Project Finance Initiatives
SuMi TRUST Bank is a signatory to the Equator Principles. These international guidelines for private-sector financial institutions in approving loans for project finance etc. are to ensure project implementers give sufficient consideration to impacts on the natural environment and regional communities.
- Application processes
Following internal policies based on procedures for evaluating social and environmental considerations, the Equator Principles Department carries out assessments of environmental and social impacts relating to individual projects.
- Implementing environmental and social impact reviews
Reviews of the environmental and social impacts of a project proposed by developers take into account its industry, the country where it is sited, and whether it meets the standards called for by the Equator Principles, and from there, a comprehensive risk is judged.
- Monitoring compliance
Compliance with important items concerning environmental and social impacts have been reflected into loan agreements, and compliance with these is regularly confirmed through such methods as reports on project compliance status on these fronts.
- Company training programs
Regular training sessions are provided for employees in departments and sections relating to sales, assessment, and screening to foster a thorough understanding of internal operations supporting environmental and social impact reviews and raise their awareness about related concepts.
The Equator Principles
The Equator Principles are standards that enable privatesector financial institutions approving loans for a largescale project to confirm the project pays sufficient care to impacts on the natural environment and regional communities. Regardless of the country where the project is sited or industry, the Principles apply to project finance, projectrelated corporate loans (PRCL), and bridge loans that are intended to be re-financed by a project finance or PRCL. The Equator Principles are based on guidelines and standards concerning environmental and social risk management established by International Finance Corporation, a member of the World Bank Group. These standards and guidelines span many fields from implementation processes for assessing environmental and social risks and/ or impacts, pollution prevention, and consideration for regional communities to environmental protections.
The Equator Principles Association Annual Meeting in November 2019 adopted EP4, the fourth version of the Equator Principles. Other than stronger consideration of indigenous peoples in developed countries and partial expansion of applicable transactions to include refinancing and the like, EP4 reinforced action on climate change by adding to the due diligence items. The added items were implementation of physical risk analysis in cases likely to cause substantial or greater impact, and, for projects with annual greenhouse gas emissions in excess of 100,000tCO2, the implementation of transition risk analysis in TCFD in addition to consideration of alternative proposals.
As of December 2020, 111 banks (including export credit agencies) from around the world have signed the Equator Principles. Signatories require project proponents to comply with the Equator Principles. The signatories can refrain from providing financing if requirements are not met, particularly in the case of large-scale projects in developing countries.
Types of Financial Instruments and Other Criteria Including Financing Size for the Application of the Equator Principles
|Type||Application criteria including financing size|
|Project finance||All projects with total project capital costs equivalent to USD 10 million or more|
|FA services*1||Same as the above|
|Project-Related Corporate Loans (PRCL)*2||
If all four of the following criteria are met
|Bridge loans||Bridge loans with a loan term of less than two years that are intended to be re-financed by a project finance meeting the above criteria or PRCL|
- *1Project finance advisory services
- *2PRCL includes the buyer's credit-type export financing but does not include the supplier's credit-type export financing. Furthermore, it does not include asset financing, M&A financing, hedging transactions, leases, L/C transactions, general funds and general working capital to maintain operations of a company.
Implementing Environmental and Social Impact Reviews
In our processes for assessing project finance for projects subject to the Equator Principles, we conduct environmental and social impact reviews to confirm whether the response of project implementers in taking into account environmental and social impacts satisfies the standards set by the Equator Principles.
In environmental and social risk/impact reviews based on screening forms, the relevant project is categorized into one of three categories-A, B, and C as shown below-reflecting its environmental and social risks and/ or impacts. The Structured Finance Department conducts detailed reviews based on environmental impact assessment reports that take into account the risk/impact category, the status of the country (designated* or non-designated country) where the project is sited, and industry. The results of the environmental and social risk/impact reviews are sent to a credit supervision department, where it devises a comprehensive risk assessment based on the review results.
*Designated countries are those countries deemed to have built robust environmental and social governance, legal systems, and institutional capacity to protect their people and the natural environment. For more information, please visit the Equator Principles Association website.
Company Training Programs
In adopting the Equator Principles in February 2016, we provide multiple training sessions for the employees of sales, assessment, screening and other departments and sections involved to foster a thorough understanding of Equator Principles concepts as well as implementation processes for environmental and social risk/impact reviews. Through regular training programs, we strive to go further to raise awareness regarding environmental and social impacts among our employees and deepen their understanding of Equator Principles concepts and implementation processes for environmental and social risk/impact reviews.
Monitoring Compliance with Equator Principles
As a rule, projects subject to the Equator Principles are engaged to submit regular reports in the loan agreement stipulating compliance with important items concerning environmental and social laws, regulations and rules as well as approvals and permits. Based on regular reports submitted by the borrower of the projects, we monitor compliance with rules relating to the environment and communities.
Number of Projects Subject to Equator Principles
26 projects were subject to the Equator Principles in fiscal 2019. Projects featuring the mark have received thirdparty certification from PwC Sustainability LLC.