The Export Finance and Insurance Corporation (Efic) facilitates and encourages Australian export trade on a commercial basis.
As the Australian Government’s export credit agency, Efic assists clients by providing financial services in circumstances where they have been unable to source adequate finance from the private sector.
Efic’s corporate values include a commitment to uphold best-practice environmental and social standards.
This policy sets out the principles that Efic applies to meet that commitment in its consideration of transactions.
A separate procedure document describes how this policy is implemented.
1. Global standards
Efic incorporates two globally recognised approaches in its environmental and social assessment of transactions.
Efic is 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).
Efic also voluntarily applies the Equator Principles, a globally recognised benchmark used by many financial institutions to manage environmental and social risk in projects.
These global standards were developed by the OECD and the Equator Principles Financial Institutions respectively for their roles. As a result, they apply to only some of the transactions that Efic could be asked to consider. Efic chooses to extend the principles they embody to all transactions it considers.
2. Screening and classification
Efic screens and, where relevant, classifies all transactions to identify the type and degree of environmental and social risk evaluation necessary. The process considers:
- an exporter or investor’s role in a transaction, which can determine their responsibility and authority to manage environmental and/or social impacts
- the potential environmental and social issues associated with a transaction
- Australia’s obligations under international agreements and
- the above global standards.
3. Risk evaluation and benchmark standards
When Efic’s screening and classification process identifies potential environmental or social impacts, it benchmarks the project associated with the transaction, typically against relevant Performance Standards of the International Finance Corporation (IFC), a member of the World Bank Group.
The IFC Performance Standards were selected as Efic’s usual benchmark as they are a widely used and understood global standard.
Where a higher benchmarking standard is applicable to a particular transaction, Efic applies that higher standard.
For transactions not directly related to a project, Efic may use other internationally recognised standards as its benchmark.
Where a transaction supports a project located within Australia and relevant Australian government approvals have been obtained, Efic considers that the environmental and social benchmark has been met.
Efic publicly discloses its potential involvement in each transaction which:
- is 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 SDR10 million or more. The monetary limit does not apply to projects in sensitive areas.
In accordance with the Common Approaches, where a transaction involves Efic reinsuring another OECD export credit agency (ECA), Efic may rely on the disclosure undertaken by that ECA.
Efic maintains on its website a register of transactions associated with Category A projects.
5. Approval of transactions
Efic considers the findings of the screening, classification and risk evaluation process in deciding whether to support or decline a transaction.
The contractual terms of Efic’s support may include conditions covering environmental and social issues. Efic monitors compliance with these conditions during the course of the transaction.
Efic declines transactions if it determines that the environmental and/or social impacts do not satisfy relevant benchmarks.
The approval of the Efic Board is required for Efic to support on its Commercial Account a transaction associated with a Category A project located outside Australia. Efic’s Board also receives annual reports (or as otherwise required) on transactions associated with Category A projects to which Efic has exposure.
The Commonwealth Minister for Trade, Tourism and Investment is responsible for decisions to support transactions undertaken on the Australian Government’s National Interest Account and Efic then manages the exposure. However, the screening, classification, evaluation and disclosure process for these transactions is the same as for transactions on Efic’s Commercial Account.
Decisions for all other transactions are made in accordance with Board-delegated credit authorities.
Throughout the year, Efic publicly reports on the application of this policy and the types of transactions it has supported.
7. External review
Efic will periodically engage an independent environmental and social expert to examine Efic’s application of this policy and the procedure. The expert’s report will be provided to Efic’s Board and to the public.
This policy was last reviewed by the Efic Board on 24 April 2018.
Efic will review this policy as and when necessary but will commence a review no later than five years from the Board review date.