Application for projects
Environmental and social risk management process under the Equator Principles
Mizuho Bank recognizes that large scale development projects may have adverse impacts on the environment and local communities. To minimize and/or mitigate the environmental and social risks associated with such large scale developments, Mizuho Bank, in collaboration with the project proponents (customers), conducts appropriate environmental and social risks assessment/due–diligence as required under Equator Principles.
Overview of the environmental and social risk management process
Categorization and requirements
The Equator Principles Financial Institution (EPFI) categorizes the project into one of the following three categories, based on the magnitude of associated environmental and social impacts. EPFI also ensures that the client undertake appropriate mitigation actions depending on the project category.
|Definition of the categories||Impacts of the project|
|Category A||Projects with potential significant adverse environmental and social risks and/or impacts that are diverse, irreversible or unprecedented||
|Category B||Projects with potential limited adverse environmental and social risks and/or impacts that are few in number, generally site–specific, largely reversible and readily addressed through mitigation measures||
|Category C||Projects with minimal or no adverse environmental and social risks and/or impacts||
Projects classified as Category A, those with significant adverse impact on the environment and society, need to satisfy all fourteen of the following requirements. In addition to the Environmental and Social Impact Assessment report prepared by the client, a report by an independent environmental and social consultant is also required.
|a.||Require the client to conduct an Environmental and Social Impact Assessment report|
|b.||Human Rights Risk Assessment|
|c.||Climate Change Risk Assessment (Physical risk)|
|d.||Climate Change Risk Assessment (Transition risk, when GHG emission is more than 100,000 tons of CO2 equivalent annually)|
|e.||Require the client to conduct an alternative analysis (for project emitting more than 100,000 tons of CO2 equivalent annually)|
|f.||Require the client to prepare an Action Plan|
|g.||Require the client to establish an Environmental and Social Management System|
|h.||Require the client to conduct Stakeholder Engagement with project–affected communities|
|i.||Require the client to establish a grievance mechanism|
|j.||Require the client to disclose the Environmental and Social Impact Assessment report online|
|k.||Require the client to disclose the GHG emissions (for projects emitting more than 100,000 tons of CO2 equivalent)|
|l.||Share Project specific biodiversity data (required when applicable)|
|m.||Require an independent environmental and social consultant to prepare an assessment report on the above items (a) to (i)|
|n.||Require an independent environmental and social consultant to conduct monitoring after project funding is executed|
Review by EPFIs
EPFIs review (a) the Environmental and Social Impact Assessment report and (m) the assessment report by an independent expert and will determine whether the project complies with the requirements of the Equator Principles before deciding whether to provide loan to the project.
Reflection on the financing agreement
Equator Principles (EPs) require the client to include the following four covenants in the loan agreement:
a. Compliance with the applicable host country's environmental and social laws, regulations and permits;
b. Compliance with the ESMPs and Equator Principles Action Plan;
c. Preparation of periodic reports regarding the compliance of items (a) and (b)
d. Decommissioning plan of the facilities (where applicable).
Action Plan is prepared, as a result of the EPFI's due diligence process, to describe and prioritize the actions needed to address any gaps in the assessment documentation, ESMPs, the EMS, or Stakeholder Engagement process documentation to bring the project in line with applicable standards of the EPs. The Equator Principles Action Plan is typically tabular in form and lists distinct actions, mitigation measures, follow–up studies or plans to complement the assessment.
The impact of environmental and social risks of the project can be reduced and the project can be modified to qualify for financing by including the compliance of the Action Plan as a requirement for financing. Project expense may increase due to the implementation of the Action Plan.
In case of project finance, after the syndicate member banks providing funds to the project are officially determined, the lead arranger will initiate the negotiations between the client and the syndicate toward an accord on the Action Plan and the covenants.
Disclosure of the implementation process and the number of screened projects
Each Equator Principles Financial Institution is required to publicly report its internal EPs implementation process and the number of projects to which EPs are applied each year by category, by industry and by region, etc.
Mizuho discloses relevant information in accordance with this requirement.