Mitigation of Climate Change and Environmental Sustainability: The Role of Development Banks in both dimensions

Bogotá - November 2010

Section I-b – Systems of environmental and social management in the financial sector: Discussion

AGENDA

1. Introduction

2. BNDES Environmental Policy

3. Sectorial Environmental Policy

4. Sectorial Guides

Drafting of environmental policies

and provision of technical support during

all phases of project analysis;

Innovation and Native Forests non-refundable

financing

Development and execution of financial

instruments and strategies to encourage

sustainable environmental initiatives

Verification of adherence to environmental

legislation and analysis of the legal aspects of

the divisions’ operations

Management of

the Amazon Fund

DEPUTYMANAGEMENT

Advisors Advisors

Department ofEnvironmental

Policies and Studies DEMAM

Green Financing Department

DEOPE

Amazon Fund Department

DEFAM

Legal Department

JUAMA

Structure of the Environmental Division

AGENDA

1. Introduction

2. BNDES Environmental Policy

3. Sectorial Environmental Policy

4. Sectorial Guides

• Reputation Risk: Environmental damage generated by funded projects can generate negative

impacts on the image of the institution;

• Legal Risk: Financial institutions can objectively be held liable for environmental damage recovery

funds;

• Credit Risk: Environmental damage can lead to financial liability for the beneficiary, changing their

payment ability and market value;

The socio-environmental analysis is essential for financial institutions and in particular for BNDES

Credit financial institutions perform socio-environmental analysis of projects.

This analysis is associated, in general, to the goal of identifying and mitigating risks.

• Opportunity: Brazil has unparalleled access to natural resources, which will be gradually more

scarce and valuable. Therefore, the preservation of ecosystems has strategic importance for the

country;

• Threat: requirements meet the standards of sustainability by transnational markets but may affect

access and competitiveness of Brazilian products abroad;

For BNDES, there is a relationship with its role of promoting sustainable and

competitive development of the Brazilian economy.

BNDES Environmental Policy: Structure

BNDES has a corporate environmental policy, with principles, guidelines and tools

applicable to all activities of the institution. There are also sector policies,

establishing criteria and guidelines, in accordance with the specifications of a

given sector.

BNDES has a corporate environmental policy, with principles, guidelines and tools

applicable to all activities of the institution. There are also sector policies,

establishing criteria and guidelines, in accordance with the specifications of a

given sector.

BNDES ENVIRONMENTAL POLICY

Sectorial EnvironmentalPolicy

Sectorial Guides

Applicable to all BNDES activities

Establishes criteria to ensure that the project / company has adequate level of sustainability

Provides technical support to the institution, assisting the compliance with industry regulatory and guiding the promotion of best practices.

To promote the competitive and sustainable development of the Brazilian Economy, creating employment and reducing social and regional inequalities

BNDES mission

SCREENING ANALYSISAPPROVAL AND CONTRACTING

Information from the proponent

• Localization;

• Project main features• Environmental vision, policies and management• Environmental licencing• Environmental liabilities

Other issues observed:• Slave labour• Environment Convictions• IBAMA´s notes

DISBURSEMENTS AND MONITORING

BNDES Environmental Procedures

Environmental screeningof projects:A – high impactB – medium impactC – low impact

Social-Environmental Recomendations

SCREENING ANALYSISAPPROVAL AND CONTRACTING

• Environmental Licences

• Opportunities for environmental investments

• Social and Environmental Guidelines

• Selected information from proponents

DISBURSEMENTS AND MONITORING

BNDES Environmental Procedures

Previous License: Granted during the preliminary planning of the project or activity. This license approves the location and design of the project, certifies the environmental viability and establishes the basic requirements and conditions to be met in the subsequent phases of implementation

Licensing Competency• Federal: When the project or activity is performed on two or more states or when the environmental

impacts exceed the limit of the Country;• State: When the project or activity is performed on two or more municipalities or conservation areas with

the state´s domain;• Hall: When the project or activity generates local environmental impact and / or licensing when it is

delegated by the state for legal instrument or agreement. Source: CONAMA Resolution 237/97

SCREENING ANALYSISAPPROVAL AND CONTRACTING

DISBURSEMENT AND MONITORING

• Environmental Licences

Installation License is required for contracting the operation

• Social and environmental contract clauses

BNDES Environmental Procedures

Installation License: authorizes the installation of the project or activity in accordance with the specifications of the plans, programs and projects approved, including environmental control measures and other conditions;

SCREENING ANALYSISAPPROVAL AND CONTRACTING

• Monitoring environmental licences

Operating License is required within 180 days after the last disbursement of the project.

• Monitoring environmental performance

DISBURSEMENTS AND MONITORING

BNDES Environmental Procedures

Operating License: authorizes the activity or project operation, after verification of actual compliance with the previous licenses, the environmental control measures and the conditions specified for the operation.

AGENDA

1. Introduction

2. BNDES Environmental Policy

3. Sectorial Environmental Policy

4. Sectorial Guides

Normative Resolutions:

• Present criteria for financial support

• They are designed from the joint work of the Operational Areas, the Planning Area and the Environment Area

• Examples:

Cattle Supply Chain Traceability

Thermal Coal, Oil and Natural GasEmission Limits , Accepted Combustion Systems , Solutions for the final disposal of ash

from burning coal and from waste of desulphurizer; Restrictions to the use of water , Compensation plan for GHG emissions

Sugar and Alcohol

Agroecological Zoning (ZAE) of Cane Sugar (2009)

Sectorial Environmental Policy

AGENDA

1. Introduction

2. BNDES Environmental Policy

3. Sectorial Environmental Policy

4. Sectorial Guides

The Guides have tutorial nature and purpose of providing technical

support for the socio-environmental analysis of projects, companies

and sectors:

• Assist compliance with the applicable standards;

• Guide the promotion of better social and environmental standards;

• 26 Guides covering the whole economy;

• Mapping out socioenvironmental best practices.

Sectorial Guides

Thank You!

Claudia Nessi Zonenschain

nessi@bndes.gov.br

www.bndes.gov.br