Environmental and Social Business Assessment for Obtaining a Loan under the “Affordable Loans 5-7-9%” program

More about Environmental and Social Assessment

Environmental and social assessment urges businesses to provide their activities responsibly. The assessment is intended for projects financed by the World Bank and other international organizations.
Depending on the purpose of financing, assessment can be simplified or in-depth.

Which Borrowers are assessed

The borrowers applying for loans which are provided pursuant to the CMU Resolution “On the Provision of Financial State Support” No. 28 as of January 24, 2020. According to Clause 7, lending is provided in line with the World Bank environmental and social standards.

From December 1, 2024, this condition is applied to all the borrowers having the following NACE codes:

• 01.1 “Cultivation of annual and biennial crops”;
• 01.2 “Cultivation of perennial crops”;
• 01.3 “Plant reproduction”;
• 01.4 “Livestock breeding”;
• 01.5 “Mixed agriculture”;
• 01.6 “Auxiliary activities in agriculture post-harvest activities”;
• 02 “Forestry and logging”;
• 03 “Fisheries”;
• 10.51 “Milk processing, butter and cheese production”;
• 10.61 “Production of flour and cereal industry products”;
• 10.71 “Production of bread and bakery products”; production of short-term flour confectionery, cakes and pastries”.

Main Assessment Stages

1. Filling out the questionnaire in “Privat24 for Business”.
   “Corporate Customer Documents” section.
2. Provision of additional documents (for the in-depth assessment).
3. Business inspection by the bank representative (for in-depth assessment).
4. Approval of the corrective action plan (CAP) to eliminate detected discrepancies. The actions and their deadlines shall be specified in the loan agreement.
5. Periodic monitoring of compliance with the standards throughout the whole period of financing.

The borrower shall be obliged not to carry out activities prohibited from financing. More details

Additional Commitments

The borrower shall be obliged:

• Not to carry out activities prohibited from financing (see the list).
• Adhere to the environmental and social standards of the World Bank (see the list).
• Implement the corrective action plan. Provide supporting documents on its implementation and, if necessary, approve revision of the plan.
• Take recommended environmental and social management measures.
• Inform the bank on environmental and social incidents (see the list) by sending an email to cancelyaria@privatbank.ua within 24 hours (email template) and provide the Bank with an incident investigation form (email template);
• Notify the bank on the significant changes in the activities within 5 business days by mailing to cancelyaria@privatbank.ua (email template).
• Update data in the questionnaire and provide documents for risk re-assessment once  every 12 months or at the bank’s request.
• On a quarterly basis, report on compliance with the environmental and social management system requirements in “Privat24 for Business”, “Corporate Customer Documents” section.
• Admit the bank representatives to business locations.

The borrower shall confirm that it is compliant with the legislation of Ukraine on healthcare, labor and environmental protection which shall be applied to the borrower itself, its representatives and employees.

What should be done if a company lacks some documents from the list

The full package of documents is not an obligatory condition for obtaining a loan. If some documents are missing, it shall be deemed as an additional requirement which will be included in the corrective action plan, and the borrower will be able to provide the documents during the period of financing.

How the Environmental And Social Assessment Results Affect the Possibility for Obtaining a Loan

If the high-risk level factors are detected during the assessment, the financing is not provided.

The factors include:

• A company carries out activities prohibited from financing (see the list).
• A company does not comply with national regulatory requirements when carrying out economic activities.
• A company does not have valid environmental permits and licenses required for conducting activities.
• A company uses harmful child labor, including involvement in the supply chain.
• A company involves its personnel in forced labor, including in the supply chain.
• A company has planned the acquisition of land plots for doing its business within the following 12 months.
• A company has displaced the population, either physically or economically, through the acquisition of land for doing its business over the last 12 months.
• A company’s economic activities cause a negative impact on biodiversity.
• A company is doing business in the territories protected by law without the appropriate permission.
• A company is doing business in the territories with cultural heritage objects (including artifacts, archaeological sites, tombs, ancient forests, etc.).

If, during the assessment are detected any other gaps related to non-compliance with environmental and social requirements which do not cause significant negative impact, then, after obtaining the loan and within the period of financing, shall be developed the corrective action plan to eliminate these gaps. Based on the results of the plan implementation, risk re-assessment shall be conducted and, if necessary, the plan may be improved. 

What is the Corrective Action Plan (CAP)

This is a list of customer additional commitments to mitigate environmental and social risks, it is attached to the loan agreement. The plan is developed individually for each loan, depending on the environmental and social assessment results.