HSBC Bank Armenia is a joint venture between the HSBC Group, which has a 70% ownership, and Wings Establishment, a company controlled by a UK-Armenian business with 30% ownership.

The total project cost is estimated at US$30 million. IFC is considering supporting the Project with financing from the Canada Climate Change Program, a donor-funded facility for climate change friendly projects administered by the IFC.

22.0 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	22.0
Equity

* These investment figures are indicative

Proceeds of the loan facility will be on-lent by HSBC Bank Armenia to its customers in Armenia through its 8 branches operating in Armenia.

The development impact is expected to be high, as the Project provides the needed long term funding for investments in renewable energy and energy efficiency sub-projects in an IDA country through an experienced and capable bank and contributes to the deepening of financial intermediation in Armenia. It will also help Armenian companies to improve their competitiveness and overcome the consequences of the economic crisis as well as support job generation. Estimated volume of greenhouse gas emissions that can be avoided as a result of the project implementation stands at 15,000 tons.

As a result of economic crisis, long-term funding for Armenian companies became scarce, especially for projects in renewable energy sector that require longer tenor. The Project will provide long-term funding for financing investments in renewable energy and energy efficiency for Armenian companies through a well established bank with a good track record. It will be complemented by advisory work to help the bank improve technical and credit skills for RE/EE financing. The IFC facility will provide sufficient long-term funding to support lending for the intended sub-projects at reasonable terms.

This project, classified as Category FI according to IFC’s Environmental and Social (E&S) Review Procedure, consists of an IFC senior loan to HSBC Bank Armenia (HBAM), a new IFC client, to finance energy efficiency and renewable energy in Armenia. Preliminary information provided by HBAM indicates that as a subsidiary of HSBC Group, the bank subscribes to international standards such as the Equator Principles and also follows the Group’s sustainability policies and operational procedures.

As part of IFC’s appraisal, IFC reviewed the potential E&S risks associated with financing projects involving energy efficiency (such as upgrade of general/auxiliary and industry-specific energy equipment in industry sectors such as food processing, chemical industry, building material production, metal-processing and mining) and renewable energy (such as small hydro power plants, wind and solar energy). IFC’s appraisal also focused on assessing HBAM’s capacity to identify and manage these risks, including the bank’s experience to date with similar types of projects as well as the extent to which HSBC Group-level E&S procedures are implemented at the subsidiary level as part of the bank’s lending procedures. IFC has also appraised HBAM''s labor practices against IFC Performance Standard 2 on Labor and Working Conditions.

As a condition of IFC commitment, HBAM will need to designate an ESMS Officer and demonstrate that E&S risk management procedures will be revised and integrated with the bank’s lending procedures to meet IFC’s standard for an acceptable Environmental and Social Management System (ESMS). As a condition of IFC disbursement, HBAM will need to provide evidence that adequate E&S due diligence and monitoring procedures have been developed and implemented to ensure that the E&S risks associated with energy efficiency and renewable energy projects are assessed against the IFC Exclusion List, applicable social and environmental laws and regulations of Armenia, and IFC''s Performance Standards.