Sustainable Forest Finance Toolkit - PwC

Reviewing an action plan 1 of 1Portfolio Mgt HOMETime-bound action plan – guidanceWhere clients are not compliant with bank policy, the bankwill want to develop an agreed-upon action plan for theclient to demonstrate that they are on the path tocompliance.An action plan should have a specific timeframe andmilestones to be agreed between the client and the bank.A key priority of an action plan may be the progression tocredible certification for a high proportion of the client’stimber.If certification is agreed to, the action plan provided to thebank should include details of a certification action plan(prepared by a credible external consultant if necessary),along with a summary of any Corrective Action Requests(CARs) identified in previous audits.The client’s operations should be subject to an annualexternal audit to verify any reported progress against theplan.If any of the client’s forestry operations are currentlyassessed as illegal, the period for the plan to achievelegality should be not more than three months. In addition,an action plan to stop illegal activities must be presented tothe bank immediately if these are evident.By the end of the plan period the client should achieve anagreed acceptable level, as evidenced by the client statussummary. For example the bank may set a minimum targetof 70% in the sustainable / best practice category, with amaximum of 30% in the legal category (not yet sustainable),and clearly no FMU / timber volume in the illegal category.This would apply to FMU / timber originating from countriesnot deemed to be lower risk under the client evaluationdecision tree.Client basicsA) Set out the period of the plan (2-5 years is conventional).B) Set out the aspiration of the plan, e.g. minimum 70% sustainable, maximum 30% legal, no illegal.C) Identify key milestones (six monthly or annual depending on the bank’s portfolio review process).D) Identify in turn how each of the key client performance requirements will be addressed by the plan:1 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 ReportingE) Include details of certification action plan and any associated CARs (until third-party audits are in place)F) Include details of annual external audits to be performed.Bank basicsH) Set out clearly the action that the bank will take if key milestones are not met.I) Explain the review process that will be undertaken, and the frequency of review.Page 71pwc