The Project involves an unfunded guarantee to a revolving portfolio of eligible corporate and SME exposures. The capital released by this guarantee will be utilized to support a new portfolio of sustainability related sub-projects, primarily lending to eligible climate (including blue) sub-projects and women-owned SMEs in Romania. This Project has been categorized as FI-2 in accordance with IFC’s Sustainability Policy.

Applicable E&S requirements for the Project will be the IFC Exclusion List, applicable national E&S laws and regulations, exclusion of higher E&S risks transactions/activities as contemplated in IFC Performance Standards. In addition, the Project will not support coal related activities and companies exposed to higher risk activities such as (a) involuntary resettlement, (b) risk of adverse impacts on Indigenous Peoples, (c) significant risks to or impacts on the environment, community health and safety, biodiversity, cultural heritage, or (d) significant occupational health and safety risks, (e) significant retrenchment risks, as well as sub-projects rated as high E&S risks according to BRD’s internal review procedures, such as Category A sub-projects, transactions having high ESG risks score or subject to E&S monitoring due to identified high ESG risks and issues. Additionally, the original reference portfolio will exclude companies involved in oil and gas and peat activities and new climate sub-projects will not support construction of new hydro powerplants and offshore wind power plants. With digitalization being a strategic axis for BRD, physical footprint is accordingly adjusted and transformed. As such, the Bank is currently in the process of workforce optimization. The Bank has developed a staff retrenchment plan to meet national requirements, which is broadly aligned with IFC’s Performance Standard 2 on Labor and Working conditions (PS2). The Bank will be required to maintain alignment with life and fire safety requirements, and IFC’s PS2 requirements including staff retrenchment process. IFC’s requirement on disclosure of climate-related sub-projects will not be triggered due to the nature of this transaction. E&S risks associated with the Bank’s portfolio from multiple sectors may include issues related to labor, gender issues, pollution prevention, production and handling of hazardous materials, community impacts, biodiversity, and others.

BRD as part of SG Group has a comprehensive framework to manage ESG risks in project and corporate finance transactions, which includes Environmental and Social General Principles, sectoral policies, list of excluded activities, E&S risks assessment instructions and tools. The Bank’s environmental and social management system (ESMS) allows conducting screening of eligible SMEs and corporate customers and their activities against exclusion criteria, identify controversies, and assess compliance with the Bank’s policies and national requirements and conduct ESG risks and impacts assessment. Being a part of SG Group, BRD applies Equator principles on E&S risks assessment, where applicable.

The Bank’s ESMS team includes E&S experts and ESG related trainings are delivered on a regular basis. More details on the BRD ESG practices could be found at their Sustainability report for 2022, disclosed at https://www.brd.ro/_files/documents/BRD-SUSTAINABILITY-REPORT-2022_0.pdf Under this Project, BRD will be required to complement its ESMS in line with the applicable E&S requirements for this specific Project which may include but not limited to introducing processes and tools allowing to screen out and exclude higher risks activities for corporate clients as per IFC requirements, an E&S risk assessment for smaller SMEs, and a specified approach for supply chain risks management of relevant sub-projects.