Resources and responsibilities continued The main objective of the E&S Policy is to increase Environmental and social issues are tracked at project environmental and social benefits for our clients. sites in cooperation with the facility staff, providing Through ESRM procedures, the Bank enhances clients’ ongoing advice and guidance on good practice and opportunities to be in compliance with national standards and monitoring compliance with the environmental and social regulations and adopt requirements. For environmental and social due international best practices in this area. ESRM procedures diligence of certain high risk projects, the Bank contracts are periodically updated and approved by the Board of independent external experts. As part of monitoring, Directors to ensure that the Policy remains fit for purpose the Bank requires each high risk client to provide the and reflects experience and changes in the relevant Bank with an annual report on their environmental and legislation. ESRM procedures, along with other tools social performance and the implementation of applicable necessary for their implementation, comprise the core Environmental and Social Action Plans. Alternatively, components of the Bank’s Environmental and Social Risk the Bank’s staff visits high risk clients on a regular basis. Management System (ESMS). Under this mechanism, the Bank endeavours to become an environmentally Throughout 2018, the Bank held extensive Environmental friendly financial institution. and Social Due Diligence (ESDD), where the Bank monitored clients and developed action plans for non- Furthermore, to ensure a more effective operation compliant clients. Thanks to the Bank’s efforts, some and maintenance of the ESRM Policy, the Social and clients conducted an environmental audit and obtained Environmental Risk Unit was created in September 2016. the necessary environmental impact permits to continue Until then, the Environmental and Social Risk Coordinator their business operations. Those clients started to identify, was responsible for the implementation of the Policy. avoid, mitigate and manage environmental and social risks In 2018, we appointed a Social and Environmental Risk and their impact on the natural and social environment. Manager in the Social and Environmental Risk Unit, In addition, as a result of ESDD some clients took out who will oversee the practical, day-to-day implementation loans to enhance their companies’ power and ability of the Bank’s ESMS. to reduce negative impacts on the environment and positively benefit their communities. Others implemented We implement the following procedures to ensure environmental and social management systems in the operation and maintenance of the ESMS: accordance with international standards. •We refrain from financing environmentally or socially sensitive business activities mentioned in the exclusion Procedures for addressing external queries and concerns, lists of Development Finance Institutions such as EBRD, developed within the framework of ESMS, provide IFC, DEG, FMO and ADB, among others. a means for the public to submit queries or concerns •We aim to assess the relative level of environmental and related to the Bank’s E&S Policy, and have these inquiries social risk associated with clients’ businesses. We require responded to by the Bank in a timely manner. In the certain customers to implement specific environmental Association Agreement between the European Union or social action plans to avoid or mitigate their and Georgia, Georgia has committed to progressively environmental and social impact and adhere to specific approximate its legislation in the relevant sectors with monitoring and reporting requirements that we set in that of the EU and to implement it effectively. Through order to minimise environmental and social risk. These this approximation process, Georgia is actively developing requirements are included as covenants in agreements and amending its national legislation in the relevant between certain of our customers and the Bank. sectors. As a result, the Bank regularly checks legal •We aim to regularly monitor environmental and social risks developments and updates with regard to environmental, associated with the Bank’s activities, and assess clients’ health and safety, and labour issues and places great compliance with the terms of respective agreements. emphasis on the improvement of ESDD opportunities. The Bank’s staff are very focused on introducing clients Through ensuring comprehensive environmental and to information about relevant (existing and new) social assessment and action plans, as a part of stable regulations and laws during ESDD with the aim of due diligence, the Bank encourages its customers to fulfil strengthening public knowledge and capacity in the area their environmental and social obligations and establishes of environmental and social protection. a framework for them to achieve good environmental and social standards. In many cases, the Bank’s proper and timely management of customers’ environmental and social risks has helped them to avoid financial and legal sanctions during inspections conducted by state enforcement agencies. 72 Annual Report 2018Bank of Georgia Group PLC