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ANNUAL REPORT 2015

MANAGEMENT DISCUSSION & ANALYSIS

10.0. ENVIRONMENTAL AND SOCIAL MANAGEMENT SYSTEM

Subsequent to the execution of Bank Audi Group’s subordinated debt agreement with the International Finance Corporation in March 2014, the Bank embarked on the process of formalising an Environmental and Social Management System (ESMS). This was in an effort to further ensure that, beyond Bank Audi’s existing commitments and procedures to manage E&S risks in our lending portfolio, Environmental and Social Risk Management (ESRM) considerations would be formally integrated into the Bank’s existing credit approval and risk management procedures. To support in formalising the Bank’s ESMS, a consultant was commissioned, in April 2014, and March 2015 marked the formal implementation of the ESMS across the Group. Throughout 2015, the Bank worked towards full integration of the ESMS into the credit approval process.

Bank Audi’s ESMS consists broadly of a set of commitments and procedures, and a dedicated organisational structure covering the entire Group which has the responsibility of overseeing, supporting and monitoring the effective implementation of the ESMS and ensuring compliance. The ESMS organisational structure of Bank Audi Group is organised under the Bank’s Group Environmental and Social Management System Officer (ESMS Officer) who reports to the Group CEO. Country ESMS officers are designated in each of the Bank’s subsidiaries to ensure the effective implementation of the ESMS at entity level.

The ESMS ensures that the Bank conducts its Corporate and Commercial Banking activities in conformity with environmental and social best practice standards. It helps us avoid and manage loans with potential environmental and social risks by conducting environmental and social due diligence prior to loan disbursement, and adequate supervision of projects during the term of the loan agreement, where required. This E&S Risk Review is built on the approach and criteria of the International Finance Corporation (IFC) Performance Standards 11. It helps determine the scope of review required for any given transaction, by taking into consideration both the client’s industry, as well as size, tenor, type and use of funds.

social best practice standards. It helps us avoid and manage loans with potential environmental and social risks by conducting environmental and social due diligence prior to loan disbursement, and adequate supervision of projects during the term of the loan agreement, where required. This E&S Risk Review is built on the approach and criteria of the International Finance Corporation (IFC) Performance Standards 11. It helps determine the scope of review required for any given transaction, by taking into consideration both the client’s industry, as well as size, tenor, type and use of funds.

In 2015, 679 transactions across the Group were subject to an E&S Risk Review, as per requirements set out by our ESMS.

1The IFC Performance Standards have become globally recognised as a benchmark for environmental and social risk management in the private sector.