Sustainable Forest Finance Toolkit - PwC

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2 Portfolio ManagementOne of the hardest challenges in implementing forestrysustainability policies can lie in improving the performanceof existing clients.This section provides guidance to help banks assess andmanage client-related risks at a portfolio level. A frameworkfor assessing client performance and assigning risk rating isprovided, as well as some guidance for reviewing clientaction plans.DevelopmentPortfoliomanagementClient reviews: OrganisationalperformanceClient reviews: FMU / supplychain performanceReviewing an action planPage 68pwc
Organisational performance1 of 1Portfolio Mgt HOMEAssessing sustainability risk in legacyclientsThe table and guidance included here and on the followingpages outlines a possible approach to assessing thesustainability risk associated with legacy clients. Theapproach will necessarily require tailoring to the bank’sparticular circumstances. A review of legacy clients shouldacknowledge existing client contracts. Where clients breachbank policy, banks should open negotiations to redress theseviolations within the framework of client agreements.A framework for reviewing client performance and risk shouldbe based on bank policy structure and client performancerequirements against which new and existing clients can beassessed. The bank has a range of options for assessinglegacy clients, from the management interview to a templateas exemplified below to assess conformity to bank policy.Additional due diligence deemed necessary may be conductedat the bank’s or client’s expense. It may be appropriate to attachweightings to policy issues identified in the policy frameworksuch that a balanced picture of the sustainability of a client’soperations is obtained.Weighting should be tailored to the nature of the existingportfolio (e.g. upstream / downstream, Northern / Southernhemisphere), and to the relative importance attached to thevarious policy requirements. For example, the bank mayconsider labour issues to be particularly critical in the regions inwhich it is active, thereby assigning a greater weighting toHuman Rights and Labour Standards.Depending on the ambition level of the policy document, policycompliance may be achieved at any point beyondthat at which basic legality and credible progress towardscertification is achieved. It may be the intention tostrengthen policy over time and move clients towards bestpractice.The overall sustainability risk rating is determined by thelevel of compliance in each area, balanced against theweighting attached to those areas by the bank, and shouldbroadly reflect the bank’s appetite for risk and the letter andspirit of the bank’s environmental and social lendingpolicies, specifically its forestry policy.The eight areas in the sample below are consistent with theManagement Interview and Client PerformanceRequirements as defined in the creation of a bank forestrypolicy.Category Weighting (%) Outstanding client performance issues Non-conforming / illegal Legal <strong>Sustainable</strong> / bestpractice1 Management and Governance2 Resource Management3 Fibre Sourcing4 Eco-efficiency and Climate Change Mitigation5 Health and Safety6 Community Well-being & Stakeholder Engagement7 Human Rights and Labour Standards8 ReportingOverall sustainability ratingStaff conducting these assessments will require training to understand how to identify and accurately assess the risks present in their clients’ businesses.Page 69pwc
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Sustainable ForestFinance ToolkitTh
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Guidance for using the ToolkitThis
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How does economic development impac
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Challenges and problems associated
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Sustainability issues in the forest
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Costs and benefits of certification
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Costs and benefits of certification
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1 New ApplicationThis section provi
Page 18 and 19: Illustrative - Management Interview
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Page 22 and 23: Illustrative - Higher risk client a
Page 24 and 25: Legality issue briefing note2 of 5N
Page 26 and 27: Legality issue briefing note 4 of 5
Page 28 and 29: Small scale and community forestent
Page 30 and 31: Sustainable ForestManagement briefi
Page 32 and 33: Special places briefing note 1 of 4
Page 34 and 35: Special places briefing note 3 of 4
Page 36 and 37: Planted forests briefing note 1 of
Page 42 and 43: Certification briefing note 1 of 7N
Page 46 and 47: Certification briefing note5 of 7Ne
Page 50 and 51: Pollution and EnvironmentalManageme
Page 52 and 53: Local communities and indigenouspeo
Page 54 and 55: Local communities and indigenouspeo
Page 56 and 57: Forest carbon and otherecosystem se
Page 58 and 59: Forest carbon and otherecosystem se
Page 60 and 61: Brazil - country briefing note 1 of
Page 62 and 63: Indonesia - country briefing note 1
Page 64 and 65: Malaysia - country briefing note 2
Page 66 and 67: Russia - country briefing note 2 of
Page 70 and 71: FMU / supply chain performance 1 of
Page 72 and 73: 3 Policy DevelopmentA carefully con
Page 74 and 75: Suggested Internal Bank ForestryPol
Page 76 and 77: Suggested Internal Bank ForestryPol
Page 78 and 79: 4 ProcurementIn 2007, the WBCSD and
Page 80 and 81: Sample procurement policy2 of 2Proc
Page 82 and 83: Appendix 1: Special places 2 of 3De
Page 84 and 85: Appendix 2: Client performancerequi
Page 86 and 87: Appendix 2: Client performancerequi
Page 88 and 89: Appendix 4: Consolidated duediligen
Page 90 and 91: Appendix 5: Acronyms1 of 1ASEAN Ass
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