In recent years, Mongolia’s key economic drivers, including the mining sector and other industries, have caused significant environmental damage. To address this pressing issue, the Trade and Development Bank (TDB) is preparing to take concrete measures.
We spoke with B. Medree, CEO of TDB, to discuss this initiative as well as global economic trends and developments in the banking and financial sectors.
Journalist: "I couldn't resist asking after hearing that the Trade and Development Bank is preparing to incorporate environmental and social responsibility management into its operations. It might surprise people that a bank would adopt environmentally friendly practices. What can you say about this?"
B. Medree: "Yes, our bank is in the final stages of implementing an environmental and social responsibility management system into its operations. This is a comprehensive framework that not only addresses business and financial risks but also considers environmental and social responsibility risks, aiming to mitigate and prevent them.
Under this system, individuals and organizations will assess the environmental and social impacts and risks associated with their activities. They will also take measures to manage and monitor potential negative consequences, provide explanations and reports, disclose information, and undergo evaluations by independent experts. It’s a multi-step and thorough process aimed at ensuring accountability and sustainability."
Journalist: "How is this management approach being utilized internationally?"
B. Medree:"Today, no matter how profitable or promising a project may seem, if it has negative impacts on the environment, society, or communities, it is often rejected outright. Non-governmental organizations like Greenpeace express strong opposition, and leading global financial institutions that have adopted environmental and social responsibility management systems refuse to finance such projects. These institutions publicly announce their decisions and commit to global initiatives aimed at responsible practices.
For example, the International Finance Corporation (IFC) of the World Bank Group, along with nine globally renowned banks, established the Equator Principles in 2002. Today, 77 of the world’s leading banks have joined this initiative, including the Netherlands' FMO, ABN Amro Bank, Rabobank, NIBC Bank, and ING Group; Australia’s ANZ; the United States’ Bank of America, Citi Group, and Export-Import Bank; JP Morgan Chase; the United Kingdom’s Lloyds Banking Group Plc and Barclays Plc; Japan’s Bank of Tokyo-Mitsubishi UFJ; and Switzerland’s Credit Suisse.
Another example is nuclear energy production. While its efficiency is undisputed, its negative impact on the environment, society, and communities has led to widespread opposition across Europe and Asia. Several governments have even officially abandoned nuclear energy. These actions are part of the broader framework of environmental and social responsibility management.
Journalist: "Why did the idea of implementing such a policy in Mongolia come about?"
B. Medree:
"In recent years, sectors such as mining, construction, light industry, and processing industries have developed rapidly in Mongolia. However, this growth has significantly impacted the environment. For instance, there are raw material processing plants near the Tuul River using chemicals and operating without wastewater treatment facilities, causing severe pollution. In Ulaanbaatar, steam boilers pollute the air, while construction projects obstruct public spaces like playgrounds and parks, creating strain on the urban environment. Similarly, mining operations pollute the Orkhon River, and there are numerous abandoned sites without proper rehabilitation. These are just a few examples of the challenges we face.
Every one of these issues stems from human actions, often supported by financial backing from banks, financial institutions, or companies. With 2.7 million Mongolians—let alone the world’s 7 billion people—sharing a single planet, everyone must play a role in addressing these challenges. As a pioneering institution in Mongolia’s banking sector, TDB has decided to implement environmental and social responsibility policies. This will minimize risks and, through our efforts, help make our clients' businesses healthier and less harmful to the environment. Additionally, we will actively support businesses that operate without causing negative environmental impacts."
Journalist: "What is the significance of implementing this policy?"
B. Medree:
"First and foremost, the bank will consider not only business, financial, and credit risks for every project it funds but also environmental and social responsibility risks. This approach will establish knowledge and standards that encourage our clients to evaluate these aspects before implementing their projects.
Today, major business and investment projects that attract public interest require not only regulatory approval but also social and environmental acceptance. For instance, organizations like the World Bank mandate that projects undergo an impact assessment covering their effects on society and the environment. These assessments must be conducted by independent experts, not by the implementing or funding institutions themselves. If negative impacts are identified, the project must establish solutions to mitigate them, meeting minimum standards. Independent organizations also oversee the implementation of these measures, and the project implementers must report to authorized government bodies, civil society organizations, and the public to obtain what is referred to as a 'social license' to operate."
Journalist: "What happens if a project does not have a social license?"
B. Medree:
"If there is no social license, even a license obtained from a government official’s office can be rendered invalid. The implementation of the project could be delayed, among other risks. To address these risks, the bank and the client must sit down together, identify potential issues, and develop the capacity to resolve them effectively. This ensures that clients do not recklessly engage in environmentally or socially impactful projects that could expose them to risks, while the bank also avoids credit risks. Ultimately, this approach prevents pollution, harm to public interests, and damage to the environment and society."
Journalist: "Isn’t it difficult to implement such measures?"
B. Medree:
"If we want to develop, live up to global standards, and adopt international best practices, we must implement these measures, no matter how challenging they may seem. The alternative—pursuing profits at the expense of the environment, society, and communities while leaving the responsibility for restoration to the government, affected people, or future generations—will never lead us to the progress and well-being we aspire to achieve."
Journalist: "If your bank imposes such high standards, won’t your clients and borrowers simply switch to other banks?"
B. Medree:
"While we are pioneering this effort, these requirements should eventually become standard across the entire banking sector. I believe other banks will begin implementing similar measures soon. We also expect strong support and collaboration from institutions such as the Bank of Mongolia, the Government, the Ministry of Environment and Tourism, the Ulaanbaatar Mayor’s Office, and the General Agency for Specialized Inspection.
We are working with our clients to help them understand, adopt, and develop the necessary culture and skills, so they are unlikely to leave us. In fact, learning about these new requirements and their significance early on will enable them to avoid future risks and potential losses.
Clients might think, 'Why should my environmental and social impacts matter to the bank?' However, two years down the line, that same person could find themselves labeled as the biggest offender, causing the most harm, and being seen as an irresponsible actor. By that time, the damages and compensation they might owe could far exceed the profits or assets they’ve accumulated."
Journalist: "Has the government implemented any regulations to support this policy?"
B. Medree:
"The recently approved Environmental Laws Package includes provisions that could result in criminal charges, even imprisonment, for violations. Our approach is to work collaboratively with our clients to identify potential risks and damages, prevent them, and, if necessary, help restructure their business operations. We can also seek advice and guidance together from professional consulting firms, create protective measures, and develop actionable plans.
Of course, there may be clients who refuse such collaboration, and we won't force them. However, as we focus on helping our clients conduct their business in ways that are more responsible and considerate of society, the environment, and future generations, I am confident that we will attract clients who are more responsible, forward-thinking, and socially aware."
Journalist: "There is state oversight through plans like mining operation plans, isn’t there?"
B. Medree:
"Yes, while state institutions oversee mining operations, including rehabilitation, it’s clear that such oversight is often insufficient. This policy can complement the shortcomings of state monitoring systems and create opportunities for collaboration. Beyond working with government agencies, this system ensures that any activity accounts for its potential impacts on residents, indigenous communities, and the environment, while also measuring, monitoring, and reporting these impacts during implementation. This approach builds trust and reduces risks for clients, such as reputational damage, lawsuits, fines, or other liabilities."
Journalist: "While this management approach has positive effects on the environment, it also seems to offer benefits to your clients, correct?"
B. Medree:
"Absolutely. In the early years, if a client’s business or project requires it, they will need to conduct environmental and social impact assessments and properly address mitigation and rehabilitation measures. These steps will not only satisfy state agencies but also financial institutions like banks, which are increasingly interested in ensuring compliance with such standards.
If a client does not meet these new requirements, the bank will make decisions based on its policies. Simply put, if a mining company fails to conduct proper rehabilitation, they will not be able to seek further financial services from the bank. This will encourage both individuals and organizations to take greater responsibility for their social and environmental impacts. I doubt there will be any citizen or organization that would oppose such improvements. After all, a country can only progress when its people care for Mother Nature and the environment."
Journalist: "Thank you for the interview."
Reporter: A. Ariunbold