Environmental and Social Management Systems (ESMS) for Banking Institutions
Sultan Consults ltd collaborates with Sri Lankan, German and Singapore counterparts, (www.patersonsustainability.com and www.innovativkonzept.com) to integrate environmental consciousness into the Banking Sector through introducing Environmental and Social Management Systems (ESMS) into banks’ lending programs.
The Environmental and Social Management System (ESMS) is a framework that integrates Environmental and Social Risk Management into a Financial Institution’s business processes (in case of a Bank). It is a set of actions and procedures that are implemented concurrently with the Financial Institution’s existing risk management procedures.
The ESMS ensures that the Financial Institution’s (FI), lending activities are in compliance with accepted social and environmental risk assessment procedures and standards. It helps the Financial Institutions to avoid and/or manage proactively any social and environmental risks likely to arise from a project or activity for which the bank grants a loan, by conducting social and environmental due diligence prior to loan approval and disbursement.
ESMS is therefore a proactive approach to serve as a deterrent during the term of the loan agreement, which imposes adequate E&S risk mitigation and supervision.
Therefore, the ESMS and its operational procedures complements the Bank’s existing environmental and social policies, risk management practices and operational procedures and thereby be aligned with the Bank’s typical loan management cycle.