ES risk management in Finnvera’s export financing operations

• Our export credit guarantee application forms include questions about the use and location of the export product as well as its potential environmental and social impacts and risks.
• The purpose of these questions is, among other things, to establish where the export product will be used, whether the export transaction is associated with a larger investment, and whether the investment could have impacts on communities, especially vulnerable groups, within the specific region.
• Based on the responses provided and other sources of information, we aim to identify projects with high environmental and social risks.
• We use the ESG risk tool and other sources of information to support our screening process.

Based on the screening process the application is assigned to an ES risk category (A/B/C).

• The ES risk category describes the significance of the project's potential environmental and social impacts and risks:
  • Risk category A: potentially high risk
  • Risk category B: potentially moderate risk
  • Risk category C: low risk
• If the risks associated with the sector are high and the target country’s legislation related to environmental and social risks is weak or poorly enforced, Finnvera’s obligation to ensure that national and international requirements are met is highlighted.
• If the classification shows that the project involves environmental and/or social risks and/or impacts, we gather further information and decide how the assessment should be carried out. The extent of the assessment depends on the value of the transaction, the extent of the buyer’s investment, and the financing product that the exporter is applying for.

• In the assessment phase, our interest focuses on project documents, including building and environmental permits, environmental and social impact assessment reports (ESIA) and project descriptions.
• In smaller high-risk projects (risk category A), we also use questionnaires addressed to the buyer to find out more details about project's impacts. Here exporter can facilitate our work by directly liaising with the buyer regarding the questionnaire.
• In large projects with a high risk, a consultant visits the project site and produces an Environmental and Social Due Diligence (ESDD) report.
• In some cases, we also like to send Finnvera’s representatives out to the site to evaluate the operator's attitude, ability and practices related to risk management. We also consult various stakeholders affected by the project, including NGOs, authorities and local populations to find out about their opinions of the project. Having an overall picture of the project and understanding local circumstances is important for us.
• When evaluating the impacts, we rely on the World Bank Group’s Environmental, Health and Safety Guidelines and IFC’s Environmental and Social Performance Standards. 

• Based on the information we receive about the project, we carry out an ES assessment and prepare a proposal for the financing decision.
• Depending on the size of the project and its risk category, the proposal may also include an evaluation report which includes our analysis of  project’s likelihood to succeed in relation to Finnvera's ES requirements and the ways in which the potential risks can be managed. The evaluation also draws attention to the measures required to fulfil the requirements.
• Environmental and social issues are also addressed in negotiations on the terms and conditions of the credit, which are always defined on a case-by-case basis. In our credit agreements, we aim to ensure that Finnvera has sufficient rights to visit the project site.
• Finnvera monitors the progress of the project and effectiveness of its actions to ensure that any negative impacts and risks have been addressed. The objective of monitoring individual projects is to assess if the parties to the project take appropriate action in problem situations and to ensure that projects financed by Finnvera comply with the requirements set for them.
• In large, high-risk projects we rely on  an external consultant, who pays follow-up visits to the site and reports regularly to Finnvera on the environmental and social impacts of the project following a jointly agreed monitoring plan. Once the loan agreement has been signed, the consultant visits the site at agreed intervals and ensures that Finnvera’s standards are reached.
• In projects with particularly high risks, we require a monitoring consultant throughout the loan repayment period.