Environmental and Social Due Diligence

Category A includes projects that involve significant negative, perhaps irreversible, environmental and social consequences. Some of the consequences can be difficult to mitigate and may affect a wider area than just the site or facilities themselves. An illustrative list can be found in Annex 1 to OECD Common Approaches.

Category B projects have a lower potential negative environmental and social impact than those in category A. They typically involve a smaller number of negative consequences, have a defined area of, and generally reversible, impacts and with available mitigating measures .

Category C projects have a minimal or potentially no negative environmental and social impact.

For applications that fall within OECD Common Approaches and the Equator Principles (in principle, a loan or lender guarantee for a project of > NOK 100 million) and that are categorised as high risk (A), Eksfin will require:

– An environmental and social impact assessment (ESIA) of the project, including any associated facilities, conducted by a third party in accordance with the IFC Performance Standard.

– A climate risk assessment (cf. the Equator Principles)

– An environmental and social management plan (ESMP) for mitigating measures related to the environment and human rights.

– Eksfin and/or an approved representative to carry out a physical inspection of the project.

– A project description with a link to the impact assessment and/or a non-technical summary to be uploaded to Eksfin’s website at least 30 days before Eksfin’s final decision.

Eksfin is happy to provide input on the scope of work required for a project’s ESIA to ensure compliance with the IFC Performance Standards and/or that specific project-related risks are identified and managed in accordance with Eksfin’s expectations. Recommendations on the content of impact assessments are available in Annex II Environmental and Social Impact Assessment (ESIA) Report to OECD Common Approaches. The Equator Principles suggest which risks and impacts an ESIA should assess. This can be found in the Equator Principles (EP4) and Exhibit II: Illustrative List of Potential Environmental and Social Issues to be Addressed in the Environmental and Social Assessment Documentation.

For applications categorised as high risk (A) but that do not fall within OECD Common Approaches and the Equator Principles, Eksfin’s requirements will be in line with applications categorised as moderate risk (B).

For applications categorised as moderate risk (B), regardless of the size of the financing, Eksfin requires documentation of a systematic approach to the identification and management of risks. Based on risk and impact, Eksfin may require:

1. An environmental and social impact assessment (ESIA) of the project, including any associated facilities, conducted by a third party.

2. Especially high risks must be managed in accordance with the IFC Performance Standards.

3. Eksfin or an approved representative to carry out a physical inspection of the project.

4. A project description to be uploaded to Eksfin’s website for applications that fall within OECD Common Approaches and the Equator Principles.

Eksfin is happy to provide input on the scope of work required for a project’s ESIA so that specific project-related risks are identified and managed in accordance with Eksfin’s expectations.

Some general recommendations on the content and assessments to be covered by an impact assessment are available in Annex II Environmental and Social Impact Assessment (ESIA) Report to OECD Common Approaches and in the Equator Principles (EP4) and Exhibit II: Illustrative List of Potential Environmental and Social Issues to be Addressed in the Environmental and Social Assessment Documentation.

For applications categorised as low risk (C), Eksfin requires a systematic approach to the identification and management of risks. Transactions that are typically low risk are projects in Norway and deliveries to existing facilities.

Existing facilities may be evaluated as having a higher risk if:

– Existing facilities are located in or near protected areas.

– Existing facilities have a significant environmental footprint or are in a country with significant challenges in respect of labour law and working conditions.

– Existing facilities have a poor HSE history and there have been local protests and/or disputes.

– Exports require major changes in terms of resource use, footprint, production, and increased emissions to the air/water/ground and/or a reduction in the number of employees.

Eksfin requires an assessment of working risks (i.e. core HSE risks and workers rights) at foreign shipyards where the latter are key suppliers in a transaction. An assessment will be made in accordance with Eksfin’s Shipyard Labour Rights Guidelines and associated checklists. Mitigation measures to address any shortcomings will be compiled in an Action Plan or Corrective Action Plan. The shipyard’s willingness and ability to co-operate in respect of necessary improvements will be decisive for Eksfin’s ability to contribute financing.

The following are not permitted at shipyards involved in the transaction:

– child labour that is not approved in accordance with ILO conventions,

– forced labour,

– serious and/or systematic HSE violations, or

– serious and/or systematic violations of applicable laws and regulations.

Serious and/or systematic violations or shortcomings in respect of the above must be addressed in an action plan that will be followed up in connection with the financing being paid.

Eksfin will also require information on the use of any hull yards, and it may also require an evaluation of working risks at those yards. This also applies to the use of overseas hull yards as subcontractors to Norwegian shipyards.

In respect of the use of foreign shipyards in connection with retrofits, the assessments that will be made will be tailored according to the case in question. Any shortcomings that must be addressed specific statements related to the management of the environmental and social risks from the shipyard.

– For Eksfin’s Shipyard Labour Rights Guidelines, click here.

– For the Labour Rights Checklist, click here.

– For the Integrated Sustainability Checklist, click here (Similar to labour audit checklist with additional questions related to the environment, local community, worker health & safety and security, and corruption.)

– For the Sustainability Checklist click here. (In some cases a self-assessment may be relevant. This checklist is similar to the integrated sustainability checklist, whilst with some modifications. Scope of the self-assessment is agreed upfront of the exercise.)

Shipping is largely regulated by international conventions adopted by the IMO. Eksfin’s due diligence assessments take this into account. In addition to assessing stakeholders in the construction phase, Eksfin will also assess the owner company and/or operator of the ship. 

Eksfin will require the following for the operations phase of the ship:

– The country of registration must be on the Paris MoU white list and have ratified the IMO conventions SOLAS, MARPOL, STCW, and MLC.

– For ships over 5,000 dwt operating in international waters (deep sea shipping), IMO DCS data must be reported to Eksfin annually (cf. the Poseidon principles).

– Any new charter parties with a duration of two or more years must be reported.

– The recruitment of crew, working conditions, and worker rights must adhere to MLC 2006 and the “employer pays principle”.

Eksfin adheres to the Responsible Ship Recycling Standards (RSRS) and requires that all ships have the following:

– an Inventory of Hazardous Materials (IHM) and

– a policy to be in place within one year of payment in respect of the scrapping of the ship.

Reder skal bekrefte at enheten eller skipet vil overholde Hong Kong konvensjonen og/eller EUs regulering mht skraping.

The shipowner must confirm that the unit or ship will comply with the Hong Kong Convention and/or EU regulations in respect of scrapping.

Shipowners must have management systems that meet the requirements of the FAO Guidelines for the Ecolabeling of Fish and Fishery Products from Marine Capture Fisheries. Fishing must be traceable and take place in well-regulated waters and must be subject to quotas from countries with well-regulated fishing policies. Eksfin has a special focus on areas where the rights over the control of fishing are disputed.

– Eksfin must be given information on the vessel’s quotas, as well as on other ships and quotas that the shipping company has at its disposal.

– Foreign fishing boats must be able to document a system that meets the authorities’ reporting requirements regarding quotas and traceability of the catch. 

– The country of registration must have ratified the ILO 188 convention, also known as the Work in Fishing Convention (WFC).

– Fishing boats 24 metres in length or longer must adhere to the STCW-F convention from 1995.

– The boat must have an Inventory of Hazardous Materials (IHM).

– The shipping company must report any significant changes in quotas to Eksfin during the loan and guarantee period, such as changes in location and type of catch.

In accordance with the Equator Principles, projects/activities with greenhouse gas emissions of > 100,000 tonnes of CO₂ per year must have a Climate Change Risk Assessment (CCRA) drafted by a third party that includes a reference measurement of the greenhouse gas profile of the project. A guide for CCRAs has been developed in line with the Equator Principles and can be found here.

For projects/activities estimated to emit > 100,000 tonnes of CO₂ per year, Eksfin will require annual public reporting of green gas emissions in scope 1 and 2 in accordance with the GHG Protocol and, if appropriate, of greenhouse gas efficiency in the operational phase. In addition, all customers with greenhouse gas emissions of > 25,000 tonnes of CO₂ per year will be encouraged to submit public reports, which will be submitted to the OECD.

Eksfin conducts due diligence assessments of mobile offshore units associated with the production of oil and gas, such as FPSO and FSRU . The due diligence assessment will include the environment and social risks for the development of the field itself and an associated impact assessment for where the unit is to be operated. Management systems will also be assessed. It is likely that these units’ greenhouse gas emissions will trigger Eksfin to require a Climate Change Risk Assessment (CCRA) in accordance with the Equator Principles.