability to repay the loan on account of social and environmental issues. Credit risk is often considered by the level of risk the project is exposed; often determined by the number of environmental and social factors that threaten the success of the project.

For instance, if the cost of mitigating environmental and social risks is significantly high in comparison to the value of the entire project, the client may be unable to pay back. Also, the cost of complying with environmental and social standards as well as regulatory fines and penalties may contribute to the inability of the client to meet its obligations to the financial institution.

Liability RiskLiability risk arise from the financial institution and investee client facing legal complications, in rectifying social and environmental damages by virtue of taking possession of collateral. These include fines, penalties, legal fees as well as costs for addressing third-party claims for damages due to n e g l i g e n c e i n m a n a g i n g environmental and social risks in business operations. Clean up of contaminated resources or the environment may also aggravate risk mitigation measures. In cases where the f inancia l ins t i tut ion i s a shareholder in the investee company, it may also be directly liable for all risks associated in the operations of that company.

Reputational RiskNegative aspects of a project harm a financial institution's image in the media with the public, the business and financial community and even with their own staff. The exposure of the financial institution to such reputational damage may reduce its brand value and perception by stakeholders. Project categorization of risks border on the nature of risks involved in the project whether or not the financial institution is involved. However, these risks are also business risks for the financial institutions because they have significant impact on the client as well as the credit facility to be disbursed.

Furthermore, to mitigate risk, a financial institution may categorize the investee client's project to enable it i dent i f y, a s sess and manage environmental and social risks before they become significant or produce negative results for the investee client. Projects are grouped mainly in three risk categories, namely:

FEATURE

High RiskHigh risk projects are often referred to as 'Category A' projects. This means that the project is likely to have significantly adverse environmental impacts that are sensitive, diverse or unprecedented. A potential impact is considered �sensitive� if it is irreversible, which could lead to loss of a major natural habitat, involve involuntary displacement and resettlement, or affect significant cultural heritage sites. In this case, a full Environmental Impact Assessment (EIA) is required before the commencement of such projects in order to mitigate the risks involved.

Medium RiskProjects that are not high risk, however involve a cer ta in amount of environmental and social risk are referred to as 'Category B' projects. In this category, the project may have specific environmental impacts, but these impacts are usually site specific and few, if any of them are irreversible. In most cases, mitigation measures are predetermined by Performance Standards, Guidelines, or design criteria. The potential adverse environmental impacts on human population or environmentally important areas are less adverse than those of 'Category A' projects. Although a full EIA is not required, environmental assessment focusing on the anticipated impacts is required.

Low RiskProjects which are neither very risky nor risky at all are referred to as 'Category C' projects. In this case, the project is likely to have minimal or no adverse environmental impacts and an environmental assessment neither is required.

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EXECUTIVE EDUCATION

UNEP ESRA ONLINE

The United Nations Environment Program Finance Initiative (UNEP FI) Environmental & Social Risk Analysis (ESRA) Online Course provides in-depth and personalised training. Tutors engage with participants online on a daily basis, providing guidance and facilitating debates.

As a participant, you will be involved in a range of activities, from simulating implementation of environmental and social policies and guidelines and analysing case studies, to carrying out exercises based on your own clients' environmental and social impacts.

Target audience includes r isk managers and analysts in commercial, corporate, investment and retail banking in or dealing with developing countries and emerging markets. A limited number of places are also available for representatives from relevant stakeholder audiences including: supervisory/regulatory bodies , bank ing assoc iat ions , government agencies, academic institutions, NGOs and civil society organisations involved in finance and sustainability issues. For 2013 course dates, please contact: Carolina Yazmín López, training@unepfi.org.

Please note that places for non-financial institution representatives are limited. Courses will not address how to financially analyse or how to set up a b u s i n e s s p l a n f o r a n environmental/socially oriented

project in search of funding. The courses teach participants how to include environmental and social variables in the traditional analysis made by financial analysts when making lending and/or investment decisions, whatever the nature of the project.

Course contents and materials can only be accessed by participants. The course modules (available in English, Spanish and French) cannot be disaggregated and duration is for three weeks with a time commitment of two hours/day on average, Monday to Friday.

However, the timetable is flexible allowing participants to set their own study times. Please note that course fees serve exclusively to cover the costs of running the course.

IFC STEP COURSE

The Sustainability Training and E-Learning Program (STEP) Course is developed by the International Finance Corporation ( IFC) for managers and staff of financial institutions (FIs) including banks, pr ivate equi ty funds , leas ing compan ies and mic ro f inance institutions and is available in English, French and Russian. STEP is based on the face to face Competitive Business Advantage (CBA) training which IFC has been offering to financial institutions since 1997. This e-training represents the next generation of products designed to help financial inst i tut ions better understand sustainable finance, social and environmental risk management and explore sustainability-related business opportunities. It will take approximately 3 hours to complete the training. The book marking capability of this training enables participants to proceed at their own pace. Participants are also able to stop at any time and then begin where they left off at a later time. At the end of the training, an electronic certificate of completion is issued.

Courses are available in English, French and Russian Modules.

For questions or feedback, please email: asksustainability@ifc.org.

...from simulating implementation of

environmental and social policies

and guidelines and analysing

case studies, to carrying out exercises based on

your own clients' environmental and

social impacts

tm

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FEATURE

T h e E nv i ro n m e n t a l & S o c i a l Management System (ESMS) is a f r a m e w o r k t h a t i n t e g r a t e s environmental and social r isk management into a f inancia l institution's business processes. They include a set of actions and procedures that are implemented concurrently as a risk management procedure. It clearly articulates an institution's c o m m i t m e n t t o m a n a g i n g environmental and social risks and explains the procedures for identifying, managing and reporting these risks. It also stipulated the decision-making processes, responsibilities of staff as well as guides the overall credit cycle in any financial institution.An ESMS also helps f inancial institutions to avoid and manage loans /investments with potential, social and environmental risks all through the te rm o f the loan/ inves tment agreement in line with global best practices and national laws which are in force in the specific country.An ESMS should consist of the following key components:

Brief E&S PolicyOutline Applicable Criteria (Exclusion List, Performance Standards).A c t i v i t i e s c o v e r e d b y t h e Environmental & Social Due Diligence (ESDD).Detailed and integrated step-by-step ESDD process.

Responsibilities of Staff.E&S Covenants for Legal Agreements.Monitoring and Reporting (Internal and External). I n t e r n a l T r a i n i n g a n d Communication of E&S procedures.R isk Management too l s i .e . Categorization, Guidance notes and Due Diligence Questionnaires to be used.There are rewards for having a proper E n v i r o n m e n t a l a n d S o c i a l Management System (ESMS) in place such as, a systematic and consistent approach to E&S issues in all client transactions, a high impact on cost/benefit ratio and also an easy integration into existing organization and management systems leading to improved risk control.

Other benefits range from better communication resulting in improved client relations, greater stakeholder dialogue and credible commitment toward staff and external stakeholder as well as greater brand value and loyalty. Most importantly, it helps to e n s u r e i m p r o v e d a c c e s s t o international capital markets and funding from Development Finance Institutions.

T h e f i n a n c i a l i n s t i t u t i o n ' s documentation associated with each stage of the transaction cycle should b e r e v i s e d t o i n c o r p o r a t e environmental and social r isk considerations or new forms should be developed, if necessary. A financial institution's transaction cycle should include:

IdentificationThis is where it all begins. The credit officers and relationship managers at the financial institution are expected to identify a potential transaction as soon as they are approached by a potential client/investee. The scope of potential transactions that a financial institution will consider will be based on its own financing objectives, and may include a focus on certain transaction types, industry sectors, or environmental business opportunities. It is often advised that the financial institution should develop an exclusion list, which states the nature of transactions and sectors which will be considered.

ScreeningAfter identifying the nature of the transaction, initial screening should commence immediately. Here, the

DEVELOPING AN ESMS

28

credit officers determine if a proposed transaction complies with the financial ins t i tut ion's requi rements for financing. Beyond the exclusion list, client/investee reputation and integrity may also be considered as well as current trends in the proposed industry or sector. The initial screening categorizes the project into High, Medium or Low risk projects.

AppraisalAgain, the credit officers and analysts are to appraise the financial viability and credit risk of a proposed transaction. Here, a site visit is often advised for on-the-port assessment of the business. For green field projects, pre-requisite permits, documentation and regulations are reviewed to ascertain client's willingness to adhere and preparedness for the project. The appraisal process also evaluates the mitigation strategies to be employed for the potential environmental and social risk associated with the transaction based on the product type and industry sector. At this stage, Due Diligence must be conducted.

Formal ApprovalAfter evaluating and reviewing the Due Diligence reports, a Credit Committee ( i n d i v i d u a l s w i t h h i g h e r responsibil it ies and mandates) a p p r o v e t h e t r a n s a c t i o n i n consideration of the overall risk to determine if the financial institution should proceed with the transaction,

FEATURE

and if so, under what conditions. The formal approval therefore factors in the environmental and social r isk category, the f indings of the environmental and social due diligence and recommendations for corrective actions.

NegotiationAfter a financial institution decides to proceed with a transaction, the discussions and negotiation of terms and conditions with the client/investee is expedient. This may include requirements to comply with environmental and social parameters, such as implementing corrective actions to mitigate environmental and social risks. Here, 'legal covenanting' commences with specific agreements are decided prior to disbursement and subsequent to specific timelines.

The financial institution's

documentation associated with each

stage of the transaction cycle

should be revised to incorporate

environmental and social risk

considerations or new forms should be

developed, if necessary

DisbursementThe Legal Department develops the loan agreement which will stipulate the client's/investee's obligations for proceeding with a transaction to mitigate the financial institution's exposure to potential risk. Additional covenants in the legal agreement will include the c l ient 's / investee 's o b l i g a t i o n s t o c o m p l y w i t h environmental and social parameters to minimize the financial institution's exposure to environmental and social risk and liability.

MonitoringMonitoring is often underestimated in project finance transactions. A client/investee may not adhere to the covenants stipulated in the agreement if the financial institution does not effectively monitor the project after disbursement of the credit facility. Therefore, monitoring on a regular bas is i s important to ensure continuous compliance. Any non-compliance, which increases the transaction's overall risk, can be identified early on and followed up with the client/investee.

Monitoring should also include a review of the client's/investee's ongoing environmental and social p e r f o r m a n c e a s w e l l a s implementation of corrective actions, as necessary, to identify early on a potential environmental and social risk to the financial institution.

In may of this year, carbon dioxide levels in the earth's atmosphere reached four hundred parts per million. Experts are not sure when levels were last historically this high but are guessing it was about 3 million years ago. In case the implications are not clear, a marine geologist neatly summed up the situation: �It's the inevitable march to disaster.�

Climate change is only one of the global �megatrends� driving the changing landscape of risk and creating potential instability. Considering population growth, by 2030 our �global village� will reach 8 billion people; 2 billion more than today. We have a declining natural resource base coming up against increased demand rates in the next 15 to 20 years: 30%, 40%, and 50% respectively for food, water and energy. Urbanization, once seen as a contributor to economic growth, increasingly poses major challenges as the pace of urbanization and the growth of megacities have created a new front in the battle against pollution, congestion and the swelling of slums.

These trends present key challenges to sustained development and progress. In particular, countries in Africa and the Middle East are expected to run the most risk in terms of food and water shortages in the coming years with potential for a collision on three fronts: shifting climate patterns, declining water resources, and the continuing problem of food-insecurity.

The Business of

RiskEnvironmental and Social Risk Management as an integral for

Risk Resilient Financial Institutions.

By Swe Thant and Carey Bohjanen

COVER STORY

30

31

N o n - p e r fo r m i n g o r u n d e r -performing loans/assets/investments;

Loss of investor/shareholder confidence;

Loss of access to international markets and capital;

Reputational damage

The financial sector has responded by signing onto international principles and frameworks; adopting sustainable finance policies and practices; and engaging in mult i-stakeholder p l a t f o r m s f o r d i a l o g u e a n d collaboration on good practices. Industry-led voluntary initiatives such as the Equator Principles have driven sector response and progress by implementing standards such as the International Finance Corporation ( IFC ) Per formance S tandards . Increasingly, environmental and social risk management has become mainstream practice across a range of f inance inst itut ions including: commercial banks, private equity houses, investment banks, retail banks and development finance institutions. S u s t a i n a b l e f i n a n c e a n d environmental and social r isk management, are operative words as evidenced by the study just completed for the OECD Working Party on Responsible Business Conduct that mapped environmental and social risk management practice of financial institutions around the globe. Central banks in key emerging markets are also responding with policy requirements; with Nigeria leading the way in Africa.

In 2012, Nigeria's banking sector broke new ground among peers in emerging markets when the commercial banks developed and adopted the Nigerian Sustainable Banking Principles (NSBP) and three sector guidelines for investing and lending activities relating to Agriculture, Oil & gas and Power. The banking sector recognized its unique position to help drive balanced economic development and make a

hold for international mining giants such as Newmont, Barrick Gold and Xtrata. It forced others, such as Bear Creek Mining Corporation, to quit and left government and industries scrambling for solutions to the issue of overwhelming poverty in a resource and growth-rich economy.

Consequences of the worst disaster in the garment industry supply chain, Lax authorities in Bangladesh and negligent plant owners may legally be held accountable for the safety violations in a fire that claimed 1,127 lives. But the public and the media put the responsibility squarely in the hands of global retailers, Walmart and H &M among them. And these retailers are whom they are looking to pay for the consequences.

Sustainable growth in Africa, i.e. development that is economically profitable, environmentally sound and socially relevant is no longer a choice. The role and indeed societal expectation for businesses are increas ingly c lear-to improve performance by managing and mitigating the risks of their operations on people and the planet.

For banks and other financial institutions, the environmental and social risks associated with a client's business can seem one step removed. However, the failure to understand and adequately manage these issues exposes financial sector players to the risk of any or more of the following:

COVER STORY

Climate change is only one of the

global �megatrends�

driving the changing landscape of risk

and creating potential instability

Considering population growth, by 2030 our �global village� will reach 8

billion people; 2 billion more than

today.

The growth rate for urbanization is forecast to be the highest in Africa, shifting the focus from Asia for the first time and such growth will bring heavy demands for infrastructure and services. Altogether, it has been said that the urban explosion around the world is expected to generate a need that will equal 40percent of all the construction the world has seen to-date throughout its history. Overlaid on existing challenges�poverty, unemployment, the �youth bulge,� conflict and instability, and demands for inclusion and empowerment � these trends call for a balancing act among all key players of the economy. Hence, this balancing act presents a number of risks and opportunities for businesses.The mega trends have varying implications for businesses, with materiality as an aspect worth highlighting. Consider the following examples: Economic costs of extreme weather related to climate change. Insurance providers have been writing checks for storm and water damage after a number of fast and furious weather events in recent years, estimating it will cost insurers and reinsurers USD25 billion altogether for damage caused by Hurricane Sandy in the US alone and a total of USD65 billion for all storms including Hurricane Sandy. A report commissioned by European governments last year estimated USD1.2 trillion in annual cost to the global economy or 1.6percent of global GDP.

China spent USD1 billion in 2011 to alleviate the impacts of an extended drought in its primary wheat belt. Drought and shifting rainfall in 2011 drove record high food prices and severe food shortages in Kenya, Djibouti, Ethiopia, and brought famine to parts of Somalia. The 2011 Thai floods tallied 1,000 factories lost and USD45.7 billion in economic damages. Costs that come with business impacts on the communit ies and the environment where companies operate. In its last 2011 report, the U n i te d Na t i o n s E nv i ro n m e n t Programme (UNEP) estimates that it will cost USD1 billion and 30 years to clean up the oil spills that have devastated the Niger Delta region in the previous decades, although there are no estimates for spills that have occurred since. Last year, violent community protests in Peru, over wa te r a n d th e e nv i ro n m e n t , suspended or put major projects on

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At BCB Resources our

commitment is sacrosanct:

Bringing the Best Results Rapidly.

info@bcbresources.com I www.bcbresources.com

The growth rate for urbanization is

forecast to be the highest in Africa,

shifting the focus from Asia for the first time and such growth will bring heavy demands for infrastructure and services. Altogether, it has been said that the

urban explosion around the world is

expected to generate a need that will equal 40percent of all the

construction the world has seen to-date throughout its

history

info@sustainablefinanceadvisory.com and carey@sustainablefinanceadvisory.com

COVER STORY

contribution to the real economy.

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RISK MANAGEMENT

FRAMEWORKS

In managing environmental and s o c i a l r i s k s , f i n a n c i a l institutions and experts often refer to widely-acceptable standards and global best practices. Some of which are summarized below:

IFC Performance Standards (PS)The Performance Standards (PS) are broadly accepted comprehensive principles for E&S Risk Management with a global benchmark and seal of a p p r o v a l d e v e l o p e d b y t h e International Finance Corporation. Currently, the governments of Bangladesh, Canada, China, Norway, and Vietnam refer to IFC's standards in an effort to guide companies, particularly those in the financial or extractive sectors, in other to adopt sustainable practices.

For instance, in March 2009, the Canadian government endorsed the IFC Performance Standards in its national corporate social responsibility strategy.

The PS increases the expectations of stakeholders for managing E&S risks and performance as well as increases transparency of private companies. They also support institutions in integrating issues that gain much public attention such as labour, biodiversity, climate change, civil unrests, security personnel among others; and they largely focus on outcomes rather than processes.

By applying the IFC performance standards, financial institutions improves its financial and operational performance; gains the approval of the l o c a l c o m m u n i t y a n d o t h e r stakeholders, who grant them the

FEATURE

social license to operate; and lastly, receives an international stamp of approval. As a global benchmark, the PS are references for other designed f r a m e w o r k s o n E & S R i s k Managementsuch as the Equator Banking Principles. They are also applied by the Export Credit Agencies of OECD Countries as well as European development financial institutions. Hence, it is increasingly relevant and also a reference point for governments in policy guidance.

Performance Standards are principles based and can assist organizations in many ways such as:

Improving competitiveness in a dynamic, global context;

B u i l d i n g a n d / o r e n h a n c i n g reputation such as the reduction of reputational risks which can be a business driver for customers and investors;

Saving operating costs through better resource efficiency;

And at the same time, mitigation of potential costs associated with environmental mishaps;

Avoiding potential conflicts with communities, and thus business slowdowns or lost productivity.

PS 1: Assessment and management of

environmental and social risks and impacts, or significantly change the nature or degree of an existing impact.

Currently, 79 adopting financial institutions (78 EPFIs and 1 Associate) in 35 countries have officially adopted the EP, covering over 70 percent of international Project Finance debt in emerging markets.

The EP have greatly increased the a t t e n t i o n a n d f o c u s o n social/community standards and responsibility, including robust standards for indigenous peoples, labour standards, and consultation with locally affected communities within the Project Finance market. T h e y h a v e a l s o p r o m o t e d convergence around common environmental and social standards. Multilateral development banks, including the European Bank for Reconstruction and Development , and export credit agencies through the OECD Common Approaches are increasingly drawing on the same standards as the EP.

The EP have also helped spur the development of other responsible e n v i r o n m e n t a l a n d s o c i a l management practices in the financial sector and banking industry, for example Carbon Principles in the US, Climate Principles worldwide. They have also provided a platform for engagement with a broad range of interested stakeholders, including non-governmental organisations (NGOs), clients and industry bodies.

P r i n c i p l e 1 : R e v i e w a n d Categorization

Principle 2: Environmental and Social Assessment

Principle 3: Applicable Environmental and Social Standards

Principle 4: Environmental and Social Management System and Equator Principles Action Plan

Principle 5: Stakeholder Engagement

Principle 6: Grievance Mechanism

Principle 7: Independent Review

Principle 8: Covenants

Principle 9: Independent Monitoring & Reporting

P r i n c i p l e 1 0 : R e p o r t i n g & Transparency

alleviation.

Sustainable banking however involves more than philanthropic spending. It also involves the consideration of environmental, social and governance issues in investment and financial decisions.

Principle 1: Environmental and Social Considerations (indirect)

Principle 2: Environmental and Social Footprint (direct)

Principle 3: Human Rights

Principle 4: Financial Inclusion

Principle 5: Governance

Principle 6: Institutional Capacity

Principle 7: Collaboration and Partnerships

Principle 8: Reporting

The Principles are also accompanied by a Guidance Note to support implementation and Sector-Specific guidelines for Agriculture, Power and Oil & Gas.

Equator Principles (EP)The Equator Principles (EP) is a risk management framework, adopted by financial institutions, for determining, a s s e s s i n g a n d m a n a g i n g environmental and social risk in projects and is primarily intended to provide a minimum standard for due diligence to support responsible risk decision-making.

The EP applies globally to all industry sectors and to four financial products: 1) Project Finance Advisory Services 2)Project Finance 3)Project-Related Corporate Loans4)Bridge Loans.

The relevant thresholds and criteria for application are described in detail in the scope section of the EP. Equator Principles Financial Institutions (EPFI) commit to implementing the EP in their internal environmental and social policies, procedures and standards for financing projects and will not provide Project Finance or Project-Related Corporate Loans to projects where the client will not, or is unable to, comply with the EP.

While the EP are not intended to be applied retroactively, EPFI apply them to the expansion or upgrade of an existing project where changes in scale or scope may create significant

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Environmental and Social Risks and Impacts

PS 2: Labour and Working Conditions

PS 3: Resource Efficiency and Pollution Prevention

PS 4:Community Health, Safety, and Security

P S 5 : L a n d A c q u i s i t i o n a n d Involuntary Resettlement

PS 6: Biodiversity Management and Sustainable Management of Living Natural Resources

PS 7: Indigenous Peoples

PS 8: Cultural Heritage

The Nigeria Sustainable Banking Principles (NSBP)The Sustainable Banking Principles and guidelines are �stepping stones� to guide the Nigerian financial sector in moving toward better practices of managing environmental and social risks, while also promoting �green� finance to support good business opportunities.

In the bid to incorporate sustainability in the banking sector, the members, N ige r i an Banker s Commi t tee developed sustainable banking principles for the Nigerian banking sector, to drive long-term growth and h e l p t h e i n d u s t r y fo c u s o n development priorities, as well as safeguard the environment and its people. This strategic turn is particularly appropriate, more so, with the current global financial crisis that has brought threats to the global financial services sector and also as a result of the governance, ethics and risk management issues that have besieged the Nigerian banking system.

The Sustainable Banking Principles cover Oil and Gas, Power (with a focus in renewable energy), Agriculture and related water resources issues. This will give banks guidelines on when and what to invest on.

Prior to announcement for the sustainable banking principles, Corporate Social Responsibility (CSR) amongst Nigerian banks was mainly centered on corporate community investments or corporate giving. These included construction of roads and decoration of public spaces; donations t o h o s p i t a l s , s c h o o l s , l o c a l c o m m u n i t i e s , p r i s o n s a n d o r p h a n a g e s ; e c o n o m i c e m p o w e r m e n t a n d p o v e r t y

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FEATURE

In categorizing environmental and social risks, certain sectors pose higher risks than others and are often considered more closely because of the nature of their activities and its corresponding impact on the environment, people and natural resources. Some of the sectors largely notorious for triggering risks include Agriculture, Chemical production, Forestry, General manufacturing, Infrastructure (or Construction), Mining (Extractive industries and excavation activities, Oil and Gas and Power.

Therefore, three of these sectors that have high tendencies of generating E&S risks are reviewed below with a case study of an unnamed real project and the risks that were mitigated:

Oil and GasThe E&S risks associated with the oil and gas sector are particularly significant and multifarious. The E&S risks vary greatly depending on the scale and type of oil and gas activity that is being financed. There are potential E&S Risks to be encountered in financing projects in the oil and gas sector such as:

Environmental & Ecosystem damage.Oil spillage & pollution of water bodies.

Climate Change impactsRevenue management.Community conflict and social unrest.Health and safety issues .Local employment issues Case Study: Gas Pipeline ConstructionCategory: A - High RiskProject: Construction of 45 km pipeline to transport gas for processing and distribution in Nigeria, Niger Delta Region.

Potential E&S Risks:Pipeline right of way and river crossing would cause: displacement of local residents' homes, food sources and livelihood in fishing communities.Extensive environmental damage.Infringement on religious shrines and deities.Possible controversy around local employment opportunities

AgricultureA large population across Africa depends on agriculture as a source of livelihood, it is therefore clear that agriculture is a practical means of reducing poverty, unemployment and food security whilst providing raw materials for industries and export in t h e m e d i u m t o l o n g t e r m . Consequently, along the agricultural value chains there are a number of

recurring challenges that continue to hinder the growth of the sector, which includes high cost of farm inputs especially seeds and fertil izer, i n e f f i c i e n t p ro c u re m e n t a n d distribution systems for critical inputs, poor access to credit for farmers etc.

There are potential E&S Risks to be faced in financing projects in the agriculture sector such as: Land conflict. Involuntary physical and /or economic displacement. Impact on water resources. Loss of Biodiversity. Climate Change adaptation. Deforestation and soil erosion. Disposal of animal waste. Greenhouse gas emissions. Health & Safety of labour. Employment practices

Case Study: Farm Waste Management SystemCategory: A- High RiskProject: Construction of an effluent and waste management system to enhance farm operations for a L i v e s t o c k a n d A q u a c u l t u r e Agribusiness venture.

Potential E&S Risks: Air and water pollution from solid wastes, liquid effluents and emissions

SECTOR CONSIDERATIONS FOR

E&S RISKS

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FEATURE

produced in pig and fish farming activities;Health and safety risks from untreated bacteria, viruses and pathogens in waste; andIntensive livestock farming methods overusing local natural resources such as fertile land and clean water.

PowerThere are various types of power generation activities associated with diverse E&S Impacts. These impacts can be significant owing to the size of the projects and the footprints of the p owe r p l a n t a n d a s s o c i a te d infrastructure. To this extent, E&S risks vary greatly depending on the scale and type of power activity that is being financed. There are potential E&S Risks to be stumbled upon in financing projects in the agriculture sector:

Environmental risksIncreased GHG emissions; air pollutant emissions, or locations where existing air quality is already poor due to cumulative impacts from combined pollution sources.Not deploying best available control technologies for emissions and waste (e.g. hazardous pollutant deposits in water bodies and land).High Water Extraction for cooling operations and which will affect water flow and quality to other ecosystem services that require water.

Habitat defragmentation with the construction of roads, transmission pylons and distr ibution l ines, increasing access to previously remote areas and natural habitats.

Social risksPeople and economic displacement (e.g. loss of assets such as land,crops, fisheries, agricultural land etc.Conflict with local communities as a result of the plant site or storage facilities due to the real and perceived risk of explosion, plants and storage facilities that are situated near populated areas may be of particular concern to local stakeholders.D a m a g e d c u l t u ra l h e r i t a g e , operations in areas prone to natural hazard such as earthquake, extreme weather), which could affect the structural integrity of the plant.Infringement of labour rights Case Study: Construction of Electricity Transmission distribution lines

Category: A - High RiskProject: Construction of electricity transmission poles and lines to distribute electricity from a 141MW natural gas-fired plant

Potential E&S Risks: D i s p l a c e m e n t w i t h o u t compensation of local residents from their homes as well as farmlands, which provide a primary source of

food and livelihood.Potential health and safety hazards to local residents.Increased noise pollution, dust, traffic and risk of road accidents during construction phase.Low hanging wires that could lead to electrocution.

References:International Finance Corporation Case Studies from Sustainable Finance Advisory.

Editor's Note: For more information, resources on sector-specific fact sheets and useful tools, please visit IFC's First for Sustainability Website: www.firstforsustainability.org.

A large population

across Africa depends on

agriculture as a source of

livelihood, it is therefore clear that agriculture

is a practical means of reducing poverty,

unemployment and food

security whilst providing raw materials for

industries and export in the

medium to long term

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The Banking Sector is uniquely positioned to further economic growth and development in Nigeria through its lending and investment activities. The context in which Business decisions are made is, however, characterized by complex and growing challenges relating to population growth, urban migration, poverty, destruction of biodiversity and ecosystems, pressure on food sources, prices and security, lack of energy and infrastructure and potential climate change legislation from our trade partners amongst others.

The Bankers Committee of the Central Bank of Nigeria is committed to deliver positive development impacts to society whilst protecting communities and environment in which financial institutions and their clients operate. In line with this commitment, at its retreat on July 14th, it approved the adoption of the Nigerian Sustainable Banking Principles by Banks, Discount Houses and Development Financial Institutions in Nigeria.

Successful implementation of these principles and guidelines will require

A Beginner’s Guide to the Nigerian

Sustainable Banking Principles

Successful implementation of

these principles and guidelines will require banks,

discount houses and development finance

institutions to develop a

management approach that balances the

environmental and social (E&S) risks

identified with the opportunities to be exploited through

their business activities.

COMPLIANCE

b a n k s , d i s c o u n t h o u s e s a n d development finance institutions to develop a management approach that balances the environmental and social (E&S) risks identified with the opportunities to be exploited through their business activities. The CBN in l i n e w i t h f u l l a d o p t i o n a n d implementation of these principles by these institutions wil l provide incentives, as necessary to those institutions that take concrete measures to embed the provisions of these principles and guidelines into their operational, enterprise risk management and other governance frameworks.

Finally, to enable the CBN track the progress of implementation and adherence to the principles and guidelines, banks, discount house and development finance institutions will be required to submit regular reports to the CBN in line with reporting requirements which will be made available to the Industry.

Bank's performance and progress made on the implementation of the principles.

Principle 7: Capacity BuildingThe Institutions will develop individual institutional and sector capacity necessary to identify, assess and manage the environmental and social risks and opportunities associated with their Business Activities and Business Operations. Banks will provide necessary resources and support to equip and train employees on E&S Management approaches based on roles, responsibilities and functions.

P r i n c i p l e 8 : C o l l a b o r a t i v e PartnershipsThe Institutions will collaborate across the sector and leverage international partnerships to accelerate their collective progress and move the sector as one, ensuring their approach is consistent with international standards and Nigerian development needs.

Principle 9: Reporting The Institutions will continuously monitor and measure performance against each of the Principles and will report progress against targets to its relevant Internal and External stakeholders. This report will be at an individual level and another will be in form of an annual report which will be for the sector level on the collective success in implement ing the principles.

The Institutions will

promote women's economic

empowerment through a

gender inclusive workplace culture in their Business

operations and seek to provide products

and services designed

specifically for women through

Business activities

COMPLIANCE

Brief Description of the 9(Nine) Principles

process when selecting Banks Suppliers, Contractors and Third-party Service providers.

Principle 4: Women Economic OpportunityThe Institutions will promote women's economic empowerment through a gender inclusive workplace culture in their Business operations and seek to provide products and services designed specifically for women through Business activities. This would be in line with the provisions of the wider CBN Women's Economic Empowerment Committee.

Principle 5: Financial InclusionThe Institutions will promote financial inclusion, seeking to provide financial s e r v i c e s t o i n d i v i d u a l s a n d communities that traditionally have had limited or no access to the formal financial sector. This would help to reduce extreme poverty, reduce barriers to economic participation and also improve financial education and financial literacy.

Principle 6: E&S Governance The Institutions will implement robust and transparent E&S governance p rac t i ces in the i r respec t ive institutions and assess the E&S governance practices of our clients. Key components within these institutions will include: Transparent Organizational Structures, Clearly defined Roles and Responsibilities; Reporting on and accounting for a

Principle 1: Our Business Activities: Environmental and Social Risk ManagementThe Institutions wil l integrate e n v i r o n m e n t a l a n d s o c i a l considerations into decision making-processes relating to their Business activities to avoid, minimize or offset negative impacts. The Institutions will set-up E&S framework to identify and assess E&S risks as posed by their client's disposition to E&S and also E&S r isks associated with var ious transactions.

Principle 2: Our Business Operations: Environmental and Social FootprintThe Institutions will avoid, minimize or offset the negative impacts of their B u s i n e s s O p e ra t i o n s o n t h e environment and local communities in which they operate and, where possible, promote positive impacts. This would also be extended to Suppliers, Contractors and also Third Parties, an assessment of the E&S commitment, capacity and track record, identifying that they meet E&S standards.

Principle 3: Human Rights The Institutions will respect Human Rights and also internationally recognized standards, e.g. No Discrimination, Safe and Fair labour conditions, Prohibition of Use of Child or Forced labour in their Business Operations and Business Activities. Also, conducting of a human rights Due Diligence in its Decision-making

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EPMD is a phased program focused on building market capacity for improved environmental and social (E&S) p e r f o r m a n c e o f f i n a n c i a l intermediaries (FIs) and their clients, by w o r k i n g w i t h l o c a l p a r t n e r organizations.

The capacity building program aims to: Provide training to FIs on E&S risk management techniques; spanning the business case to development of an Envi ronmenta l and Socia l Management System (ESMS) including tools and procedures to allow success fu l ident i f i ca t ion and management of E&S risks in banks' portfolios.

Demonstrate opportunit ies for sustainable banking and share best practice globally support Nigerian banks in development of systems and reporting structures to aid compliance with the Nigerian Sustainable Banking principles.

Build awareness amongst bank staff focusing on the benefits of prioritizing E & S r i s k m a n a g e m e n t a n d

opportunities build the capacity of supporting institutions such as consultants, the Chartered Institute of Bankers of Nigeria and the Financial Institutions Training Centre to be able to offer ongoing guidance to banks in Nigeria on E&S Risk Management. The capacity building program was launched in November 2012, and has already delivered three workshops in Lagos (February, March and May 2013). The remaining workshops are scheduled for July 9-11 and S e p t e m b e r 1 0 - 1 2 , 2 0 1 3 .

Environmental Performance

and Market Development

(EPMD) Program

EVENT

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SUSTAINABLE CONVERSATIONS (SC)

Based on certain topics creating discussions among the general populace, businesses, government, international organizations, non-profits, conversations have developed be it formally or informally. SC seeks to

F.I.R.S.T. FOR SUSTAINABILITY

FIRST (Financial Institutions: Resources, Solutions and Tools) for Sustainability is a one-stop shop for f inancial institutions to get information and learn about the benefits of environmental and social risk management and how to identify and take advantage of e n v i r o n m e n t a l b u s i n e s s

ONLINE RESOURES

opportunities.

For managers and staff of financial institutions, stakeholders and other users, FIRST provides guidance and tools to understand and manage the risks that environmental and social issues present for financial institutions. FIRST also introduces users to financing/investing in environmental business opportunities with traditional

c r e a t e a n a v e n u e f o r s u c h conversations to take place and be stored for reference purposes.

SC portal also contains reports and ThistlePraxis Consulting�s online mater ia l s , a r t ic les d i scuss ing opportunities and developments

financial/investment products.

FIRST provides guidance to a financial institution on how to implement a Environmental and Social Management Systems (ESMS), conduct environmental and social due diligence as well as how to create a pipeline of new business and develop product offerings tailored to the environmental needs of its clients.

FIRST for Sustainability has been funded by generous support f rom the governments of Finland and Sweden. Resources for financial institutions inc lude a l i s t o f in ternat iona l conventions and standards; training; tools and guidance; and a consolidated list of related documents that can be found on the FIRST for Sustainability

website.

taking place in various sectors; upcoming events and also latest news from around the world on Sustainability and CSR.

T h i s t l e P r a x i s b e l i e v e s t h e s e conversations would be very beneficial and insightful to all audiences who either partake or are involved in the conversation.

www.firstforsustainability.org

www.sustainableconvos.com

LOG ON:

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9 QUESTIONS

Dr. Alex OttiGMD, Diamond Bank Plc

Dr. Alex Otti has a First Class Honors Degree in Economics (Dean's Prize & Valedictorian), an MBA, and Honorary Doctorate degree in Business Administration. He is an alumnus of Harvard Business School (AMP 177), Stanford Business School, California, Wharton Business School and Columbia Business School, New York. From starting his banking career at Citibank, Nigeria; holding previous management positions in other leading Nigerian banks, he is presently the Group Managing Director and Chief Executive Officer of Diamond Bank Plc.

Dr. Otti also sits on the Governing council of two Nigerian Universities and has served on the board of various companies including Airtel Nigeria Limited and FBN Mortgages Limited, amongst others. He discusses Risk Management, shares his thoughts on the implementation of the Nigerian Sustainable Banking Principles (NSBP) and Sustainability of the Nigerian Financial Sector.

How important is Sustainability to you as an individual and then, to Diamond Bank as a Financial institution of repute?

As an individual, sustainability is very important because it ensures that we appreciate the big picture, guide our thought processes on how to optimize opportunities of life, and helps keep things in perspective about the kind of world we want to leave for coming generations to live in. As a financial institution, Diamond Bank is conscious of the need to do business in a way that is socially and environmentally responsible, non-threatening to our environment and does not cause wanton depletion in non-renewable resources. As a financial institution, we are in a vantage position to persuade our clients to assess the impact of their businesses on the environment. Of course, we reserve the right not to support businesses that we believe are in conflict with sustainability.

Taking into consideration that there w o u l d b e a s s u m p t i o n s a n d uncertainties involved in Risk Assessment, how does Diamond Bank measure the various risks the Bank is exposed to?

The various environmental and social risks the bank is exposed to in its

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financing activities are assessed first on the basis of the risks in our clients' operations and their ability to manage such risks. The environmental and social risks in the bank's internal operations are assessed on the basis of impact of our operations on our stakeholders. Sometimes these risks have more of a reputational impact. However, as a financial institution, we are also exposed to additional risks with direct financial impact, such as credit, exchange rate, investment risk etc. We have a robust enterprise risk management framework in place to identify, track and mitigate such risks and we have staffed these functions with some of the best hands in the industry.

How would you react to and assess the recent focus on Risk Assessment and Sustainability for Nigerian financial institutions?

I believe that this is a step in the right direction and while we seem to have just started as a nation in this regard, it is not late. If you recall, just a few years ago, the global financial system was severely threatened with collapse and Nigeria, which is now more integrated globally, was not an exception. The main cause of this crisis was poor risk

assessment of the portfolio of assets held by banks, be they simple plain vanilla loans or complex breed of derivative instruments, and poor corporate governance in many institutions. As an individual, when you don't do periodic assessments of the risks you take, bad things are bound to happen and that is exactly what happened to the financial services sector in Nigeria. Beyond risk assessment, I see sustainable banking principle as a catalyst for the success of various initiatives such as access to finance and agricultural credit scheme programs which will ultimately drive economic growth in the country. So in many ways, aside the need to comply with regulatory requirements, there are social and economic benefits to enjoy.

At the same time, how does Diamond Bank balance prioritizing and implementing E&S Risk Management and Corporate Social Responsibility?

Environmental and Social Risk Management involves dealing with the bank's indirect impact on the environment through its financing and lending activities; this is addressed through the effective implementation

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of the bank's enhanced environmental and social risk management system, while Corporate Social Responsibility which entails addressing the bank's direct impact from its operations on the environment is addressed through the active involvement of relevant functions of the bank in identifying various aspects of the bank's operations which impact on the environment and implementing appropriate action to address such identified impact.

How does the bank intend to manage the implementation of the current SustainableBanking principles knowing fully well that it may mean declining p r oj e c t s an d o p t in g o ut o f Stakeholder relationships?

The bank intends to manage the implementation of the current sustainable banking principles by viewing it as a business enabler, rather than from a compliance perspective. This would help us understand better; various aspects of activities we are involved in and help us give priority to projects that will yield the best value for our stakeholders. From experience, looking at the principles, it reinforces our intuition that it is not every business that we must do. The fallout is that we are more discerning in analyzing opportunities and thus taking advantage of those ones with greater long term impact.Also, just to let you know that before we formally signed up to the Sustainable Banking Principles, we had carried on business in a way that reflects our concerns and affirmation of sustainability and how our clients and partners impact their environment and communities.

As one of the pioneer financial institutions to go paperless in the production of Annual Reports, how would you describe your role in l e v e r a g i n g s t a k e h o l d e r relationships and at the same time promoting socially responsible practices?

Our stakeholders appreciate the fact that initiatives like Going Paperless represent not just the right thing to do when you consider the environment

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but also make good economic sense as it ultimately improves the returns to the stakeholders. In my 2012 letter to shareholders, I dwelt on this a bit more. Going paperless just makes things tidier and faster and going beyond the annual reports, many customer interfaces with the bank are migrating from paper based processes to online and real time interactions. In the near future, we hope to have branches that are energy efficient and support e-transactions only.

What role can CBN play in assisting financial institutions towards being more socially responsible and from being over-exposed to the risk caused by clients ' activit ies andoperations?

The CBN has started on a good note by promoting sustainable banking principles and driving adoption. It is recommended they go further by ensuring there is active supervision on their part to guarantee the effective implementation of the Nigerian Sustainable Banking Principles. This will provide a level playing field for all banks and help drive the need to build adequate capacity within the banks formanaging such risks.

Through the introduction of the BETA Savings Account, Diamond Bank is fulfilling Principle 5 in the Sustainable Banking Principles. What challenges has the Bank faced and how are these challenges being handled?

A 2010 survey of access to financial services in Nigeria showed that of the 49.2 million adults that own a mobile phone, 25.3 million were unbanked. Exper iences f rom East Af r ica demonstrate the opportunities for using mobile phones to deliver banking services and the gap in Nigeria is indicative of market potentials. Successful rollout of some of our future products such as �BETA Savings Account� places a great reliance on the use of mobile phones and related technology as most of the prospects are located in the remote areas and so have limited or no access to conventional banking services. Given the quality of telecommunication infrastructure available in the country, our ability to seamlessly deliver services maybe challenged. One other major challenge we have faced since the launch of the proposition pilot test, is lack of inter network cooperation and connectivity amongst the telecommunication companies.

Therefore, to promote financial transactions using this device, there is need for a critical level of participation ( b y r e g u l a t o r s a n d telecommunications companies) or interoperability to enable and enhance service to these segments.

In your opinion, what lies ahead of the Nigerian Financial Industry in the areas of Sustainable Banking and Social Responsibility?

Given the immense role the Nigerian Financial Industry plays in the Nigerian economy, there is no doubt that as a nation we are set to achieve great strides in the area of Sustainable Banking and Social Responsibility. Because Banks have enormous influence in the economy, they can also act as catalysts for awareness and adoption by other sectors of the economy.

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The main cause of this crisis was

poor risk assessment of the portfolio of assets held by banks, be they

simple plain vanilla loans or complex breed

of derivative instruments, and poor corporate governance in

many