Moving Forward with Environmental and Social Risk Mmanagement

Financial institutions (FIs) face a number of risks related to the activities of their clients. The impact of climate change, resource scarcity, environmental pollution and social issues such as involuntary resettlement are just some of the factors that might increase the risk incurred by FIs extending credit to clients. The potential impact can be substantial: FIs may face increased credit risk, reputational risk, or liability risk. In this context, IFC has observed a growing interest in Environmental and Social Risk Management (ESRM) from the financial sector in emerging markets. Furthermore, FIs are increasingly aware of the opportunities of environmentally and socially sustainable banking. To provide an overview of the current state of ESRM, IFC has conducted a series of baseline surveys in Africa, Asia and Latin America. This paper provides a summary of the main findings of these market surveys and insights into the current practices of ESRM in emerging markets. In this paper, the scope of the baseline surveys will be presented, followed by a detailed analysis of the survey results and a summary of the main survey findings. The last section of the paper provides an overview of current ESRM guidance1 in the survey countries.