Environmental and Social Risk Management System (SARAS)

Environmental and Social Risk

Management System (SARAS)

Since the implementation in 2017 of the Bancomext Environmental and Social Risk Management System (SARAS|) credit process for first-tier operations, the assessment and administration of this type of risk have been strengthened by reviewing environmental and social aspects (AyS) in compliance with national legislation, and by analyzing investment projects in compliance with the Equator Principles and Performance Standards in Environmental and Social Sustainability of the International Finance Corporation (IFC).

This methodology has allowed a categorization based on the AyS risk identified through assessments by first-tier operations in:

In 2020, the Bank's commitment to promoting good practices, in terms of environmental and social responsibility to achieve sustainable economic development was reiterated. The Bank is in alignment with, and contributes to, the principles of various international initiatives for global warming mitigation, complying with its institutional commitments with other international Banks and making progress on the 17 Sustainable Development Goals (SDGs) of the financial sector. The preceding considering that one of the main elements and premises of the initiatives is the incorporation, review, and documentation of environmental and social aspects that allow the measurement and reporting of potential financial risks.

In particular, in accordance with its mandate, due to the Bank’s nature of sectoral focus financing, in the contribution to the improvement of the following SDGs:

The guiding principles with which the SARAS methodology is defined, as well as its policies and guidelines for compliance with environmental and social legislation, are reiterated:

Advantages and characteristics of SARAS at the Bank

Existence of a specialized unit.

The Environmental and Social Management Unit (UGAS) was created, in the Adjunct General Directorate of Credit, to handle the SARAS operation. It is a multidisciplinary area with initial assessment functions (AyS risk categorization): supervision of environmental and social aspects during the validity of the first-tier loans; and coordination of institutional training on these practices.

Vision and inclusive scope.

SARAS is a comprehensive system applied in first-tier operations as part of the credit process. Likewise, for second-tier operations with IFIs, through a virtual platform coordinated by the Adjunct General Directorate of Promotion, supplies are provided that serve as training for the adoption of good practices and international initiatives in the field of sustainability for the financial sector.

Regulatory Process, parallel to the Credit process.

It is a normative methodology that entered into force in September 2017 as a Support Manual for the Credit Process. It involves all its areas, including the Internal Comptroller, making it a totally transparent and auditable process.

Portfolio Administration, follow-up, and monitoring of borrowers Environmental and Social risk (AyS).

SARAS’s credit category A&S risk-based portfolio allows timely and continuous monitoring of changes in potential risks to suggest action plans with mitigation measures.

Leadership and promotion for the National Development Bank (BND)

Bancomext is a reference for the other development banks in Mexico regarding the adoption of good international practices in managing environmental and social risks, since it has a SARAS with recognition from commercial and international development banks and multilateral organizations. Bancomext shares its experience in various forums and meetings with other Banks. The preceding allow the institution to access more and new funds from responsible markets in environmental and social aspects.

Development of "Green or Sustainable Products"

There is a Sustainable Building program with which in the real estate sector (construction of national infrastructure) is promoted to incorporate voluntary certifications in Mexico in the design, construction, and operation phases, as well as the Leadership in Energy and Environmental Design (LEED) certification globally endorsed by the Green Building Council of the United States of America. Additionally, it is expected that new programs can be developed in response to the environmental and social needs and opportunities in some sectors and industries, in accordance with the bank's mandate and in alignment with national priorities.

Alignment with Banking in Mexico and firm commitment to sustainability.

Bancomext was the first National Development Bank (BND) to subscribe and sign the ABM Sustainability Protocol in December 2017, which subsequently encouraged the other Development Banks to join in the effort. To date, the seven development institutions have joined this effort.

Technical advice and support to companies regarding environmental and social legislation.

The UGAS, in addition to promoting compliance in environmental and social matters of its accredited or potential clients, provides advice on related Mexican regulations for companies lacking specialized areas. The objective is for companies to comply with their environmental and social procedures and permit obligations, ensure a regular operation, and thus gradually promote their social and environmental responsibility.

Collaboration and Liaison with Government Agencies

Communication and collaboration channels have been established between the authorities and government agencies in charge of regulations and management of environmental and social aspects (SEMARNAT, PROFEPA, SECTUR, SENER, CONAGUA, INAH, etc.). Shared experiences have strengthened UGAS and Bancomext technical capabilities.

Internal and external institutional campaign coordination

In conjunction with the Coordination of the Bank's Institutional Social Responsibility Program, a Work Plan has been developed to define the guiding principles and dissemination messages on topics such as Bancomext contribution to social welfare and sustainable economic development, internally and with its clients.

SARAS results

The environmental and social assessments carried out from the beginning of the SARAS up to December 31, 2020, totaled 670 tokens issued. Of these, 4% are risk category A, 53% risk B, and 43% risk C. During the COVID-19 pandemic (April to December 2020), a total of 243 assessment sheets were issued, mainly for rescheduling operations of the tourism sectors, industrial warehouses, and to a lesser extent the sectors of metal products, automotive, trading companies, and transport and logistics. It is relevant to comment that the incorporation of three sectors was identified, having no prior assessment history: cement, construction materials, and maritime transportation.

Below are the graphs with the results, by category and by sector:

Assessments, by AyS risk category, accumulated 2017-2020

The evolution of the portfolio in terms of environmental and social assessments was directly modified by the pandemic. When comparing the workload of 2019 to 2020, the number of operations carried out by the UGAS grew 2.1 fold, accumulating throughout the year 2020 a total of 284 assessment sheets, of which 243 correspond to the work at home period.