47750 - DCM BCR MREL 3

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Summary of Investment Information

Project Number

47750

Company Name

BANCA COMERCIALA ROMANA SA

Date SPI Disclosed

May 12, 2023

Country

Romania

Region

Europe

Projected Board Date

Mar 14, 2023

Environmental Category

FI-2 - Limited

Status

Active

Last Updated Date

May 21, 2023

Department

Regional Industry FIG LAC & EUR

Industry

Financial Markets

Previous Events

Approved : Mar 14, 2023
Signed : May 10, 2023
Invested : May 19, 2023

Sector

Commercial Banking - General

Project Description

Part of the bonds will be issued under Erste Group Bank A.G.’s (“Erste Group” or “Erste”) Sustainable Finance Framework which is aligned with ICMA’s Green Bond Principles, Social Bond Principles, and Sustainability Bond Guidelines, as confirmed by an independent second party opinion provider. The IFC investment will be used to support the growth of the Bank’s climate and housing to women portfolio.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	200.0
Equity

IFC's loan to the financial institution described in this SII is targeted for on-lending to the following sector(s):

Product Type	Use of Proceeds
Quasi-Equity	Labeled: Green;Blue;Social-Loans/Bonds
Quasi-Equity	Housing Loans to Individuals
Quasi-Equity	Labeled: Green;Blue;Social-Loans/Bonds
Quasi-Equity	Housing Loans to Individuals

IFC's Definitions of Targeted Sectors can be found here.

Development Impact

The project will support a leading bank in Romania to access the international capital markets while contributing to the country’s developmental goals of transitioning to green economy and increased access to finance for women. By supporting a systemic bank in raising MREL eligible funding, the project will also contribute to the banking system’s stability in the country.

IFC’s investment in MREL eligible bonds supports the implementation of the EU’s Bank Recovery and Resolution Directive (BRRD) in Romania by helping the banking sector to achieve the required MREL targets for regulatory compliance by 2023. The Project will support local banks’ access to international capital markets and allow them to raise funding that would not be available in the domestic markets. In addition, IFC will leverage its global knowledge and best practices to support the Bank to streamline and grow its gender finance business.

E&S Category Rationale / Risks and Mitigation

IFC's funds under this project will be earmarked to financing green and women mortgages, green buildings and onshore wind farms, which are defined as green projects by the Erste's Sustainable Finance Framework. The following renewable energy activities will be not eligible for financing under this project: hydro power plants, solar PV projects, geothermal energy. It is considered that activities supported by the project may include a limited number of projects with significant adverse environmental and social risks and potential impacts, particularly in relation to impacts on biodiversity. However, most of the portfolio will consist of low to medium risk transactions, therefore the project has been categorized as FI-2 according to IFC's Policy on Environmental and Social Sustainability Policy. Applicable E&S requirements for the project will be the IFC Exclusion List, national E&S laws and regulations, and the Performance Standards (PSs). This project will not support any activities on the IFC's Exclusion List and coal-related projects. Additionally, the Bank will continue applying its current labor standards which are aligned with the requirements of PS2: Labor and Working Conditions and meet Life and fire safety requirements. The Bank will submit an annual E&S report as per a format provided by IFC and provide for IFC review a sample of ESDDs completed for supported asset class. The sub-project disclosure requirements will not apply to this transaction as IFC is not a sole investor in the bond. Key risks of the activities supported may derive from the client's capacity to identify, assess, and manage risks associated with its green projects in pipeline, which typically include occupational health and safety issues, labor and working conditions, waste and wastewater management, community health and safety, impacts to biodiversity. Key risks of the activities supported may derive from the client's capacity to identify, assess, and manage risks associated with its green projects in pipeline, which typically include occupational health and safety issues, labor and working conditions, waste and wastewater management, community health and safety, impacts to biodiversity.

BCR has an ESMS specifying the Bank's approach to E&S risk management. The relevant ESG risks assessment operational processes are integrated into the Bank's loan origination and review procedures and risks management framework. The ESMS screens potential ESG risks of corporate sub-clients and commercial real estate transactions at the loan origination phase and identify positive ESG impacts. The scope of E&S risks assessment includes review of issues related to climate change, waste generation & recycling, water scarcity, land degradation and biodiversity loss. Based on completed ESG assessment an ESG score is assigned, which is updated on the annual basis. Detailed environmental and social due diligence (ESDD) is conducted for project finance transactions by external qualified consultants to assess project's against IFC Performance Standards requirements and alignment with EU Taxonomy, if any gaps are identified an ESAP is developed and negotiated with sub-clients. The Sustainability department is responsible for the oversight of the overall implementation of ESMS, while the function for E&S due diligence and ESG risks assessment is assigned to relationship managers and risk managers. External E&S consultants are hired to conduct ESDD of project finance transactions. All staff involved into ESG risk management undergone the relevant training. As part of the project, the Bank will be required to enhance its ESMS procedures by applying of IFC Exclusion list, establishing an external communications mechanism, and specifying monitoring process for wind farm projects. BCR will hire a qualified E&S Specialist and continue E&S capacity building of internal staff and engaging external qualified consultants for ESDD of wind farms. In addition, E&S risks assessment template for green buildings shall be upgraded to allow more thorough assessment of potential E&S risks related to construction phase and screening out higher risk transactions.

Contacts

For Inquiries About the Project, Contact

Banca Comerciala Romana S.A.
Cosmina Plaveti
Senior Banker, Corporate Finance Division
+40-373-516-308
Cosmina.Plaveti@bcr.ro
Bucharest, 159 Calea Plevnei, Business Garden Bucharest, Building A, 6th floor, 6th District
www.bcr.ro

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This Summary of Investment Information (SII) is prepared by IFC to disclose a factual summary of the main elements of the potential investment. It also includes findings and recommendations related to environmental and social considerations regarding this potential investment. The purpose of the SII is to enhance the transparency of IFC’s activities. For any project documentation or data included or attached herein, whether prepared by the project sponsor or otherwise, authorization has been given for public release by the project sponsor. IFC considers that this SII is of adequate quality for release to the public, but has not necessarily independently verified all of the project information therein. It is distributed in advance of IFC Board of Directors’ consideration and may be periodically updated thereafter. Board dates are estimates only and this document should not be construed as presuming the outcome of the Board Directors’ decision. The following SII is disclosed in accordance with IFC's Access to Information Policy (AIP) that went into effect on January 1, 2012.

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Task Title & Description	Anticipated Completion Date
Staff Training	11/07/2023
Enhance ESMS procedures	08/09/2023
Expansion of ESMS application	11/07/2023
Hire an ESMS Manager with E&S background	09/08/2023
ESMS implementation and implementation records	11/07/2023
Retain internal and/or external E&S capacity	05/11/2023
Prepare Staff ESMS Training Plan	05/11/2023

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