• Sustainable Finance Initiatives Course Material




Environmental and social Back to top

E&S Categorization

A step in a Bank’s ESMS procedures where, based on basic information about a project such as sector and scale, the level of E&S risk of a client’s business activities/project is determined. It ensures that that the extent of the subsequent E&S due diligence work is commensurate with the nature of risk. Examples of categorization are Category A (high), B (medium) and C (low). Back to top

Category A

Business/project activities with potential significant adverse environmental and social risks and/or impacts that are diverse, irreversible or unprecedented. Back to top

E&S Category B

Business/project activities with potential for limited adverse E&S risks and/or impacts that are few in number, generally site-specific, largely reversible and readily addressed through mitigation measures. Back to top

E&S Category C

Transaction that typically involves clients with business activities with minimal or no adverse environmental and social impacts. Back to top

E&S Due Diligence

A due diligence that involves the systematic identification, quantification and evaluation of environmental and social risks associated with a proposed transaction. This process also helps identify the mitigation activities that are necessary to reduce any environmental and social risks that are identified. The extent of the environmental and social due diligence and level of detail is based on the transaction’s E&S Category and may vary by transaction type. Back to top

E&S Exclusion List

List of the business activities the financial institution will not finance for risk management, ethical, and/or other reasons. Back to top

E&S Impact Assessment (ESIA)

A study usually required under national law to identify potential environmental and social consequences and mitigation measures of a project. It is a study that would be undertaken by a client and submitted to the relevant regulatory authorities who then decide whether or not to approve a project. Back to top

Environmental and Social Management System (ESMS)

A management system consisting of policy, procedures, delineation of roles and responsibilities and guidance that a bank follows to review and manage the E&S issues and risks associated with its investments. Back to top

E&S Monitoring

A step in an E&S Procedure that generally involves a periodic review of environmental and social performance of client. Back to top

E&S Procedure

A procedure detailing how the organization addresses E&S and sustainability issues as part of its investment operations. Procedures are normally step by step instructions focusing on what needs to be done and by whom at various stages of the investment cycle (including supervision). A procedure may be stand-alone or constitute part of the credit or other operational procedures of the financial institution. Back to top

E&S Screening

A first step in the E&S Procedure to identify E&S aspects in a transaction. It typically involves a check against an E&S Exclusion List and early identification of potential environmental and social E&S aspects. Back to top