For the effective management of environmental and social risks by creating a linkage between the probability of default with the environmental vulnerabilities and labor and working condition and community health and safety, an Environmental and Social Risk Management process has been followed.
Prime Bank has integrated environmental and social due diligence as part of their standard due diligence process. As part of the overall assessment of whether the Bank should pursue a proposed transaction, it is screened against the list of environmentally and socially excluded activities. If a transaction involves an excluded activity the prospective borrower will be informed, and further consideration of financing for the project will be terminated. Otherwise, the business official will indicate the applicable requirements for the transaction.
After conducting due diligence as per Policy Guidelines on Environmental & Social Risk Management, transactions are categorized as High, Medium and Low risk. Transactions, which may have significant adverse environmental or social risks; categorized as High and are elevated for enhanced review and business selection discussion. Based on the risk appetite of the Bank, Board of Directors give approval of High Risk transactions. Sustainable Finance Unit of the Bank assists business teams by providing guidance on environmental and social related matters, doing independent reviews and identifying mitigation and positive engagement opportunities with the client to reduce material risk. Every identified environmental or social risks have to be mitigated within an agreed timeline. A corrective action plan needs to be developed by identifying the risk, mitigation measure, timeline for implementation and assigning responsibility for implementation. Transaction specific corrective action plan and covenants is part of the legal loan documents.