Societe Generale’s decision making process
Equator Principles Implementation
Front officers hold primary responsibility for the implementation of the EP. They identify transactions which fall within the scope of the EP, categorize the projects, review the E&S documentation (due diligence report where applicable or other documentation received from the client) and draft an E&S memo for projects in categories A and B.
The E&S advisory team review (E&S advisory team is part of the commercial team) is required for all projects categorised A or B. The 10 people team, which has a field expertise, provides a second E&S review and engages in discussions over E&S impacts and mitigation and management measures with the client, the E&S independent expert or counterparts from other financial institutions where necessary. They may also visit the project site. As a result, it is compulsory that the E&S advisory team provides its opinion on the opportunity to pursue the deal (with potential E&S conditions) or not. This applies to lending and financial advisory operations.
The procedure addressing EP transactions integrates all the EP principles and describes for each of them the implementation process within Societe Generale Group.
Categorisation of the project: the potential E&S risks and impacts attached to the project are identified to commensurate the E&S due diligence that will need to be conducted. It is important to stress that categorisation is not a rating of the E&S performance of a project but reflects the magnitude of potential E&S risks and impacts prior to mitigation measures: category A projects are intrinsically more likely than other projects to have important E&S risks and impacts due to their size, nature (including sector), or the vulnerability of the natural or social environment they are located in. The point of early categorisation is to ensure that all relevant E&S issues will be carefully identified assessed and, if unavoidable, minimized, mitigated and/or offset. The E&S advisory team reviews and validates all project categorizations.
Evaluation, Remediation, Disclosure: under EP, the client is required to conduct an E&S assessment of the project (category A and category B), develop an Action Plan demonstrating how adverse impacts and risks are mitigated and monitored, discloses information and consults with project affected communities, and establishes a grievance mechanism, as appropriate.
Independent review and monitoring: an independent E&S expert with duty of care to the future lenders is involved to assess the project’s alignment with EP requirements and/ or verify monitoring information for all category A and, as appropriate, category B projects.
E&S standards: in designated countries, the regulatory, permitting and public comment process requirements are considered an adequate and sufficient set of E&S standards. In non-designated countries, compliance with the IFC Performance Standards and World Bank EHS Guidelines is required in addition to compliance with the local applicable E&S framework. Sustainability issues covered are broad and include labour standards, impacts on local communities (including resettlement), impacts on indigenous populations, impact on cultural heritage, pollutions and impact on natural resources and biodiversity.
Actions and Opinions: as an EPFI, Societe Generale categorises the project, makes its own evaluation of how the steps taken by the client fulfill the EP requirements (assisted by independent E&S expertise where relevant), integrates EP covenants in the documentation and annually reports on the processes and projects. These requirements are reflected in the internal “Opinion memo” issued by the Societe Generale E&S advisory team and are part of the decision by the Bank’s Risk Division as well as the Compliance process.
In case of disagreement between the front officer and the E&S advisory team, the file is escalated to the highest levels of responsibility within the Corporate Investment Bank or, as the case may be, at Group level for arbitration. Transactions carrying reputational risk for E&S reasons undergo a more stringent validation process which may include additional participation of the Compliance, Corporate CSR and Communication departments to consider the case. Legal documentation or advisory mandate, reflect the decision making. EP standard clauses (conditions precedent and monitoring of drawdowns, covenants, representations & warranties) have been drafted jointly by the E&S advisory team and Societe Generale Legal department.
Middle Officers are responsible for controlling that legal documentations are in line with the decisions and for the monitoring of EP clauses. Where relevant, they can be supported by the E&S advisory team. In case of material deviation to these EP clauses, Societe Generale may decide to withdraw its financing.
In Societe Generale a training program about the Bank’s E&S General Guidelines and the E&S evaluation of transactions and clients process in general, and EP implementation in particular, is rolled out every year. Around 250 employees within the Corporate and Investment Bank received face to face training in 2018, in addition to continued online learning allowed by the development of eLearning tools. Those training sessions reached the main actors involved in the credit management process, such as Front officers but also the Risks, Compliance and Middle Office Departments, hence the teams potentially working on EP transactions and focused on new joiners.