Pursuant to its environmental policy, it plays a key role to perform risk assessment for projects in order to review their environmental and social risks. Accordingly, MEHIB does not support a transaction that has a negative, i.e. adverse environmental impact, or transaction which demonstrably violates fundamental human rights standards or results in significant greenhouse gas emissions. In order to screen these projects at an early stage of financing, MEHIB applies environmental and social risk assessment.
Process of environmental and social evaluation:
Pre-screening – screening and assessment of project whether the transaction falls under the scope of the procedure. Pre-screening is implemented at an early stage of the transaction. During this stage some basic information should be obtained from the exporter.
Transactions outside the scope of the procedure – i.e. project period does not exceed 2 years, and exports of goods / services relate to basic agricultural products and military assets (livestock, cereals, etc.) and where risk is not on the exporter – are not classified but indicated with “K” and are exempted from further steps of the environmental and social risk assessment.
Screening – all the information provided by the exporter is reviewed during screening. Screening can only be applied to projects with a risk-taking period of more than 2 years and if the value of the transaction exceeds 10 million SDRs, or if the project is on or near sensitive area or sector, or if it can be assumed that the implementation of the project involves potential environmental risk.
Classification – the project is classified into two main categories (new project or existing facility) and three environmental and social risk categories (A - sensitive, B - moderate, C - neutral). Further information can be obtained from the exporter if it is required.
Three categories of environmental and social classification:
- Category A: a project is classified as Category A if it has the potential to have significant adverse environmental and/or social impacts, which are diverse, irreversible and/or unprecedented. These impacts may affect an area broader than the sites or facilities subject to physical works. Category A includes projects in sensitive sectors or located in or near sensitive areas.
- Category B: a project is classified as Category B if its potential environmental and/or social impacts are less adverse than those of Category A projects. Typically, these impacts are few in number, site-specific, irreversible, and mitigation measures are more readily available.
- Category C: a project is classified as Category C if it has minimal or no potentially adverse environmental and/or social impacts.
Result of the classification may vary flexibly (reclassification) on a case by case basis depending on the scope, depth and timing of the necessary information.
Information required for environmental and social risk categories:
- Category A: Environmental and Social Questionnaire, Environmental and Social Impact Assessment (hereinafter referred to as ESIA) and if it is necessary Human Rights Impact Assessment (hereinafter referred to as HRIA)
- Category B: Environmental and Social Survey Questionnaire (on a case-by-case basis ESIA)
- Category C: no further information is needed (on a case-by-case basis ESQ)
Assessment – The assessment of the environmental and social impact of the transaction is based on the Questionnaire and all the relevant information and documentation that had been provided previously. In order to be able to perform the appropriate evaluation of projects different kind of information should be obtained depending on the environmental and social category of the project.
In order to evaluate the financing of category A, client must provide the ESIA on environmental impacts and documents on mitigating compensatory measures.
ESIA may be requested on a case-by-case basis for assessing category B projects which has a moderate impact on the environment, but the classification and evaluation of the project will be implemented based on the outcome of the Questionnaire and the consideration of the relevant environmental impacts.
For category C projects, only the result of the evaluation of the Questionnaire and the evaluation of the documents provided will be taken into account as the environmental and social risks of the transaction are negligible. However after evaluating the ESQ additional documents can be requested.
Decision – MEHIB mainly take into consideration the information for which the customer is responsible when assessing environmental and social impacts. It is the responsibility of the client to be able to provide the necessary documentation, basic and additional information to MEHIB. In addition, MEHIB may obtain independent information if it is required (e.g. from a funder, other insurer, green organization, etc.).
Based on the outcome of the due diligence, the transaction will be accepted, conditionally accepted or rejected.
Monitoring – in case of all project classified as category A, MEHIB requires regular ex post reports and related information to be provided during the involvement in the project to ensure that relevant potential environmental and/or social impacts are addressed according to the information provided by applicants during the environmental and social review. If project monitoring is included as a condition in the contract client should periodically provide a monitoring report on the environmental and social impact as long as the insurer is in risk.