Vanuatu Bank Introduces New Environmental and Social Risk Assessment Framework

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Port Vila, Vanuatu - The National Bank of Vanuatu (NBV) has launched a new framework for assessing environmental and social risks associated with lending activities.

Categorization of Projects by Risk Level

The framework categorizes projects into three risk categories: Low Risk, Medium Risk, and High Risk. Each category has specific requirements to manage these risks:

• Low Risk: Activities that are unlikely to have significant environmental or social impacts can proceed without further review.
• Medium Risk: Activities may have some environmental or social risks, but these can be mitigated through recognized good practices and a sound Social and Environmental Management Plan (SEMP). The bank will verify compliance with applicable laws and regulations, obtain necessary permits, and ensure that the project does not contravene the Exclusion List.
• High Risk: Activities involve significant or controversial issues that require careful consideration of impacts, mitigation, and trade-offs. These projects may include large-scale land acquisition, permanent loss of income or assets, or direct impact on traditional landowners. A Social and Environmental Impact Assessment report will be required for these projects, focusing on key issues of concern.

Social and Environmental Due Diligence (SEDD) Process

The bank’s SEDD process reviews a client’s project at the time of appraisal to ensure that it meets social and environmental requirements. The extent of SEDD varies depending on the transaction’s risk category and type:

• For High Risk projects, external consultants may be sought to assist with the assessment.
• The bank will review a client’s Social and Environmental Impact Assessment report to ensure compliance with IFC Performance Standards.

Additional Conditions for Long-Term Corporate and Project Finance Transactions

The bank has outlined additional conditions that must be met for all long-term corporate and project finance transactions:

• Compliance with IFC Performance Standards, covering topics such as:
  • Environmental and social risks
  • Labor and working conditions
  • Resource efficiency
  • Community health and safety

Monitoring and Reporting

NBV staff will monitor clients’ social and environmental performance annually or more often if necessary. The bank will also require written confirmation from clients that they are taking steps to resolve any non-compliance issues.

Objective of the New Framework

The new framework is designed to ensure that NBV’s lending activities are carried out in a responsible and sustainable manner, minimizing harm to the environment and local communities.