Published in Business World, August 5, 1999

Pollutive companies better start "cleaning" up their act. Their poor compliance with environmental standards may soon prevent them from securing loans needed for their operational expenditures.

The Manila-based Association of Development Financing Institutions in Asia and the Pacific (ADFIAP) and the United States-Asia Environmental Partnership (USAEP) have urged banks to consider the environmental concerns of company-clients in processing the latter�s loan applications.

The two organizations yesterday signed a memorandum of agreement on the joint conduct of training programs covering the assessment of company-clients� environmental risks. Such an assessment may soon be adopted by banks as a requirement in processing the loan applications of their company-clients.

"Environmental risk management in banks is not only a part of good corporate citizenship but also a fundamental aspect of sound business management since the environmental risks of a borrower can become the risks of the bank," ADFIAP said in a news release.

If such an assessment is formally adopted by banks, then companies which continue to violate government environmental standards will find it difficult to obtain loans for their operations. ADFIAP and USAEP call such an assessment an "environmental due diligence" audit.

The agreement supports ADFIAP�s "Greening of DFIs (development financial institutions)" program which encourages member banks to adopt a written environmental policy for their operations. The said program also encourages member banks to designate bank officers responsible for environmental affairs.

ADFIAP, founded in 1978, has 78 member financing institutions in 33 countries.

The USAEP, meanwhile, is a program of the US Agency for International Development aimed at promoting a "clean revolution." USAEP is not only promoting the concept of environmental due diligence among banks but among investment firms and insurance organizations in Asia.