We have a comprehensive framework to help identify and manage E&S risk. The group Environmental & Social Risk and Finance (GESRF) team is responsible for ensuring that all environmental, social and related risks are correctly identified, evaluated and managed, and for ensuring that green, social and carbon financing opportunities are identified and acted upon.

Our E&S risk assessment processes are based on international best practice and are proactively embedded into lending practices at an early stage. This enhances E&S consideration and accountability in investment decision-making and monitoring, assists clients in managing their material E&S impacts and risks and, in so doing, improves their performance and guards against unforeseen risk. Our assessment processes have been broadened and are being systematically expanded across all business units within the group (CIB, PBB, Wealth). Our new, broader ESMS integrates E&S screening, management and monitoring into business and credit functions globally, enabling us to assess, mitigate, document and monitor impacts and risks associated with financing and investments. The expansion and integration of these management measures ensure E&S issues and opportunities are truly embedded in our overall performance. New environmental/green/ climate and social opportunities are being explored in appropriate sectors and with similar-minded clients.

Our E&S risk management process aims to ensure E&S consideration and accountability in investment decision-making, monitoring and banking activities.

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Standard Bank encourages clients to meet relevant internationally accepted E&S standards and to develop action plans to close any gaps between these and their current E&S performance. We work with our clients to assist them to manage their material E&S risks and impacts.

Our exceptions list has several general and regional exclusions with respect to the type of activities for which we will not provide banking or lending facilities. It is reviewed at least annually. It consists of two lists:

Exclusions list: Activities prohibited for financing in all Standard Bank/Stanbic Group operations

Restrictions list: Activities for which we have regional or sector-specific restrictions, based on policies and practices applicable at group and regional level.

E&S Risk management is undertaken throughout the transaction life cycle from pre-credit to post financial close.

E&S screening
E&S risk screening is applied to all transactions (excluding personal banking) at pre-credit application stage. We use our E&S screening tool to assess E&S risk for different risk categories of transactions across the group.

Screening of new transactions
Pre-credit committees are responsible for ensuring that E&S risks are identified at application phase. Screening provides an indication of whether to proceed with a transaction, and whether further assessment is required.

Screening provides for three levels of assessment for new transactions. These are applied according to the type of financial product, the quantum and tenor of the transaction and the sector. We assess the E&S risk involved in the activities related to:

The transaction: consideration of the nature of the transaction or project’s E&S impacts, and the sector; and

The client: consideration of the client’s ability to manage E&S risk and their historical track record.

Risks are rated low, medium or high. All project-related transactions and medium- and high-risk outcomes are escalated to the group environmental & social risk finance (GESRF) team, which works with the business and credit teams to examine and mitigate such risks. Where appropriate, we undertake an enhanced due diligence and ongoing monitoring to ensure risks are properly managed. Decisions on transactions rated as high E&S risk require sign-off from the head of GESRF.

Screening of existing transactions
Our E&S screening tool is also applied by our credit managers in their regular reviews of existing transactions and clients. This enables any E&S risks that emerge after financial close to be flagged and assessed. Transactions or clients identified as high E&S risk are reviewed annually, in addition to the client having a negative change in their annual E&S rating. Where required, GESRF team members engage with clients to gain a better understanding of issues. Where appropriate, we may require implementation of mitigating actions, or additional reporting requirements.

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E&S due diligence
Different financial products carry different levels of environmental and social risk. The depth of environmental and social due diligence is based on the level of risk, with enhanced due diligence for transactions that represent significant risk to the bank, society and environment.

The scale and scope of due diligence is determined per transaction, as advised by the GESRF team. Our E&S assessment process aims to ensure that the level of due diligence is commensurate with the potential level of E&S risk associated with a transaction. Due diligence may include sector or issue specific questions, direct client engagement and site visits. GESRF is responsible for determining whether a full due diligence process using independent external consultants is required.