TDB, for the first time in Mongolia, in partnership with the Dutch Development Bank, has implemented a complete ESRMS which consists of Environmental and Social Management policy, Environmental and Social risk assessment of clients’ business activities in accordance with the latest methodologies and monitoring of their E&S risks.
This system refers to business loan requests only and excludes loans for personal use. In this system, we identify the clients’ E&S risks and help them mitigate these risks.
TDB will not finance business activities that are forbidden by international agreements, protocols, IFC’s performance standards and Mongolian laws and therefore has made “Exclusion list” of activities not to finance.
The businesses that are not included in the “Exclusion list” must be classified according to their business activity and loan transaction as either green, yellow or red.
Based on the assessment, when necessary, the bank sets covenants to loans and gives guidance to the clients on risk mitigation measures.
The fulfillment of the additional covenants in the loan contract is reviewed periodically. Please see our system of assessing, reducing, mitigation, preventing and monitoring risk from the following diagram.
What is the Exclusion list and what businesses do we choose not to finance?
Any activity prohibited by host country legislation and international conventions relating to the protection of biodiversity resources and cultural heritage, including:
Production or trade in any product or activity deemed illegal under host country laws or regulations or international conventions and agreements, or subject to international bans;
Trade in wildlife or wildlife products regulated under Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES);
Production or trade in weapons and munitions;
Production or trade in alcoholic beverages (excluding beer and wine);
Production or trade in tobacco;
Gambling, casinos and equivalent enterprises;
Any business linked to the sex industry and/or prostitution
Production or trade in radioactive materials;
Production or activities involving harmful or exploitative forms of forced labor / harmful child labor.
Production or trade in wood or other forestry products other than from sustainably managed forests;
Trade in goods without required export or import licenses or other evidence of authorization of transit from the relevant countries of export, import and, if applicable, transit;
Depending on the type of business activity, and sector, risk level is classified as shown below.
Red | Yellow | Green |
| Mining, mineral resource quarrying, processing | Harvesting | Trading of foodstuffs and other commonly used products |
| Drilling, exploration | Animal husbandry | Hotel and food service |
| Hunting, fishing | Renovation, construction decoration | Information and communication |
| Lumbering activity | Construction material manufacturing | Financial and insurance activity |
| Road, bridge and construction | Dairy product manufacturing | Real estate intermediation activity |
| Production and trading of alcohol and cigarettes | Other food product manufacturing | Education, art, concert, and recreation |
| Raw meat and leather processing | Metallic product manufacturing | Human health and welfare activity |
| Medicine manufacturing | Electricity, power, and gas station | Transportation and warehousing |
| Chemical product manufacturing | Water and drainage accumulating system, waste management and cleaning activity | Professional, scientific, and technical activity |
| Trading of petrol | Manufacturing of other products | Small business with employees, loans for private use |
When conducting due diligence, the following documents may be requested from the customer. These include:
Statements from Metropolitan Professional Inspection Agency and other authorities regarding workplace safety, fire safety, product origin, and health inspection.
Product certifications, standards;
Environmental Impact Assessment, report, and plan;
Environmental management plan;
Occupational health and safety procedures, emergency plan;
Social responsibility policies and plan
Internal labor policy, human resources policy, etc.
As part the ESRMS implementation, TDB has been enforcing “Environmental and Social Responsibility Policy” since 2012, along with its accompanying document “Environmental and Social Responsibility Policy Implementation Guidelines” to monitor and evaluate the environmental and social risks associated with loans.
By implementing E&S policy, following advantages arise for the Bank, the customer and the environment and society.
For the Bank:
Internationally accepted standards put into practice in Mongolia;
Reduces credit risk;
Contributes towards the sustainable development of the country by reducing environmental and social risks.
For the customer:
Prevents unplanned expenditures and risks. For example:
Prevents workplace accidents, reduces the occurrence of accidents, and thus prevents expenditures related to accidents and thus, cuts down risk;
Prevents costs due to public discontentment by mitigating risks with negative consequences on the society and reduces risk;
Prevents fines and disciplinary actions from the authority due to illegal business and unsatisfactory service and products.
Reduces the cost of operation by using green technology and thus, reducing the use of energy and valuable raw materials;
Increases profit by using upright technology, reducing waste, increasing production output, providing a safe and comfortable workplace, and optimizing productivity;
Access to cheaper loans and finance;
Good reputation, and marketing among the public which increases sales and profit;
Contributes towards the sustainable development of the country.
For the environment and the society:
Decreases water, ground and air pollution;
Slows down climate change;
Conserves endangered species and plants;
Preserves cultural and historical heritage;
Prevents violation of human rights.