TDB's Environmental and Social Risk Management System

Greetings to all the clients and business partners of Trade and Development Bank of Mongolia.

I believe that the Mongolian banking sector as the leading sector in the economy today can help facilitate growth and development that is sustainable in the long run by financing businesses that are environmentally friendly and model a good example to the society. Standing at the forefront of this principle, Trade and Development Bank of Mongolia has already started acting on its environmental and social responsibility with good attention and has implemented several major projects.

For example, in 2012, we partnered with Dutch Development Bank (FMO) and became the first bank in Mongolia to implement Environmental and Social Risk Management System (ESRMS) fully in our operation and brought a completely new perspective of banking into our sector. In regards to our ESRMS, we monitor the loans we finance carefully by not putting profit first when making decisions, but by carefully evaluating every loan before we make a decision and rejecting requests from clients and businesses that have negative consequences on the environment and society and thus reducing their risk. In the process of implementing this new concept, we are training all of our employees, especially our account managers, E&S monitoring officers, and bringing awareness to our customers in the hopes of cultivating new standpoint and outlook on environmental and social responsibility.

Furthermore, it is a noteworthy event that in November, 2013 the banks of Mongolia joined the Mongolia Sustainable Finance Initiative and signed MoUs which is a huge step towards the future of our country’s development. Through this partnering of commercial banks in standing up against violation of human rights, climate change, water and ground contamination, and air pollution thus reducing E&S risks, we are on our way to fulfill our vision of creating a sustainable future and development.

I am delighted to announce that as the leading bank in Mongolia, we aspire to be a good model to the other banks through our environmental and social contributions.

Greetings to all the clients and business partners of Trade and Development Bank of Mongolia.

I am delighted to announce that as the leading bank in Mongolia, we aspire to be a good model to the other banks through our environmental and social contributions.

Sustainability plays a central role in development goals shared by countries around the world. By conducting our business environmentally and socially friendly, together we can avoid E&S risks and by doing so, create a sustainable business model. Through our Environmental and Social Responsibility policy, we aim to address issues such as responsible living of natural resources, restoring the nature, occupational health and safety, accessibility of financial services for all levels of society and better fulfilment of corporate social responsibility through our financing.

Globally, banks and financial institutions play important roles in achieving sustainability in the business world. Under the same principle as credit risk rating and mitigation, banks can assess their customers’ environmental and social risk, and protect their customers’ from E&S risks by partnering with them to help them fulfill their environmental and social responsibility.

Moreover, Trade and Development Bank will contribute to gender equality efforts by ensuring through gender mainstreaming, that the needs and interests, effective participation, and resultant benefits of women and men are equally prompted within the organization and its investment through gender-responsive assessment, consultation, design implementation, and monitoring and evaluation processes.

Policies and procedures

Trade and Development Bank’s Environmental and Social Responsibility Policy

Trade and Development Bank’s Environmental and Social Risk Management Procedures for Climate Finance

Trade and Development Bank’s Gender Equality Policy

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.

2019

TDB has started classifying its plastic waste by placing trash bins for plastic waste on each floor of the head office.
To reduce the negative impact of and prevent the water and soil pollution caused by batteries, TDB has started to classify battery waste at its head office and head branch by placing battery waste container and sending the plastic waste to recycling facilities.
To reduce energy consumption, TDB has initiated “Green Hour” campaign to turn off the lights between 12:30 to 13:30 every day.
To enhance accessibility to books and provide equal rights for growth, TDB’s employees voluntarily donated 900 books to Beyond Book community library located in Doloon Buudal, Chingeltei district primarily for teens and children in vulnerable situations.
On 29th of May, 2019, delegates from Bai-Tushum bank of Kyrgyzstan visited TDB and learned about our experience of implementing Environmental and Social Risk Management System and integrating sustainability into our operation.
TDB has signed up to the Green Investment Principles in March, 2019 and attended the GIP first plenary meeting in August, 2019. At the meeting, TDB has joined Environmental and Climate Risk Assessment and Green Financial Product Innovation working groups.
In partnership with My Club NGO, TDB’s employees together watered over 6,000 trees at Erdene soum, Tuv province and contributed towards the green and clean future for the 5th year.
TDB, as part of its efforts to be the pioneer among the banking sector, has joined the Mongolian Renewables Industries Associaton on 15th of October, 2019 and has become the first ever bank to become a member of the association.
TDB was awarded the Best ToC Award for the third time by the Mongolian Sustainable Finance Association and the Bank of Mongolia for its outstanding Environmental and Social Risk Management System, support system, green office and implementation of sustainable practices in its operation on 5th of December, 2019.

2018

As the ToC leader bank of 2018, TDB organized the Sustainable Finance international forum successfully in partnership with the Mongolian Sustainable Finance Association on 10th of December, 2018.
TDB provided 350 mln. MNT of financing to Achlalt Khuukhduud NGO which provides accommodation, restoration and recovery care to the disabled and the elderly to purchase their own building. Moreover, to further support this cause, TDB’s employees raised and donated 20.0 mln. MNT.
The representatives of the banking and financial institutions of Cambodia visited Trade and Development Bank as part of their tour to Mongolia to learn about the Sustainable Finance Initiative. During the meeting, TDB shared their experience and practices regarding the environmental and social risk management system, policy and procedures, assessment tools and methodologies, and mitigation and management of the clients’ E&S risks.
In cooperation with “My club” NGO, TDB joined the annual “Green future” initiative for the fourth year. TDB’s employees together watered over 8,000 trees in Argalant Soum, Tuv province where desertification is increasing rapidly.
TDB held an open day and facilitated an introductory seminar on Sustainable financing at the National University of Mongolia and University of Finance and Economics as part of the “We are Bankers” campaign.

2017

TDB was awarded “The Best Sustainable Financing Bank of 2018” by the Mongolian Bankers Association for the second straight year for developing a complete ESRMS, implementing Sustainable Finance principles, implementing projects that are of high importance and leading the other banks.
TDB has done assessments on the clients’ E&S risks and is working to reduce their risk. Where necessary, the bank has set covenants on loans and monitored the implementation of the covenants 75% of which has already been fulfilled.
TDB had its second external audit done to its ESRMS by Dutch development bank and “SEC” LLC Mongolian environmental counseling company and received a “Good” rating with a score of 90.04%
TDB has donated 821 animal covers, 1050 bags for newborn animals, candles, stitches, gloves and other necessities and over 400 cubes of grass and over 50 bags of brans all of which together cost over 10 mln. MNT to support herders under the program “Kindhearted help for herders”
In cooperation with “My club” NGO, TDB joined the annual “Green future” initiative by watering 8,000 trees in Argalant Soum, Tuv province where desertification is increasing rapidly.
TDB held a project competition called “GREEN OFFICE” to help create green job opportunities that are environmentally friendly and cost saving. The projects selected as the best will be implemented starting 2018 in the company’s operation.
In cooperation with the Tuul river basin administration, TDB organized an event to clean the Tuul river basin for the second year. During the event, over 400 employees of TDB picked up about 900 bags of trash from the Tuul river bank from a 6 km long area.
TDB’s employees donated 4 Mongolian traditional yurts worth 10,000,000 MNT to National Emergency Management Agency to aid their rescue mission.

2016

In cooperation with “My club” NGO, 200 employees joined the “Green future” initiative by donating 896,000 MNT and watering 8,500 trees in Erdene Soum, Tuv province.
TDB made its loan issuance process “GREEN” by decreasing the paper use in the loan issuance process. By making this process electronic step by step, we have saved 198 trees, 392 tons of water, 22 tons of carbon, 16 tons of waste.
TDB was awarded “The Best Sustainable Financing Bank of 2016” by Mongolian Bankers’ Association.
450 workers of TDB partnered with Tuul river basin administration and cleaned the river bank and collected over 880 bags of trash from over 9 km long area.

2015

TDB’s workers have received trainings on Sustainable Finance policies both inside and out of the country on a continual basis.
Within the framework of 8 policies and 4 sector guidelines from the Sustainable Finance Initiative, TDB made changes to its E&S policies and procedures and added specific requirements for clients from different sectors.
TDB started offering service to its disabled, pregnant and elderly customers in all of its branches with no queues.
TDB donated 10,000,000 MNT to 109 families from Dornod, Khentii, and Sukhbaatar provinces whose homes got caught in the fire.
TDB made its ATMs and website friendly for visually impaired, elderly, and illiterate customers.
TDB built entrances for its disabled customers in its head quarter and all of its new branches.
Branch employees have cooperated with Myclub NGO and planted trees in Umnugovi, Dornogovi, Darkhan-Uul provinces and in Baganuur district where desertification is increasing rapidly and contributed towards protecting the environment.
TDB has provided its loan managers with ESRMS trainings and seminars to develop their skills continuously.

2014

TDB provided its workers with trainings on Sustainable Finance policies in and out of the country consistently.
TDB partnered with experienced international consulting organizations that work in the environmental field.
TDB identified the major risks in every sector of the economy and updated the required set of documents for loan request to reduce their risk, covenants for different sectors, and renewed its procedures for account managers.
To raise awareness among its employees, TDB started a Sustainable finance section in its internal web to inform them about E&S policies, training and global experiences.
To better assess risks, TDB updated the codification system of every specific sub-sectors to more specificity and implemented this to its E&S risk assessment system.
TDB will continue to improve its Sustainable finance management system by implementing globally recognized measures and protecting its customers from risk to support sustainable development and thus ensure a good future for the next generations.

2013

TDB had an external audit done by PwC to assess the implementation of its E&S policy.
Together with Mongolian Banker’s Association and Dutch Development bank, TDB organized the first ever Sustainable Finance forum of Mongolia.
TDB signed a Memorandum of Understanding to support and implement the Sustainable Finance policies.

2012

TDB initiated the development of the Environmental and Social Risk Management System.
TDB trained its account managers and E&S risk analysts.
With the help of PwC, TDB developed a complete ESRMS to assess environmental and social risk of clients, ESRMS policy and procedures, monitoring and risk management.