Environmental and Social Risk Management

 

  • Environmental and Social Impact Assessment Process

    Environmental and Social Impact Assessment Process

    Banks, in particular, face risks associated with financing activities that could be associated with adverse impacts on the environment and society such as flashpoint issues capable of generating significant negative publicity, such as an oil spill. Failure to address these risks in a timely and appropriate manner may result in reputational damage and consequently a loss of investor support and customer loyalty, among other challenges. 

    Garanti BBVA sees its proactive management of these risks, such as the ones arising from climate change, not only as critical to its success but also as one of its most essential duties to its stakeholders. Through its effective sustainability approach embedded throughout its organization, Garanti BBVA monitors its resource consumption, takes steps to reduce it, raises the awareness of employees and collaborates with suppliers. Moreover, to extend its work to a larger scale, Garanti BBVA also developed an Environmental and Social Impact Assessment Process (ESIAP) including Environmental and Social Impact Assessment Model (ESIAM) within the scope of Environmental and Social Loan Policies (ESLP) to help drive similar improvement across its loan portfolios. 

    Garanti BBVA ensures that the projects it finances meet the social and environmental standards required by legislation and the Bank’s policies that an impact assessment is undertaken by the project owner(s), if necessary, that prescribed measures are taken by the project owner(s) and that project owners have effective internal audit systems. In 2015, 2016 and 2017, Garanti BBVA conducted 26, 22 and 28 site visits respectively to ensure the environmental and social action plans are being implemented by customers.

    For ESIAP, our 2018 targets are: 

    • Minimum 20 site visits and

    • Expanding the scope of Risk Assessment System to include all portfolio (Pilot phase).

    Garanti BBVA contributes to raising awareness regarding non-financial risks in the finance and other sectors by explaining its ESLP to its external stakeholders via a variety of platforms. Some examples are as follows: 

    • In 2013, Garanti BBVA has started a series of sustainability workshops aimed at building capacity among its customers and the Turkish banking sector. The first workshop was held on March, 2013 in which Garanti BBVA presented its environmental and social risk management process in detail to Turkish banks and real sector companies.

    • In May, 2015, Garanti BBVA organized the 2nd workshop together with Boğaziçi University on environmental and social risk management to its corporate customers and presented the bank’s approach and best practices. In the workshop, besides Garanti BBVA, a specialist from the EBRD, a responsible investment specialist and two international independent advisor companies presented their knowledge and experiences.

    • In December 2016, Garanti BBVA hosted 3rd Sustainability and Risk Management Workshop during which the Ministry of Environment and Urbanization, CDP and international consultancy companies presented their experiences in environmental and social risk management systems.

    • In September 2017, Garanti BBVA hosted the 4th Sustainability and Risk Management Workshop, where corporate customers from energy and infrastructure industries were informed on cutting edge sustainable business topics such as TCFD (Financial Stability Board’s Task Force on Climate-related Financial Disclosures) recommendations, carbon pricing and disruptive technologies.

    • In April 2018, Garanti BBVA delivered a ‘Sustainability in Finance’ course within the curriculum of Corporate Sustainability Certificate Program by REC Turkey in collaboration with Boğaziçi University Lifelong Learning Center.

    In 2015, EBRD selected Garanti BBVA as one of the best practices for its trainings for financial institutions on strong sustainability policy and implementation on Environmental and Social Risk Assessment among the financial institutions.

    Garanti BBVA was also selected by the UN for one of the best cases for policies on mitigating water risks and financial sustainability. Garanti BBVA was the only company from Turkey and one of the two banks mentioned in the report called “The Business Case for Responsible Corporate Adaptation: Strengthening Private Sector and Community Resilience” published by UNGC, UNFCCC and UNEP on climate change adaptation.

     

    Environmental and Social Risk Management System Implementation Scope1

     

    Compliance with our Fundamental Policiesand Legislation

    Advanced Environmental and Social Criteria

    Description

    Consumer Loans

    100%

    0%3

    BSAsaddress compliance with our fundamental policies and legislation. Advanced Environmental and Social Criteria are not applicable to this segment. Yet, there are a number of practices regarding our customers’ financial health within the scope of our Bank’s plain, transparent and responsible banking practices. 21 of 42 products and loans related to financial health and inclusion.

    SME Loans

    100%

    Partial

    BSAs and GLAsaddress compliance with our fundamental policies and the legislation. More detailed criteria specific to a given transaction may be applicable under various borrowing agreements.

    Commercial Loans

    100%

    Partial

    BSAs and GLAs address compliance with our fundamental policies and legislation. Loans above the limit valuesspecified in the related Risk Management System are subjected to advanced environmental and social criteria. The Green Loan structure may introduce additional criteria specific to a given deal.

    Corporate Loans

    100%

    Partial

    BSAs and GLAs address compliance with our fundamental policies and legislation. Loans above the limit values specified in the related Risk Management System are subjected to advanced environmental and social criteria. The Green Loan structure may introduce additional criteria specific to a given deal. Additionally, Sector Normsare applied.

    Mortgage Loans

    100%

    Partial

    BSAs address compliance with our fundamental policies and legislation. Additional environmental criteria are applied for Green Mortgage. The share of these loans to the total mortgage portfolio reached 0.95% at year-end 2019.

    Project Finance Loans

    100%

    100%

    In addition to addressing compliance with general policies and legislation, advanced environmental and social criteria were applied throughout 2019. Although investment amount limit of USD 10 million is officially applicable, all project finance deals in 2019 were subjected to advanced environmental and social analysis within the scope of the pilot run. As the limit was decreased to 0 because of the pilot, coverage reached 100%8

    1 Based on systems that were in place as at 31 December 2019. / 2 Our fundamental policies include the list of prohibited environmental and social activities. / 3 Not applicable. / 4 Banking Service Agreements.  / 5 General Loan Agreements. / 6 Limit is determined according to the following criteria: The substantial portion of the loan must be for the project in which the borrower has effective control (direct/indirect). / Total loan amount is USD 100 million and higher. / Garanti BBVA’s participation is USD 50 million minimum and above. / The minimum term is two years. / The lender pays attention that the payment is sourced from the revenues derived from the project.  / 7 For detailed information, refer to the Bank’s Investor Relations website, Management of Our Environmental and Social Risks section. / 8 It applies to all project finance loans, except the structured loans. In the structured loans, if environmental and social criteria is stipulated in the initial agreement, this criteria is fully reserved.

     

  • Environmental and Social Loan Policies

    Garanti BBVA initially set up its Environmental and Social Loan Policies (ESLP) in order to minimize the indirect impacts of loans granted by the Bank and put them into practice in 2011. These policies constitute the environmental and social principles governing the extension of loans at Garanti BBVA Bank through which the Bank runs the “Environmental and Social Impact Assessment Process” (ESIAP). Within the scope of ESIAP, Garanti BBVA ensures that the projects financed by the Bank satisfy the social and environmental standards required by legislation and the Bank’s policies. If necessary, the Bank also ensures that the project owners undertake an impact assessment, take prescribed measures for potential risks observed and establish effective monitoring and control mechanisms. 

    Reporting to the Sustainability Committee chaired by a Board Member, the Team’s responsibilities on environmental and social risk management is to:

    • Verify environmental and social risk management policies, strategy and implementation principles,
    • Ensure that risk management principles are widely embraced throughout Garanti BBVA and its subsidiaries; through hard and soft controls and
    • Provide technical and implementation support on E&S risk related measures to other departments as well as customers.

    Garanti BBVA ’s Corporate and Commercial Loans Risk Management Unit is also responsible for ensuring the effective implementation of ESIAP. ESIAP, designed with the support of an independent consulting firm, also includes the “Environmental and Social Impact Assessment Model” (ESIAM).

    Garanti BBVA has an in-house ESG experts in its Sustainability Team, which resides under the Project Finance Department. Therefore Garanti BBVA can monitor the projects that are included in ESIAM, review and approve the routine monitoring reports and attend the site visits of projects that are classified as high risk in terms of potential environmental and social impacts. The environmental and social due diligence is carried out by the independent project consultant on the agreed scope of work. The due diligence period is followed by all lenders through the reports produced by consultants. The communication between lender/lenders’ consortium and consultant is provided by the green agent of the project.

    Exclusion List as per ESLPs:

    As per ESIAP mechanisms that requires us to assess non-financial risks of associated projects and request amendments when necessary, within the framework of our ESLPs, we reject financing of the following activities;

    Activities Not Financed by Garanti BBVA:

    1

    Companies involved in the production of weapons of mass destruction and landmines

    2

    Individuals or companies found to employ child labor or which violate human rights

    3

    Individuals or companies that deal with the production and trade of asbestos fibers or radioactive substances (excluding healthcare equipment, quality control devices and situations in which use of radioactive substance are extremely limited or insignificant, or in situations where there is sufficient protection)

    4

    Fishing activities which are deemed to constitute overfishing

    5

    Forestry activities which cannot be sustainably managed

    6

    Individuals or companies involved in the production, warehousing, transport and trade of hazardous chemicals (petroleum and petrochemical products) in large quantities according to their industrial scale

    7

    Activities carried out in wetlands defined as RAMSAR (Convention on Wetlands of International Importance) sites

    8

    Individuals or companies involved with products and/or activities that fall under the scope of CITES (Convention on International Trade in Endangered Species of Wild Fauna and Flora)

    9

    Activities that threaten the cultural heritage qualifications of sites classified as UNESCO World Cultural Heritage

  • Environmental and Social Impact Assessment Model

    Garanti BBVA subjects loan requests for investments, which it defines as new projects with an investment total of more than USD 10 million, to the Bank’s ESIAM. With this internal model, projects are categorized and graded according to their characteristics, size, sensitivity, location and their possible social and environmental impacts. ESIAM is the main tool that the Bank uses for E&S risk management and it is mandatory to be utilized by all relevant employees. The Bank’s decisions are based on the risk rating calculated in accordance with Model. This risk rating enables Garanti BBVA to:

    • Determine and evaluate all environmental and social impacts of projects in a systematic way in accordance with ESIAM methods;
    • Ensure projects are sustainable from an environmental and social perspective;
    • Ensure that financed projects and all associated processes and policies pursued by the Bank comply fully with national legislation and regulations;
    • Ensure project owners reduce identified impacts to an acceptable level;
    • Effectively monitor the Environmental and Social Action Plan (ESAP) prepared by customers (project owners) in order to help monitor and improve their compliance with the Bank’s ESLP. The environmental and social action plan of the project is annexed to the facility agreement.
    • Ensure that the project is fully in line with the Bank’s Human Rights Commitment.

    ESAP, which contains actions to be completed to provide project compliance according to the Bank’s ESLP and standards of International Financial Institutions (IFI), is prepared by independent external experts. The independent external experts, who prepared ESAP, are approved by Garanti BBVA’s in-house ESG experts based on their technical expertise and their experiences in similar projects. Site inspection and routine monitoring reports are reviewed and approved by in-house experts based on the ESAP, which is annexed to the facility agreement.

     

    We disclose the number of mitigation sites, where environmental and social impact assessment, health and safety risk assessment and mitigation plans are implemented, in our annual integrated report. These indicators are verified by an independent consultant each year.

    Garanti BBVA also contributes to 10 out of 17 United Nations Sustainable Development Goals through the actions taken by customers in accordance with Garanti BBVA’s ESLP under each environmental, social, health and safety issue as well as human rights.

    In 2015 and 2016, the following updates were made in the previously implemented ESLP:

    • The monetary limit for projects subject to ESIAP was reduced to US Dollar 10 million.
    • ESIAP was agreed to be applied to projects financed outside Turkey as well. If the country is a “designated” country within the scope of Equator Principles, its own environmental and social standards are also applied. If the country is listed as “non-designated”, international best IFI practices are applied as well as Garanti BBVA’s ESIAP.
    • If the GHG emissions of the Project are expected to exceed the 100,000 ton/year CO2 equivalent GHG emissions limit, it will be reported to Garanti BBVA and published on the website of the Project.
    • Garanti BBVA will ask its customers to conduct forestation programs within the framework of its Climate Change Action Plan.
    • Projects that receive financial advisory were also included in the scope of the ESIAP.
    • Sectoral principles have been updated.

    As a member of the BBVA Group, Garanti BBVA also adopts the Sector Norms for environmental and social due diligence released by BBVA in 2018.

    The ESIAM process, where environmental and social impact of projects are identified and assessed, consists of three phases:

    • Category selection: The project is assigned to the most appropriate of the three categories of Category A, Category B, Category C.
    • Identification of the project’s risk rating:
Project risks are assessed through risk rating models with questionnaires designed for each sector and according to an algorithm based on international standards.
    • Determination of action group according to category and risk rating:
Final risk rating is applied after ESIAM and certain actions on environmental and social issues are requested according to the risk rating. In this phase, the owners of the projects with a risk rating higher than a certain grade are requested to prepare and apply the Environmental and Social Management Plan (ESMP) and periodically report it to the Bank.

    Loans Subject to ESIAM:

    New investment projects with a total investment of more than US $ 10 million are subject to the "Environmental and Social Impact Assessment Model" (ESIA) under the "Environmental and Social Impact Rating Process" (ESIA).

    Loans Not Subject to ESIAM:

    • Acquisition and privatization loans,
    • Construction loans (excluding mass housing projects),
    • Short or long-term loans that do not include the realization of any project,
    • Loans provided to a project that is already operational (provided these projects do not create an additional impact) and
    • Refinancing loans for ongoing projects (provided these projects do not create an additional impact).

    In 2016, we agreed to include the project finance advisory and projects financed abroad in the ESIAM following the decision of the Board of Directors. Furthermore, we lowered the investment amount threshold from USD20 million to USD10 million to apply ESIAM criteria in more projects, thus taking another step towards compliance with Equator Principles recognized by the international finance sector.

    Going beyond the policy scope, one project with USD82 million of credit limit, which is not included in the scope of ESIAM, was financed under certain environmental conditions. In 2017, the Sustainability Team conducted 28 project site visits to detect environmental and social conditions at the project sites.

    Breakdown of Investments which were Subjected to ESIAP in 2015-2017

     

    Loan Limit

    (USD, million)

    Number of Projects

    2015

    2016

    2017

    2015

    2016

    2017

    Projects rejected as per the ESLPs

    -

    -

    -

    8

    -

    0

    Loan requests within ESIAM’s scope and applied to ESIAM

    1.621

    2.079

    531

    10

    5

    3

    Loan requests approved with conditions added to the loan contract despite being out of ESIAM’s scope

    70

    718

    82

    2

    1

    3

    Risk Assessment Breakdown of New Investment Projects Assessed According to ESIAM in 2015-2017

    Assessment Result Breakdown

    Loan Limit

    (> 10 million USD)

    Number of Projects

    2015

    2016

    2017

    2015

    2016

    2017

    Category

    Category A

    925

    1687

    531

    6

    3

    3

    Category B

    766

    392

    -

    6

    2

    0

    Category C

    0

    -

    -

    0

    -

    0

    Risk Rating

    R1

    950

    1934

    436

    4

    3

    1

    R2

    219

    30

    95

    1

    1

    2

    R3

    522

    115

    -

    7

    1

    0

    R4

    0

    -

    -

    0

    -

    0

    Final Score

    1

    1.169

    1934

    531

    5

    3

    3

    2

    342

    145

    -

    3

    2

    0

    3

    180

    -

    -

    4

    -

    0

    We report ESIAM result as part of project assessments and actions taken to ensure compliance of the projects to senior management. We share the results of environmental and social impact assessments to the Loan Committee and Sustainability Committee. If deemed necessary by the Sustainability Committee we revise or update policies and the assessment process including investment threshold within the scope of ESIAM.

  • Environmental and Social Impact Assessment Case Studies

    Çanakkale Bridge and Motorway Project

    The 1915 Çanakkale Bridge and Motorway Project, where Garanti BBVA is the intercreditor agent, has a total of 88 kilometers length between Malkara and Çanakkale is developed by the Ministry of Transport, Maritime Affairs and Communications General Directorate of Highways. The project will be the world's longest suspension bridge with a 2023-meter long span and with a total length of 4.6 kilometer.

    Within the scope of the project, an Environmental and Social Impact Assessment (ESIA) process has been carried out in accordance with international standards, in particular Equator Principles, IFC Performance Standards and Garanti BBVA Bank Climate Change Action Plan. ESIA has been carried out to outline and document the potential environmental and social impacts and provide mitigation measures to prevent, avoid, reduce or compensate for any adverse impacts. Some of the actions taken are listed below:

    • For each tree to be affected within the scope of the project, 5 trees will be planted.
    • Throughout the project route, geophysical surveys and geotechnical studies have been carried out and the potential risks and sensitive areas (unexploded mines, archaeological finds etc.) have been determined in advance and necessary precautions have been taken.
    • During the studies carried out in the Çanakkale Bosphorus, experts will monitor marine mammals and ensure that construction methods and possible noisy works will be carried out in such a way as not to cause harm to living environment.
    • Environmental noise monitoring and modeling studies will be carried out in the project. Noise levels will be minimized by measures such as landscape, noise barriers, asphalt type change, where noise limits are likely to be exceeded.
    • The Community Support Program will be implemented by providing education, consultancy and equipment support to improve the socio-economic conditions of the settlements located near the project route.
    • A transparent communication policy will be followed at all stages of the project and the community and all stakeholders will be informed about the construction and operation phases. A Grievance Mechanism will be established and implemented to manage the queries and grievances.

    For more details about the project, you can visit the project web site www.1915canakkale.com.

    TREDAŞ Applications

    The following social investment programs undertaken by TREDAŞ, one of Garanti BBVA ’s customers committed to comply with international best E&S standards, are among the best practices on an international scale,  setting an example for projects of similar nature.

    Participation of women to the workforce:

    Because the electricity distribution works are not preferred by women, the number of female workforce in TREDAŞ is very low. In 2017, following the inclusion of the repair and maintenance personnel, the ratio of women to total number of employees dropped down from 15% to 9% because all employees (394 persons) taken into the permanent employee status are men.

    In an attempt to address this issue, TREDAŞ has undertaken an important campaign, started in 2017, with the support of EBRD in accordance with the principle of "harmonious equality". In this context, works primarily focusing on increasing women employment were started. To this end, female students in high schools are contacted and encouraged to choose electricity departments in universities. Support and internship programs were established by contacting the students who are studying in the electricity faculties; and vocational trainings have been provided. In addition, important steps have been taken to improve working conditions for women. The works on prevention of discrimination, fair opportunity and social gender is advancing with the support and guidance of senior management.

    Awareness raising campaigns have been organised and the incentive has been disseminated through TREDAŞ web site and printed material.

    Occupational Health and Safety:

    TREDAŞ operations are classified as ‘very dangerous’ as per the Turkish occupational health and safety legislation in force. Due to nature of operations, TREDAŞ has faced severe accidents in the past which resulted, unfortunately, in a number of fatalities. In an attempt to address this, TREDAŞ has invested significantly to improve the occupational health and safety practices, invested in state-of-the-art personal protective equipment and closely monitors the site practices by its dedicated occupational health and safety team through regular internal inspections.

    TREDAŞ has also established a Technical Training Center in Lüleburgaz to provide theoretical and practical training to its employees, in particular those working in the field. The trainings provide a general framework to increase awareness of TREDAŞ personnel in terms of health and safety and also focus on practices regarding work-at-height and working with electricity.

    Bird Research Project:

    Because of their size and prominence, above ground electrical infrastructures represent significant risks for birds if certain precautionary measures are not taken. Most above ground power lines present potentially fatal risks for birds through risks of collision with overhead wires and the risk of electrocution. Thrace Region is among the important bird migration routes in the world. Due to intensive bird activity in its region, TREDAS has initiated a research and development (R&D) project in order to mitigate the risks posed by the electricity distribution lines to birds and reduce the number of electricity shortages associated with bird activities. The R&D project is approved and supported by the Energy Market Regulatory Authority (EMRA).

    Bird Research Project focused particularly on the following topics to better understand the baseline conditions in Thrace Region in terms of bird activity and to devise techniques and measures to help reduce bird collisions:

    • Research of breeding areas and migration routes within Thrace Region;
    • Mapping of bird habitats in Thrace Region;
    • The interaction of different bird species with the distribution lines;
    • Bird related malfunctions in the distributions lines; and
    • Measures and techniques to keep the birds away from the lines in order to mitigate bird mortality and injuries.

    A bird habitat assessment report, a bird protection plan and a pilot applications report has been prepared within the within the scope of the R&D Project. The results of the R&D project may serve as a guideline for the electricity distribution sector in Turkey.

    Bilkent Integrated Health Campus (Bilkent IHC)

    Environmental and Social Management and Monitoring Program (ESMMP) has been prepared and drawn upon international standards and guidelines including the International Finance Institutions Performance Standards and the Equator Principles (EPs).  The Project scope includes the design, procurement and construction of hospital buildings within the campus and the operation and maintenance over a 25 years period after commissioning.  In addition to the construction of main hospital buildings (main hospital core and six towers), a medical observation clinic, an administration building for the Ministry of Health (MoH), a high security psychiatry hospital, a rehabilitation hospital and technical services buildings will integrate to the Campus. The Campus will be the largest health campus in the world built under single contract and employed over 7.000 direct labor force at peak with over 45 million man-hours expected to be spent.

    Environmental and Social Impact Assessment (ESIA) study has been carried out for the environmental and social assessment of the Project, to document the potential environmental and social impacts associated with its construction and provide mitigation measures to prevent, avoid, reduce or compensate for any adverse impacts. The aim of the ESIA is to describe the Project and the impacts it is predicted to have on the environmental and social baseline conditions. Furthermore, it aims to explain how the Project has been designed and how it will be implemented in order to minimize its adverse impacts and maximize its benefits. The subject of the impact assessment are Air Quality, Noise, Water, Wastewater and Groundwater, Soil, Geo-hazards, Waste, Traffic, Ecology, Resettlement, Population Influx, Local Economy and Local Livelihoods, Community Health, Safety and Security, Access to Services and Infrastructure, Occupational Health, Labor and Working Conditions, and Cultural Heritage.

    Environmental and Social Management and Monitoring Program (ESMMP) has been prepared and drawn upon international standards and guidelines including the Performance Standards of the IFC and the Equator Principles (EPs). The Project Company is committed to full compliance with all Turkish EIA Regulations, the international lending PSs of the IFC and EPs.

    The Stakeholder Engagement Plan (SEP) has been prepared in accordance with the Performance Standards (PSs) of the IFC, the EPs and the common social policy and corporate principles of the sponsors of the Bilkent IHC Project.

    Many energy-efficient systems will be employed in the Bilkent IHC. One of the systems is the tri-generation plant. The blower and exhaust fans as well as circulation pumps and pumps used in a part of the cooling system will be frequency-controlled to save energy. Use of frequency-controlled pumps aim to decrease the annual total energy consumption up to 25%. In addition to this environmental technologies such as Low-NOx burners will be used for minimization of NOx at tri-generator plant.

    All of the actions identified as mitigations relating to construction and operation of the Project have been collated and presented in a separate document as an Environmental and Social Action Plan (ESAP). The related actions that will be taken by the Borrowers are periodically monitored by us. The Environmental and Social Monitoring Report of the Bilkent IHC Project are preparing to meet Borrower’s requirements in accordance with the Facility Agreement. Monitoring reports cover all of the information relating to Borrower’s compliance with Environmental Law, Environmental and Social Standards, Environmental Permits, Environmental and Social Action Plan and Environmental and Social Report Requirements of the Facility Agreement. Health and Safety Performance of the Project are also monitored.

    Construction Permit of the Project was secured on April, 2015 and it is planned to finish the whole construction works by October, 2018 with phased completions starting from June 2017.

    ISO 9001, ISO 14001 (for Project Companies) & OHSAS 18001 (Bilkent IHC Project and Istanbul Office of the Project Company) Management Systems Certifications are to be secured with the commencement of the operation of the Campus.

    The Project Company is committed to full compliance with related national labor legislation and the Performance Standards (PSs) of International Finance Corporation (IFC). Within this scope, periodical IFC PS 2 Compliance Audit Reports are being prepared for the purpose of checking labor and working conditions of the Project construction phase against the ESAP. The interviews were conducted by the experts with more than 100 employees in the Focus Group Discussions.

    Gebze-Orhangazi-Izmir Motorway (including the İzmit Gulf Crossing and Access Roads) Project

    Gebze-Orhangazi-İzmir Motorway (including the İzmit Gulf Crossing and Access Roads) Project consists of the financing, design, construction, operation and maintenance and transfer of 433 km of new three-lane dual carriageway tolled Motorway. It includes a crossing by a suspension bridge of the Izmit Gulf between Dil İskelesi in the north and the Hersek Peninsula in the South, the design and construction and transfer of 44 km of new Access Roads, the taking over and operation and maintenance and transfer of 27 km of existing highway and the design and construction of the widening and transfer of 3 km of existing Motorway and an interchange.

    A comprehensive Environmental and Social Impact Assessment (ESIA) Report was prepared by the Independent Consultant Company in accordance with International Finance Corporation (IFC), European Bank for Reconstruction and Development (EBRD) and the Equator Principles (EPs) requirements as a part of Financial Agreement.

    ESIA is a study predicting and evaluating the impacts the Project might have on the physical, natural, cultural, social and socioeconomic environment during the design, construction and operation phases, and identifying measures that Borrower’s will need to take to avoid, reduce, remedy, offset or compensate for adverse impacts, and to provide benefits where possible. A Stakeholder Engagement Plan (SEP) was prepared as part of the Environmental and Social Impact Assessment (ESIA) Report. SEP describes the mechanisms by which people especially local communities and other stakeholders to be are informed about the Project and gives opportunities to provide comments and input to the Project development. ESIA summarized this mitigation in its Environmental and Social Management Plan (ESMP) and suggested to develop a series of plans and procedures to set arrangements for implementation and monitoring these mitigations throughout the Project. As a part of the ESMP requirements, a route-wide Biodiversity Action Plan (BAP) for the terrestrial and freshwater environmental has been also prepared in accordance with the findings of ecological studies for the Project. Animal Crossing Procedure has been also prepared to identify specific locations to maintain ecological connectivity to fragmentation within the areas specified in ESMP and provide suitable design for converting culverts and underpasses to be used by target species and a design for new animal crossings in accordance with Designing Road Crossings for Safe Wildlife Passage: Venture County Guidelines.  In addition to BAP, several documents has been prepared such as Land Acquisition Compensation and Resettlement Plan (LACRP), Emergency Prevention and Response Plan (EPRP), Cultural Heritage Mitigation Strategy including A Change Finds Procedure (CFP), Human Resources and Labour Management Plan, Occupational Health and Safety Management Plan, Marine Environmental Design Management Plan (MEDMP), Marine Environmental Construction Management Plan (MECMP), Terrestrial Environmental Construction Management Plan (TECMP).

    Environmental and social monitoring studies are periodically conducting for the Project and construction works are being evaluating in detail with respect to environmental impacts, permits and licenses, workers health and safety, archaeological sites, grievance mechanism and expropriation. During the monitoring period of the Project,  implementations of the site specific mitigation along the motorway related to wetland, watercourses and sensitive areas are reviewing by the independent consultant company and Lenders. 

    The Phase I (Approximately 52 km / Gebze-İzmir) and Phase II-A (Approximately 25 km / Bursa-İzmir) section of the Project has been started to operate and construction works at Phase II-B (Approximately 327 km. / Bursa-İzmir) section of the Project are ongoing. 

    The SOCAR Aegean Refinery (STAR) Project 

    The SOCAR Aegean refinery (STAR) Project consists of the construction, start-up and operation of a new oil refinery plant processing 10 million tons of crude oil per year. The Project site is located on the Aliağa Peninsula, which hosts oil refining, petrochemicals, iron and steel manufacturing plants, ship breaking facilities and various other industrial facilities. The Peninsula is bordered by the town of Aliağa to the east, the Aegean Sea to the west, Nemrut Bay to the south, and Aliağa Bay to the north. 
    Construction activities at the refinery site started in December 2014. Construction at the Jetties area started in June 2015 with piling activities for Jetty 1.
    The Project’s facilities are being constructed on approximately 246 hectares of land. The primary goals of the Project are summarized as follows:

    • ensure the continuity of supply for the PETKİM complex by meeting the raw material demand in an economic and reliable manner;
    • produce Ultra Low Sulphur Diesel and Jet Fuel for the domestic market, which is currently experiencing supply shortages;
    • create additional synergy by establishing Refinery - Petrochemicals integration;
    • add value to the national economy through production, trading, employment, logistics, and other related activities; and
    • contribute to the reduction of Turkey’s foreign trade deficit.

    An Environmental Social Impact Assessment (ESIA) study including Environmental and Social Action Plan (ESAP) have been prepared in terms of compliance with the applicable national and international legislation and requirements. The Project will be operated in accordance with the defined environmental and social requirements. Lender’s Environmental and Social Consultant (LESC) is undertaking construction monitoring and to visit the site twice a year. Within the scope of the Project requirements, Project Environmental Performance(1), Environmental, Social and Health and Safety Management Performance(2), Occupational Health and Safety Issues(3), and Social Aspects and Management(4) subjects are reviewing in detail by the Borrowers, Project team, and the Lenders.

    (1)Resource Efficiency and Management, Waste Management, Wastewater Management, Hazardous Materials Management, Air Quality, Noise, Surface, Groundwater, Seawater and Sediment Control, Soil Management, Management of Soil Dumping Sites and of Topsoil, and Biodiversity.
    (2)Environmental, Social, Health and Safety Policies, Organization of ESHS Management, Assessment of Environmental and Social Impacts, Contingency Planning and Emergency Procedures, Staff Training and Supervision, Auditing, Inspections and Review.
    (3)Accident Reporting, Recording and Investigation, General Housekeeping Issues, Storage of Hazardous Material and Hazardous Waste, Site Safety Issues, Occupational Exposure to Noise, Vibration and Air Pollutants, Personal Protective Equipment, Health and Comfort, Work Equipment and Machinery Safety, and Use of Safety Signs and Traffic Safety.
    (4)Labour and Working Conditions, Community Health and Safety and Security, Information Disclosure and Stakeholder Engagement, and Chance Find Procedure.

  • Management of Indirect Water Footprint

    In order to manage the Bank’s indirect water footprint from financed projects, the Bank ensures, requests and monitors that appropriate measures are taken to minimize environmental impacts, reduce the consumption of water and other resources, ensure recycling is undertaken and that negative impacts on water quality are minimized.

    Based on the ESLP, Garanti BBVA does not finance projects and activities on RAMSAR sites under any circumstances. In addition, following the ESLP, Garanti BBVA pays regard to the environmental and social impact of the projects it finances and the maximization of their positive impact. Accordingly, the Bank considers the projects’ impact on water sources in its loan processes and requests various measures towards the minimization of water use and impact on water quality, efficiency in water resource consumption and re-use/recycling, all of which are customized based on the sectors in question. Furthermore, projects where energy and water conservation is taken into consideration are prioritized.

    One of the main consequences of climate change in Turkey will be its effect on the water cycle. For example, individual regions (those prone to flooding or that experience climate change-led severe weather) and sensitive sectors of the economy (those unable to transition to a low carbon business model or dependent on stable weather patterns, such as agriculture) could suffer significant loss of income.

    In this context, the following criteria are taken into consideration during the financing of new projects:

    • Choice of location and project area: Location of the Project with respect to protected areas under international or national regulations (e.g. RAMSAR sites), important water sources, shores and ground water operations. Projects located in RAMSAR sites are not financed by Garanti BBVA. Furthermore, if the Project location is found to be in close proximity to residential areas, sensitive wetlands, protected areas and the like, re-locating the Project may be requested.
    • Current water properties: Prior to commencement of construction works, studies to measure and assess the quality and properties of water in the project location are requested. Based on the findings of these studies, preventive and/or minimization measures regarding project impact are implemented.
    • Impact on groundwater: Negative impacts of projects on ground water during the construction and operation phases are assessed. In the case of any negative impact, the use of alternative water sources would be considered.
    • Impact on surface water: During the construction and operation phases of hydroelectric power plant projects, adverse changes to flow rate, drainage and flow are assessed. Preventive measures are requested for occurrences such as flow direction and flow rate changes, excavation in the water source, dredging and sediment accumulation due to possible adverse downstream effects.
    • Water quality: Effluent water should be treated in treatment facilities. Furthermore, treatment systems should comply with discharge limits.
  • Sectoral Principles

    Each sector can have different effects on water sources in terms of consumption and quality. Accordingly, Garanti BBVA has developed specific provisions in its Sectoral Principles and monitors and manages project impacts based on these principles. The following section gives some examples from the Sectoral Principles.

    Hydroelectric Power Plant Projects

    • Environmental flow water is regarded as one of the critical issues in hydroelectric power projects. Garanti BBVA places emphasis on ensuring that basin water rights are observed and that environmental flow is sufficient to sustain the basin ecosystem and preserve river hydrology. It should be ensured that environmental water is calculated specific to project location considering Ecosystem Assessment Report by related technical experts besides meeting minimum standards set by official authorities. Furthermore, based on the results of these studies, the Bank may request that the project technical design be amended. Environmental water release data and impacts on river habitat are monitored periodically by Garanti BBVA.
    • Adverse changes to flow rate, drainage and flow are assessed. Preventive measures are requested for occurrences such as flow direction and flow rate changes, excavation in the water source, dredging and sediment accumulation due to possible adverse downstream effects.

    Thermal Power Plant Projects

    • Discharge of cooling and process water is one of the critical issues for projects of this type. Accordingly, Garanti BBVA requests modelling and/or cumulative impact studies regarding thermal discharge, particularly with respect to projects in coastal areas.
    • Furthermore, minimizing the impact on the ecosystem of water consumption during construction and operational phases is a material issue. Garanti BBVA requests alternative methods to obtain water.

    Geothermal Power Plant Projects

    • In order to preserve groundwater equilibrium, 100% reinjection is required in geothermal projects.
    • However, necessary precautions should be taken during the process to prevent contamination of groundwater in relation to reinjection.

    Transportation/ infrastructure Projects:

    • Impacts on aquatic / marine ecosystem should be assessed, and should be included in the mitigation and monitoring plan.
    • Oceanographic/hydrographic reports should be prepared for ports/coastal facilities, filling/ dredging impacts should be assessed,
    • Emergency Action Plans should be prepared for events like as accidents, collisions or leakages to the sea and systems to prevent dispersion of contaminants in the marine environment such as barriers, foams, etc. should be in place in case of any such event.

    Mining Projects

    • Water management strategies are prioritized. Reduction measures regarding project water requirements as well as recycling and re-use strategies are assessed.  Prevention of acid rock drainage needs to be assured through a water management plan.

    Other Projects

    • In industrial projects, management plans are necessary for industrial effluent water discharge. Best Available Technologies (BAT) should be preferred with respect to treatment facilities. Projects that enable efficient use, recycling and re-use are prioritized.
  • Raising Awareness on Environmental and Social Risks

    Along with our responsible financing efforts, we establish cooperation to realize sustainability development agenda through common efforts. Thanks to our collaborations with various stakeholders and memberships to international platforms, we can share information and experience, thus taking the opportunity to follow current developments closely. Then, we take necessary steps to apply these developments within our Bank, and assume the role of thought leadership to mainstream similar good practices in our country. We lead the way in the Turkish banking sector with our non-financial risk assessment mechanisms. We reinforce our pioneering position in responsible finance by sharing our ESIAP approach and system on various platforms. Thus, we contribute to the improvement of sustainability parameters in the banking sector and contribute to increasing knowledge and awareness, building capacity of external stakeholders in the finance sector and private sector. During the Second Sustainability and Risk Management Workshop at SALT Galata in December 2016, we made a presentation on sustainability, our approach in ESG risk management, national and international trends, and good practices to corporate customers in the energy and infrastructure industries. In the workshop, in addition to Garanti BBVA, authorities from the Ministry of Environment and Urbanization, IFC and EBRD specialists, CDP Turkey and independent consultancy representatives shared their know-how and experience through speeches, panels and presentations.

    Our training and capacity building efforts were qualified as one of the best practices in trainings provided to financial institutions on Environmental and Social Risk Management subject field by the EBRD in 2015 and 2016.

    Our Portfolio’s Carbon and Water Footprint

    It is not yet possible to reach reliable data on the CO2 emissions stemming from all activities financed by the Bank, since currently very few companies in Turkey calculate and monitor their greenhouse gas emissions. With the Regulation on Amendment in the Regulation on Monitoring of Greenhouse Gas Emissions, published in June 2016, companies are requested to submit their greenhouse gas emission reports from 2015 and 2016 until the end of April 2017. The articles 7 and 8 regulating the reporting and assurance of greenhouse gas emissions will go in effect as of January 1, 2017. With this change, an important step will be taken regarding the institutional capacity building necessary for tackling climate change, as set forth by the UN.

    Similarly, to manage our indirect water footprint, we also request, monitor and ensure that measures are taken to reduce consumption of water and other natural resources, decrease environmental impact, apply recycling and prevent negative effects on water quality. While financing new investments, we take into account the conditions such as ground water characteristics, and impact on underground and surface waters, quality, and sectoral criteria. In addition, based on the ESLP and in line with the 15th Goal -Life on Land from the UN Global Goals, we do not finance projects and activities in the wetlands defined as threatened ecosystems and protected by the RAMSAR Convention.

    In addition to raising awareness on carbon footprint management, we supported the launch of the CDP Water Program in Turkey in 2015 as a main sponsor. We aim to increase awareness of our corporate customers about water risks. In this field, we partner with NGOs and public and private institutions to create awareness and share experiences. In April 21, 2016, we joined the WWF Water Panel with high-level participation. Detailed information on our approach on water risks can be found in our previous sustainability reports and on our website.

  • Due Diligence for non-financial performance in KYC procedures

    Garanti Bank applies its Environmental and Social Loan Policies to all loans. Compliance to all loan policies including those related to environmental and social criteria are checked by the loan officers prior to approving a new loan request without applying any limitations in terms of the scope of application.  

    For more information please see page 53 in our 2018 Integrated Annual Report: 

    Where relevant, Garanti may apply additional Due Diligence (DD) processes, which is also called Know Your Customer (KYC) process, to check whether the loan request or the existing loan is in compliance with its specific policies and/or commitments, i.e. sustainable, environmental or social bond issuance guidelines, environmental and social impact assessment procedure, health and safety risk assessment procedure, etc.

    DD might be conducted either;

    via a DD questionnaire that is embedded in the Company Assessment Reports and answered in accordance with the declaration of the borrower prior to the approval of a new loan request and during the renewal, if there is any change in declared information.

    via e mail and/or other means of engagement/communication making use of the Bank’s own rating and due diligence guidelines and assessment tools. Garanti may also assign an independent party including consultants, rating agencies and verifiers to ensure that the client or customer operates and behaves in line with its non-financial risk assessment procedures.

    Garanti’s DD process on non-financial performance includes a range of different risks including but not limited to the following:

    Environmental, social and governance (ESG) risk

    Impact on United Nations Sustainable Development Goals (UN SDG)

    Compliance to exclusion list and defense norms

    The DD Process incorporates both the implementation of an exclusion list and the assessment of additional set of criteria.

    The results of DD process on non-financial criteria may lead to either rejection of loan request or undertaking additional actions.

    The scope of environmental and social risk management system implementation is provided on page 155 in our 2018 Integrated Annual Report. The first column named “Compliance with Our Fundamental Policies and Legislation” includes the screening of our exclusion list.

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