US-AEP is working with banks, investment companies, and insurance organizations to foster the adoption of environmental criteria into financial lending practices. line-green.gif (36 bytes) Fostering Environmental Due Diligence

bullet What is environmental due diligence?
bullet What is US-AEP doing to foster environmental due diligence?
bullet Example: Land Bank of the Philippines
WHAT IS ENVIRONMENTAL DUE DILIGENCE?

Financial institutions around the world are realizing that environmental risks associated with projects can be as important as other potential risks. Environmental due diligence thus refers to the targeted environmental screening of proposed investments by commercial banks, pension funds, mutual funds, municipal and private portfolio managers, and credit-rating agencies. Considering current account deficits, speculative lending, foreign exchange mismanagement and the decline of domestic currencies that threw Asia�s tiger economies into turmoil in 1997, adopting environmental criteria provides an opportunity for banks to reduce their financial risks while protecting the environment. Environmental due diligence can also be a powerful incentive for improving industrial environmental performance.

WHAT IS US-AEP DOING TO FOSTER ENVIRONMENTAL DUE DILIGENCE?

US-AEP is promoting the concept of environmental due diligence among banks, investment companies, and insurance organizations in Asia and increasing the analytical capacity of financial lending institutions. Working with partners and local or regional champions, US-AEP is linking the environmental and financial communities throughout Asia so that the concept of environmental due diligence develops its own constituency.

In 1997, US-AEP worked with the Bank of America, and central banks and national banking associations in the Philippines, Indonesia, Thailand, India, and Sri Lanka. US-AEP�s Environmental Exchange Program arranged individual environmental due diligence seminars in these countries and brought Asian banking professionals to the United States to observe U.S. lending practices. As a result, several changes have taken place in the banking systems where US-AEP was involved, thereby influencing environmental compliance by loan recipients.

In the Philippines. Land Bank incorporated environmental factors into its lending operations by setting up a specific Environmental Unit tasked with environmental analysis of all project financing. In turn, Land Bank became the first bank in Asia with limited redelegated authority from the government to issue their own environmental impact assessments. Land Bank has since expanded its Environmental Unit and has now accredited 13 environmental consulting firms that can be tapped for technical evaluations, and conducted environmental training program for over 2,000 people from its own project staff and client banks. The bank also plans to develop environmental credit risk assessment training modules for bank staff and clients.

Land Bank joined the Development Bank of the Philippines (DBP), also a US-AEP seminar and exchange participant, in signing the United Nations Environment Programme�s Statement on Banks and Environmental and Sustainable Development, a document that endorses the principles of sustainable development. DBP is also conduct training for their member banks to help them meet the UNEP charter requirements.

Using training materials provided by the Bank of America during the US-AEP-supported seminar, DBP is exploring various incentive schemes to encourage borrowers to include environmental considerations in their investment decisions. DBP has also changed credit evaluation procedures to incorporate environmental issues, and evaluation manuals are being written by consultants for specific sectors.

In Indonesia. Following the banking seminar, co-sponsored by the Bank of Indonesia and US-AEP with venue costs financed by USAID�s Indonesia Cleaner Industrial Production program (ICIP), Indonesia�s Central Bank is issuing a central directive on the environmental responsibilities of the industrial banking sector.

In Sri Lanka. The National Development Bank, the largest development bank in Sri Lanka, has initiated training programs for their correspondent borrowing banks around the country after attending US-AEP�s seminar on financial due diligence in Colombo. Meanwhile, the Bank of Ceylon has changed its credit review procedures.

In India. The Indian Bankers Association has indicated that it is proactively encouraging its members to sign the UNEP charter.

In Thailand. A survey undertaken by US-AEP after the seminar held in Bangkok revealed that the Industrial Finance Corporation of Thailand, an institution directly involved in industrial financing, plans to expand its environmental unit and provide training for staff. Other banks expressing interest in integrating environmental concerns in their financial criteria include: Bangkok Bank, the largest commercial bank in Bangkok; The Bank of Agriculture and Agricultural Cooperatives; Krung Thung Bank; and the Government Savings Bank.

EXAMPLE: LAND BANK OF THE PHILIPPINES

Reflecting US-AEP's 1997 success in promoting financial due diligence, the Philippines' Land Bank received recognition of its much-improved Environmental Unit. The accolades, which came from the World Bank in a local news article, demonstrated the effectiveness of US-AEP's work with Land Bank over the past two years. US-AEP activities have focused on helping the bank effectively incorporate environmental factors into its lending operations. A US-AEP Environmental Business Exchange enabled two senior officers of Land Bank to visit with U.S. banks that are successfully implementing due diligence. Land Bank staff also participated in an environmental risk management training course organized by US-AEP�s Environmental Exchange Program and the Bankers Association of the Philippines.

 
 

 

HOME | ABOUT | SERVICES | NEWS & PUBS | CONTACTS | CONFERENCESSITEMAP | SEARCH | LINKS | INSIDE US-AEP
United States-Asia Environmental Partnership, 1819 H Street NW, 7th Floor, Washington, D.C. 20006
Tel: 202-835-0333 Fax: 202-835-0366 E-mail: