Integrated environmental procedures reduce financial risks
Hilde Kjelsberg, vice-president and Head of the credit and analysis department at NIB, explains how her department assesses the environmental impact of NIB’s potential projects.
How is the environmental significance of a project measured?
“The Bank has a transaction team responsible for all new loan proposals, and within that team we have dedicated analysts, who cooperate and assess the projects from different angles. This is a good way of evaluating a project as it highlights that any environmental liabilities can directly influence the bottom line and other risks of the project.”
“NIB’s environmental categorisation system for projects is similar to the systems used by other international financial institutions, such as the EBRD and the World Bank Group. Loan applications are categorised into four different groups, according to their potential environmental impact.”
What are the categories?
“Category A projects have the potential for making an extensive environmental impact and must undergo a full environmental impact assessment (EIA). These projects are made publicly available on our website for a period of 30 days before a final decision on financing is taken, so our stakeholders can give their opinions. NIB finances five to eight category A projects per year.”
“Category B projects have the potential for making a moderate environmental impact and must undergo a partial EIA. For the projects in the remaining categories, we decide the need for information on a case-by-case basis.”
What is an environmental impact assessment (EIA)?
“EIAs are usually carried out by independent consulting firms, on behalf of the respective companies, and include project descriptions; policy, legal and administrative frameworks; environmental impacts; as well as monitoring and management plans. The EIA process is regulated by EU and national legislation. NIB utilises the EIAs in its own assessment process.”
What are the other means of evaluating projects considered for funding?
“Environmental audits are conducted in conjunction with company acquisitions or in projects where possible environmental liabilities have been identified. An environmental audit is required for projects in which there is an obvious risk of the project sponsor facing costs of environmental damage, such as contaminated soil or polluted groundwater.”
“All category A projects are monitored, as well as other projects with an identified need for follow-up. The monitoring is carried out either by personnel from the environmental unit in my department or by independent environmental experts.”
Why do we need the system?
“As an IFI offering long-term financing, we need to look at all the important risk aspects, financial and environmental, from a long-term perspective. The environmental sustainability of a project must be long-lasting.”
“I am proud to work in a bank with such an explicit environmental mandate, where the environmental analysis is integrated in the total risk assessment process. I believe this puts NIB at the forefront of the banking sector. NIB has worked with environmental appraisals for a long time, using the EU’s environmental legislation as a guide. However, our environmental requirements were further emphasised in our revised environmental policy adopted in 2008. This policy and related procedures will continue to be developed in the Bank on an ongoing basis.”