49480 - DCM UCB Ro II

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Summary of Investment Information

Project Number

49480

Company Name

UNICREDIT BANK SA

Date SPI Disclosed

Nov 22, 2024

Country

Romania

Region

Europe

Projected Board Date

May 28, 2024

Environmental Category

FI-2 - Limited

Status

Active

Last Updated Date

Nov 29, 2024

Department

Regional Industry FIG LAC & EUR

Industry

Financial Markets

Previous Events

Approved : Jun 20, 2024
Signed : Nov 15, 2024
Invested : Nov 22, 2024

Sector

Commercial Banking - General

Project Description

The proposed project is to invest up to EUR100 million (corresponding to US$108 million), in EUR and/or RON equivalent, for IFC’s own account, in one or more senior unsecured bonds to be issued by UniCredit Bank Romania (UCB or the Bank), as part of its new Medium-Term Notes Program (MTN Program). The bonds are expected to be issued in the local capital markets, with the first investment targeted for June/July 2024. The bonds will have a maturity of up to 7 years and will not qualify as minimum required eligible liabilities (MREL) but will be bail-in-able. All proceeds from IFC’s investment will be used to support the Bank’s climate finance program through loans to eligible small and medium enterprises (SMEs) and green mortgages in Romania. (the “Project”).

Associated Advisory Engagement

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	108.50
Equity

Development Impact

The most significant expected project-level outcome is increased access to climate finance in Romania. IFC anticipates that the Project will help the Bank expand access to climate finance products in Romania, with a focus on both SMEs and green housing products. The allocation of proceeds to firms, with a particular focus on SMEs, will support climate mitigation-related projects enabling them to implement climate-smart practices by purchasing energy-efficient equipment, performing facility upgrades in manufacturing, green buildings and water supply, sewage, and waste management. The Project will also support access to green housing finance by assisting households to purchase apartments in green-certified buildings, building of green-certified single-family houses, and financing of energy-efficient renovations of existing apartments. Beyond the project outcomes, IFC anticipates that this investment will promote the competitiveness of the climate finance market in Romania through capacity building, and demonstration and replication channels.

IFC’s additionality in the Project is financial and non-financial. Financial additionality will be provided through financing structure as IFC will provide longer-term funding to UCB that is currently not available locally on commercial terms due to a shallow local capital market coupled with persistent volatility due to geo-political environment. Non-financial additionality is provided through knowledge sharing and capacity building enabled by IFC’s global knowledge and best practices which will benefit the Bank to grow and expand its climate finance business product offering, improve its internal processes to accommodate monitoring of the broader product offering, enhance the Bank’s Environmental and Social (E&S) policies and procedures applicable to climate lending in the SME subsegment.

Indicator	Metrics	Comments	Calendar Year 2022	Calendar Year 2023	Calendar Year 2024
Percentage Climate Finance Loan Portfolio	%		Pre-dates IFC investment	Pre-dates IFC investment	Not Available
Value of Outstanding Loans, Climate	USDMill		Pre-dates IFC investment	Pre-dates IFC investment	Not Available

E&S Category Rationale / Risks and Mitigation

The use of IFC’s proceeds under the Project is targeted to climate financing to SMEs projects such as energy efficiency, waste and wastewater management, water efficiency, and green mortgages. The activities supported under the project are mostly expected to have medium E&S risks and include a limited number of business activities that have potential adverse environmental or social risks or impacts that are few in number, generally site specific, largely reversible, and readily addressed through mitigation measures. Therefore, this Project has been categorized as FI-2 in accordance with IFC's Sustainability Policy.

The applicable E&S requirements will include the IFC Exclusion List and Romanian E&S laws and regulations. The following activities are not eligible for financing under this project: IFC Exclusion List activities, coal related activities, Renewable Energy projects, solar projects, and higher risk business activities that may include (i) involuntary resettlement; (ii) risk of adverse impacts on Indigenous Peoples; (iii) significant risks to or impacts on the environment, community health and safety, biodiversity, or cultural heritage; (iv) risk of significant retrenchment; and/or (v) significant occupational health and safety risks. In addition, the Bank will need to be in line with life and fire safety requirements and the requirements of IFC’s PS2 on Labor and Working conditions. Given that this investment is a capital market transaction, where IFC is not a sole investor IFC’s requirement on disclosure of climate-related sub-projects will not be triggered.

Key risks from activities supported by this investment may derive from the Bank's capacity to correctly implement the environmental and social management system to manage the E&S risks associated with the portfolio supported through the Project proceeds which typically include occupational health and safety issues, labor and working conditions and waste and wastewater management.

UCB, an existing IFC client for mortgage financing, has developed an E&S Management System (ESMS) which was approved by the management board in 2021. The ESMS is applied to the bank’s business and corporate clients and outlines the E&S policy commitments, due diligence process and procedures, tools, monitoring, and reporting. The environmental and social due diligence process includes conducting screenings against the bank's exclusion list, which is aligned with the IFC's exclusion list, as well as relevant Romanian laws. For loans that are classified by the Bank as high risk, the bank is required to conduct a more comprehensive E&S due diligence process.
Under this Project, the Bank, as per the ESAP below, will be required to appoint an E&S officer within the credit risk department responsible for the ESMS implementation, develop an E&S training plan and provide E&S training on the ESMS to all staff involved in the implementation of the E&S procedures.

S.no	Title	Anticipated Completion Date
1	Nominate E&S officer	06/20/2024
2	Staff training plan	06/20/2024
3	E&S training	10/18/2024

Contacts

For Inquiries About the Project, Contact

UniCredit Bank S.A.
Cosmina Roteanu
Head of ALM and Funding
+40 21 200 2020
infocenter@unicredit.ro
Bd. Expozitiei Nr.1F, Sect 1, Bucuresti, Cod Postal 012101, Romania
https://www.unicredit.ro/en

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IFC supports its clients in addressing environmental and social issues arising from their business activities by requiring its real sector clients to set up and administer appropriate grievance mechanisms and/or procedures to address complaints from Affected Communities in relation to environmental and social issues arising from IFC's clients' business activities. Since 2012, IFC's Financial Intermediary clients applying the Performance Standards are required to develop External Communications Mechanisms to receive and review inquiries or complaints from any interested party regarding the E&S risks and impacts of their operations.

For IFC projects that are active or under consideration, individual(s), or their authorized representative(s), who allege they have been or will be adversely affected by E&S risks or impacts arising from IFC's clients' business activities, may submit a complaint to IFC directly for consideration. When receiving an E&S complaint, IFC engages with complainants and works with its clients to find solutions to E&S concerns as quickly and efficiently as possible.

Complaints can be submitted to IFC online at www.ifc.org/escomplaints or by email to EScomplaints@ifc.org.

IFC complaint response is separate from and complementary to IFC’s clients’ project level grievance mechanisms and IFC’s Independent Accountability Mechanism (CAO). Lodging a complaint directly with IFC does not, at any time, restrict access to CAO.

Affected communities have unrestricted access to the Compliance Advisor Ombudsman (CAO), the independent accountability mechanism for IFC and MIGA. CAO facilitates the resolution of complaints related to IFC and MIGA projects and sub-projects, undertakes reviews of IFC’s and MIGA’s environmental and social compliance, fosters public accountability for their commitments, and enhances the environmental and social performance of IFC and MIGA.

Independent of IFC and MIGA management and reporting directly to the IFC and MIGA Boards of Executive Directors, CAO helps resolve issues raised about the environmental and social impacts of projects through a neutral, collaborative, problem-solving approach via its Dispute Resolution function. It also reviews IFC’s and MIGA’s compliance with environmental and social policies, assesses related harm, and recommends remedial actions through its Compliance function. Additionally, CAO provides advice to IFC, MIGA, and their Boards to enhance environmental and social sustainability performance and minimize the risk of harm.

Complaints may relate to environmental and social harm regarding any aspect of the planning, implementation, or impact of a project or sub-project, and can be made by any individual, group, community, entity, or other party affected or likely to be affected by the environmental or social impacts of an IFC- or MIGA-financed business activity.

Complaints can be submitted by any of the following methods:

Online form: available at https://www.cao-ombudsman.org/
Mail/Hand Delivery to: 2121 Pennsylvania Avenue, NW, Washington, DC 20433, USA
Voice mail: +1 202 458 1973
Email: cao@worldbankgroup.org
SMS, WhatsApp, Telegram, and Signal: +1 202 650 2627

CAO receives and addresses complaints in accordance with the CAO Policy, which can be accessed at: https://www.cao-ombudsman.org/policies-guidelines.

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.

The map is for illustrative purposes and does not imply the expression of any opinion on the part of the World Bank, concerning the legal status of any country or territory or concerning the delimitation of frontiers or boundaries. Country borders or names do not necessarily reflect the World Bank Group's official position. In some cases, available project location information is limited to the country of the project's activities. Locations are approximate.

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