Two types of risk evaluation are undertaken, risk evaluation for transactions involving New Projects (see section 2.2) and risk evaluation for other transactions (see section 2.3).
2.2 Risk evaluation and benchmark standards – New Projects
EFIC completes an environmental and social risk evaluation for all transactions involving New Projects other than those Classified as Category C (where it has already been determined that there is minimal or no adverse environmental or social impact). EFIC considers:
- information provided by EFIC’s client, including their role and their environmental and social management arrangements
- where relevant, information available on a project’s environmental and social assessment and management, including engagement with project stakeholders (such as the host country government and affected communities)
- potential environmental and social issues associated with the industry and location of the project and
- information from other sources, including others involved in the project and EFIC’s stakeholders (such as the Australian public and civil society organisations).
2.2.1 Category A and B project benchmarking
EFIC benchmarks overseas Category A and B projects that are associated with its transactions against:
- relevant International Finance Corporation (IFC) Performance Standards and
- host country standards.
EFIC uses as its benchmark the more stringent of the IFC Performance Standards or host country standards. The IFC Performance Standards that apply, are generally those current at the date of the Policy or as subsequently amended. When the benchmark is amended or revised there will be a transition period where either the original or revised benchmark may be relevant. This will be determined on a case-by-case basis.
The IFC Performance Standards were selected as EFIC’s usual benchmark as they are a widely used and understood global standard. However, for a limited range of transactions EFIC may use as its benchmark other internationally recognised standards if they are more relevant to EFIC’s transaction and are at least equivalent to the IFC Performance Standards.
Circumstances in which EFIC may apply standards other than the IFC Performance Standards include:
- when the project associated with EFIC’s transaction is located in a country where the environmental and social assessment and management requirements are more stringent than the IFC Performance Standards (for example a project subject to European Community Standards) and
- when the project associated with EFIC’s transaction involves a multi-lateral financial institution (MFI) other than the IFC – here, EFIC applies the MFI’s benchmark standards.
Where a transaction supports a project located in Australia, EFIC Screens and Classifies the project. However, if relevant Australian government approvals have been obtained, EFIC considers its benchmark to have been met.
2.2.2 Information requirements
For Category A and B projects, EFIC requires clients to provide sufficient information to enable EFIC to undertake a reasonable evaluation of environmental and social risks and corresponding mitigation measures. The documentation expected from a client depends on the nature and scale of the project. The IFC Performance Standards provide that an assessment may comprise a full-scale environmental and social impact assessment, a limited or focused environmental or social assessment, or a straightforward application of pollution standards, design criteria or construction standards.
A Category A project generally requires a comprehensive environmental and social impact assessment consistent with both the requirements of the host country and the IFC Performance Standards (or other relevant benchmark).
A Category B project generally requires a narrower scope of assessment.
The information provided by a client for a Category C project must be sufficient to demonstrate minimal or no adverse environmental and/or social impact.
Information provided by a prospective client in support of a transaction is commercial-in-confidence information and EFIC does not disclose this information to any third party except with the consent of the client and otherwise in accordance with EFIC’s statutory confidentiality obligations. One such exception applies to an environmental and social impact assessment for a Category A project to which EFIC’s public disclosure obligations apply (see section 2.2.3). EFIC obtains the client’s consent for this disclosure.
Before EFIC makes a final decision to support certain Category A transactions, it discloses on its website its potential involvement in those transactions. This applies to each transaction that:
- is associated with a Category A project
- has a repayment term or policy length of two years or more and
- has a value of SDR10 million or more.
The monetary limit does not apply to Category A projects in Sensitive Areas. These include national parks and other protected areas identified by national or international law and other locations of international, national or regional importance, such as wetlands, forests with high biodiversity value, areas of archaeological or cultural significance and areas of importance for indigenous peoples or other vulnerable groups.
Disclosure is for at least 30 calendar days before EFIC makes a final decision to provide support for the transaction. It involves EFIC publishing in a Category A register on the website:
- the project name and description
- country and location of the project
- industry sector
- the facility requested
- an outline of the reasons for the categorisation
- links to an environmental assessment of the project associated with the transaction that has been provided to EFIC and
- disclosure period.
Anyone can register to receive email notification of updates to the Category A register. EFIC’s website also includes an archive of all Category A transactions it has considered.
Anyone can comment on EFIC’s potential involvement in a Category A transaction located outside Australia using the methods shown on EFIC’s website. EFIC acknowledges receipt of submissions and considers them in its due diligence for a transaction.
EFIC does not invite comment on its potential involvement in a Category A transaction located in Australia. This is to avoid potential confusion with the disclosure requirements of the various levels of Australian government.
In accordance with the Common Approaches, where a transaction involves EFIC re-insuring another OECD export credit agency (ECA), EFIC may rely on the disclosure undertaken by that ECA.
2.3 Risk evaluation and benchmark standards – transactions other than New Projects
EFIC undertakes an environmental and social risk evaluation for transactions associated with Existing Projects, Non-projects and bonds. EFIC’s information requirements for these transactions depend on the type of support requested and the role of EFIC’s client and are discussed with a client early in the due diligence for a transaction.
The risk evaluation considers:
- information from EFIC’s client, including their role in the transaction and their environmental and social management arrangements
- potential environmental and social issues associated with the industry and, where relevant, location of the transaction
- where relevant and available, information on the environmental and social assessment and management of the project associated with the transaction, including stakeholder engagement and
- information from other sources, including others involved in the project and internet searches.
Two levels of potential environmental and/or social impact are used. Nil or low potential, in which case no further action is necessary, and potential for environmental and/or social impact. If potential for environmental and/or social impact is identified, the benchmark will generally be the IFC Performance Standards. However, if more appropriate EFIC may use:
- other internationally recognised standards
- host country standards and
- good international industry practice.
Where a transaction supports an Existing Project or Non-project located in Australia or is providing a bond for a project located in Australia, EFIC Screens and Classifies the project. However, if relevant Australian government approvals have been obtained, EFIC considers its benchmark to have been met.