Procedures of reviewing the environmental and social aspects of export transactions

KREDEX KREDIIDIKINDLUSTUS FOLLOWS REQUIEMENTS OF THE OECD RECOMMENDATION ON COMMON APPROACHES FOR OFFICIALLY SUPPORTED EXPORT CREDITS AND ENVIRONMENTAL AND SOCIAL DUE DILIGENCE (THE “COMMON APPROACHES”)

Before taking decisions on officially supported export credits, KredEx Krediidikindlustus applies the principles of the common approaches (https://www.oecd.org/en/topics/environmental-and-social-due-diligence.html) for addressing environmental and social issues relating to exports of capital goods and/or services whereas the repayment term is of two years or more.

KredEx Krediidikindlustus screens the applications for officially supported export credits with the aim of identifying which applications should be classified and, where appropriate, subsequently reviewed according to the Common Approaches. For that KredEx Krediidikindlustus requires from the applicants (exporters and lenders) all necessary information for screening. Information is required in the application or additionally during the risk assessment process.

The screening is aimed to find out:

• whether the transactions are related to projects or to existing operations;
• whether or not the exports are destined to identified locations that are in or near sensitive areas;
• whether or not there may be a high likelihood of severe project-related human rights impacts occurring;
• whether or not the share of the official support from KredEx Krediidikindlustus would be equal to or above SDR 10 million.

KredEx Krediidikindlustus identifies the potential positive and negative environmental and social impacts relating to the applications:

• Potential environmental impacts may include, but are not limited to, generation of significant air emissions, including greenhouse gas emissions, effluents, waste, hazardous waste, wastewater, noise and vibrations, significant use of natural resources, and impacts on endangered species.
• Potential social impacts may include, but are not limited to, labour and working conditions, community health, safety, and security, land acquisition and involuntary resettlement, indigenous peoples, cultural heritage, and project-related human rights impacts, including forced labour, child labour, and life-threatening occupational health and safety situations.

Considering the results of the screening identification of the positive and negative environmental and social aspects, all applications are divided between three categories:

• Category A: a project is classified as Category A if it has the potential to have significant adverse environmental and/or social impacts, which are diverse, irreversible and/or unprecedented. These impacts may affect an area broader than the sites or facilities subject to physical works. Category A, in principle, includes projects in sensitive sectors or located in or near sensitive areas.
• Category B: a project is classified as Category B if its potential environmental and/or social impacts are less adverse than those of Category A projects. Typically, these impacts are few in number, site-specific, few if any are irreversible, and mitigation measures are more readily available.
• Category C: a project is classified as Category C if it has minimal or no potentially adverse environmental and/or social impacts.

Category C projects occur in case KredEx Krediidikindlustus share is below SDR 10 million and the project or existing operation is not in or near sensitive areas and then no further action is taken, except where the screening has identified that there may be a high likelihood of severe project-related human rights impacts occurring.

In case further action is required the environmental and social review follows. The review consists:

• benchmarking of the project’s environmental and social performance against the relevant aspects of the international standards applied to the project;
• consideration of measures that can be taken to prevent, minimise, mitigate or remedy adverse impacts and/or to improve environmental and social performance, as appropriate to the size of the relevant parties involved in the project, the context of their operations, the nature and extent of potential adverse impacts, the international standards applied to the project, and the significance of KredEx Krediidikindlustus share in the overall project.

In case the possible official support from KredEx Krediidikindlustus would form a minor part of a project, KredEx Krediidikindlustus may take into account the environmental and social review carried out by another institution performed in accordance with the Common Approaches.

The review may include assessing the potential environmental and/or social impacts of any associated facilities, considering any relevant statements or reports that are made publicly available, indicating to appropriate parties which information is required, including, where appropriate, the need for an Environmental and Social Impact Assessment (ESIA). The applicant is responsible for providing the appropriate information.

KredEx Krediidikindlustus in that case may require the following information:

• description of the project and its geographic, ecological, social, and temporal context;
• information relating to the potential environmental and/or social impacts of the project, together with any information on related mitigating and monitoring measures;
• the standards, practices and processes that the parties involved in the project intend to apply, including information that the project complies with local legislation and other host country relevant regulations;
• the results of any public consultations with local communities directly affected by the project and/or their legitimate representatives and of any engagement with other parties, such as civil society organisations, that have expressed an interest in the project. It is the responsibility of the buyer/project sponsor to undertake any such public consultations and/or engagements with interested parties. For the purposes of public consultations, environmental and social impact information should be made available to affected communities in a language accessible to them.
• An ESIA (environmental and social impact assessment) is required in case of a Category A project. An ESIA report and any supporting documents should address the issues set out in the international standards applied to the project.

The scope of a review for a Category B project may vary from project to project.

Where relevant, the projects will be benchmarked against the relevant aspects of the standards of major multilateral institutions, relevant guidelines, international or specific standards etc. Projects should, in all cases, comply with host country standards and local legislation.

The information resulting from screening and review is evaluated by KredEx Krediidikindlustus and the decision whether the application for official support should be declined or provided is based on the results of the evaluation.

In case official support is to be provided, KredEx Krediidikindlustus decides whether to apply any conditions to fulfil prior to, or after, the final commitment for official support, for example, measures to prevent, minimise, mitigate or remedy potential adverse environmental and social impacts, covenants.

If relevant also regular ex post reports information will be required to ensure that relevant potential environmental and/or social impacts are addressed according to the information provided by applicants during the environmental and social review. In the case of non-compliance with the conditions of official support, KredEx Krediidikindlustus shall require the applicant to take actions for restoring compliance.

KredEx Krediidikindlustus shares information with other institutions following the requirements of the Common Approaches and, if appropriate, with financial institutions involved in the project.

In case of a Category A projects, Kredex Krediidikindlustus discloses on its website information, including project name, location, description of project and details of where additional information (e.g. ESIA report, summary thereof) may be obtained, as well as a buyer and/or project sponsor contact point and/or website link, as early as possible in the review process and at least 30 calendar days before making a final commitment to grant official support.

Environmental and social information in regard projects classified in Category A and Category B for which KredEx Krediidikindlustus has made a final decision to provide official support, will be published by KredEx Krediidikindlustus annually.