Our environment and social policy

We apply two globally recognised approaches in our environmental and social risk assessment of projects and project related transactions.

We are bound by the Organisation for Economic Co-operation and Development (OECD) Recommendation of the Council on Common Approaches for Officially Supported Export Credits and Environmental and Social Due Diligence (the Common Approaches).

We are a signatory of The Equator Principles (Equator Principles), a globally recognised risk management framework used by member financial institutions to manage environmental and social risks in projects.

The OECD Common Approaches and Equator Principles are global approaches that help ensure that projects are developed in a manner that is socially responsible and reflects sound environmental management practices. In this regard, when financing projects under our Global Approaches:

• we fulfill our responsibility to protect human rights and fundamental freedoms as required by our Statement of Human Rights, the United Nations Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises by carrying out human rights due diligence;
• we support the objectives of the Paris Agreement and acknowledge the role that we can play in improving the availability of climate-related information, including through the assessment of the potential physical and transition risks of climate change of projects in alignment with the Recommendations of the Task Force on Climate-related Financial Disclosures;
• we seek to support projects that reduce emissions and implement best available technology, where appropriate, and have an appropriate climate change transition plan;
• we support conservation including the aim of enhancing the evidence base for research and decisions relating to biodiversity;
• we take into account social impacts, including impacts related to gender, indigenous persons and disadvantaged and vulnerable groups; and
• we seek to identify and support projects that are environmentally beneficial, including clean, alternative and renewable energy projects, and can offer more flexible terms and conditions to encourage their development.

Our approach for environmental and social risk assessment is conducted alongside other complementary areas of due diligence outside of this policy. These include:

• risk management incorporating relevant and appropriate climate-related scenarios for the physical and transition risks of climate change to stress-testing and scenario-analysis of financial exposures;
• compliance with our anti-bribery and corruption procedures, including the OECD Council Recommendation on Bribery and Officially Supported Export Credits;
• ensuring we conduct sustainable lending consistent with the OECD Principles and Guidelines to Promote Sustainable Lending in the Provision of Official Export Credit to Low Income Countries;
• financial and technical due diligence to consider if a project’s purpose is appropriate, including in relation to overseas infrastructure where we consider the project’s alignment with host country objectives, Australian Government programs and priorities, and the sustainability and quality of the project (in consultation with the Department of Foreign Affairs and Trade).

The OECD Common Approaches and Equator Principles were developed by the OECD and the Equator Principles Financial Institutions respectively for their roles. As a result, the scope of these Global Approaches applies to only some of the transactions that we are asked to consider.

We choose to extend the principles these frameworks embody to all transactions. In practice, this means that all transactions that we consider are subject to screening, classification and risk assessment of the potential for environmental and social impacts.

In line with these Global Approaches, we screen and, where relevant, classify all transactions, excluding military equipment, to identify the type and degree of environmental and social risk assessment necessary. This process considers:

• an exporter or investor’s role in a transaction, which can determine their responsibility and authority/ability to manage environmental and/or social impacts;
• the potential for environmental and social risks and impacts associated with a transaction;
• Australia’s obligations under international agreements, including the Paris Agreement; and
• Australia’s greenhouse gas emissions reduction targets (as defined in our legislation).

The transactions we consider vary widely in size and complexity. Small value transactions that are identified by a screening to have low potential for significant adverse environmental or social impact will not require further risk assessment. Our procedure details the process we undertake.

When our screening and classification process identifies potential for environmental or social impacts, we benchmark the project associated with the transaction, typically for compliance against the relevant Performance Standards on Environmental and Social Sustainability of the International Finance Corporation (IFC), a member of the World Bank Group.  

The IFC Performance Standards inter alia relate to labour standards, land acquisition and involuntary resettlement, biodiversity conservation and natural resources, and protection of indigenous peoples. The IFC Performance Standards are supported by the World Bank Group Environmental, Health and Safety Guidelines (EHS Guidelines), a technical framework providing standards in relation to emissions, waste management, and occupational and community health and safety, and specific industry sectors.

The IFC Performance Standards are our benchmark as they are a globally recognised and understood standard for environmental and social risk assessment.  Both the OECD Common Approaches and Equator Principles identify the IFC Performance Standards as an appropriate benchmark for projects.

The Australian environmental regulatory system is robust. The Equator Principles considers Australia a designated country and that legislation in Australia captures compliance with the relevant IFC Performance Standards through the application of its regulatory approvals process.  For this reason, where a transaction supports a project located within Australia and all relevant Australian government approvals have been obtained, we generally consider that our environmental and social benchmark has been met.

We publicly disclose, in line with the OECD Common Approaches, our potential involvement in a transaction associated with a project that:

• has potential for significant adverse environmental and/or social impacts (known as a Category A project) and
• has a repayment term or policy length of two years or more and
• has a value of Special Drawing Rights (SDR) 10 million or more. The monetary limit does not apply to projects in “sensitive areas” as defined in our Global Approaches.

We maintain on our website a register of transactions associated with the above Category A projects. We notify interested parties whenever we update this register.

We consider the findings of the screening, classification and risk assessment and disclosure process in deciding whether to support or decline a transaction.

We decline transactions if we determine that the potential environmental and/or social impacts will not meet our benchmark.

The approval of our Board is required for us to support on our Commercial Account a transaction associated with a Category A project located outside Australia.

The Commonwealth Minister for Trade and Tourism is responsible for decisions to support transactions undertaken on the Australian Government’s National Interest Account and Export Finance Australia then manages the exposure. However, the screening, classification, risk assessment and disclosure process for these transactions is the same as for transactions on the Commercial Account.

Decisions for all other transactions are made in accordance with Board-delegated credit authorities

The contractual terms of our support may include conditions covering environmental and social issues. The nature of these conditions will vary depending on the role of our customer, the type of support they request and the outcome of our risk assessment.

For Category A projects, this monitoring will include site visits and reporting by an Independent Environmental & Social Consultant.

We monitor compliance with these conditions during the course of the transaction. If a transaction fails to comply with the terms of our support regarding environmental or social issues, we will seek actions to be put in place by the customer to make the transaction compliant.

The Board also receives annual reports (or as otherwise required) on our transactions associated with Category A projects.

Our monitoring approach is the same for both Commercial Account and National Interest Account transactions.

Throughout the year, we publicly report on the transactions we have supported on our website. We update our transaction register within 8 weeks of signing a new transaction.

We will periodically engage an independent environmental and social expert to examine our application of this policy and the procedure. The expert’s report will be provided to our Board and to the public.

We will review this policy as and when necessary but will commence a review no later than five years from the Board review date.

This policy was last reviewed by our Board on 20 October 2022.