Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
environmental safeguards
SUBMITTED BY: -
Mayank Datta
A3208307023
AMITY LAW SCHOOL,
AMITY UNIVERSITY, UP
ACKNOWLEDGEMENT
I am very grateful to my teacher, SHIPRA DUBEY MAM for his able
guidance and support in the compilation of this project. His advice and
guidance has been of great invaluability and importance.
I would also like to thank my parents and friends in helping me gather
material for and research on the topic of my project. Without them, it would
have not been possible to compile this assignment.
ASHISH SINGH
DSMNRU
Table of Contents
1. Title page
2. Acknowledgement
3. Introduction
4. Involvement in Environment Protection
5. Industrial Finance Corporation
6. International Environment Management Standards
7. Small Scale Industries
8. Conclusion
9. Bibliography
Introduction
The Industrial Revolution heralded an era of prosperity, comforts and other blessings. On
the other hand, it also brought with it a serious threat to the environment. Since then the
rain forests have been decimated, oil spilled by the tankers, harmful gases spewed into
the atmosphere, poisonous fluids into rivers, lakes and the sea. Industry has always been
and continues to be the prime cause of economic development all over the world. The
need of the hour is to bring awareness for pollution prevention, waste minimisation,
resource recovery, recycling and waste utilisation in the industry. For example the single
most important step to control global warming can be taken by reducing carbon dioxide
emissions by improving upon energy efficiency. The industry needs to be encouraged and
monitored for conserving energy and using less energy intensive technologies. In a mixed
economy like India, the Government has to play an important role by bringing out
incentives. In India, however, in view of limited public resources both financial and
advantage by producing eco-friendly products, the role of commercial banks who are
Banks and financial institutions should start taking cognizance of Environment Impact
Assessment (EIA) and Environmental Audits (EA) in their assessments for funding
because -
(a) India's efforts to make the country cleaner and greener were marked by several
people's involvement in ecology and a frontal onslaught on vehicular and noise pollution.
The banks will have to assist the Government in putting India in the league of the
(b) The growth of exports may in future depend on the manufacturing of eco-friendly
(c) The success of the local pollution control equipment industry depends heavily on the
increased demand for its products and financial assistance from the banks.
(d) The existing borrowers of the banks may in future be faced with the new
environmental legislations and banks may find a standard asset converting into a doubtful
borrowers.
audits, etc. may become mandatory in future for the banks and they will have to fall in
line with the approach adopted by International Finance Corporation, Asian Development
Bank, etc.
(f) The projects now require EIA and EA as necessary prerequisites for the financial
Salomon-Inc. of New York has shown that the number of banks dealing with
environmental investment and lending is expected to triple over the next 15 years. The
survey indicates that integrating environmental issues into banking practices is not some
kind of corporate philanthropy but rather good, solid business. In this scenario, banks
require to commit their institutions to protect and preserve the environment and support
IFC's Environment Unit (EU) was established in 1991. EU is the focal point for IFC's
taken. Environmental assessment even precedes financial and technical appraisal. Each
major hazard analysis, etc. At the time of Initial Project Review (IPR), the projects are
classified into three broad categories on basis of their impact on the environment. The
draft of Environmental Impact Assessment (EIA) is analysed in the very beginning and
the same is shared with the local affected groups. The environmental performance of
projects is monitored by the EU. IFC disburses funds only after plans are in place in
accordance with the World Bank and host country requirements on the environmental
issues. The environmental impacts are evaluated after the projected completion and in
Guidelines published in 1988. They include some industry specific standards and some
pollutants specific standards, but they do not cover all industries or all the pollutants.
Another source is US Export - Import Bank (EXIM Bank), which has released its
environmental review procedures to ensure that the exports it supports financially are
ISO 14000 series attempts to set up a framework to prevent and detect violation of
environmental laws and regulations for all countries. Under ISO 14000 series, a company
policies, procedures and practices to identify and comply with its environmental
development projects brought out by Centre for Environmental Science and Engineering,
IIT Bombay is an easy, rapid and ready reference for the user agencies.
The procedure of lending process for the banks, broadly will involve :-
(1) Assessment of risk.
Conventional credit risk assessment in banks takes into consideration financial risks;
industry risks and management risks. Fourth parameter of environmental risk will have to
be incorporated. The rating on point scale is given on the basis of potential impact on the
health and safety, major hazards, pollution control efforts, etc. However, the company
will be required to achieve minimum rating under environmental risk to become eligible
for consideration for the loan. Industries with significant environmental impacts, e.g.,
petrochemical, thermal power, mining, etc., will need to have a detailed EIA of the
project.
The environmental risk assessment should also be implemented for the existing large loan
portfolio for safeguarding banks' interest from potential environment impact problems. To
make the risk assessment realistic, the report of site visit will be analysed. Site inspection
report should include review of past and present use of site, the nature of the
Forests and needs to be given special attention by the banks and financial institutions:
*Primary metallurgical producing industries, viz., zinc lead, copper, aluminum and steel
* pesticide/insecticides
* Refineries
* Fertilizers
* Paints
* Dyes
* Leather tanning
* Rayon
* Sodium/Potassium Cyanide
* Basic drugs
* Acids/alkalies
* Plastics
* Rubber - synthetic
* Cement
* Asbestos
* Fermentation industry
* Electroplating industry
(2) Environmental Audit
The nature of industry, site, process and magnitude of loan shall decide the type of
independent consultant can undertake the audit, the cost to be borne by the borrowers.
Environmental audits will identify past practice, evaluate current regulatory compliance
Environmental audits can also review a company's capital requirements and the cost
impact of environmental compliance on the company's balance sheet and cash/fund flow.
The cost effect on the project in case of dealing with hazardous materials, clean up, etc.,
yearly EA, progress reports and time table on environmental compliance and
Lending and credit officers need to have a good knowledge about environmental matters,
legislations, etc. to properly analyze the information gathered by on site inspection and
EA. Every bank should incorporate the topics of environmental risk assessment, related
legislations, analysis of EA and EIA of the project, pricing for environmental compliance
Units (EU), every bank should establish an Environmental Cell (EC) as part of their
already established consultancy cells at the level of zonal offices/head offices. EC will
become the focal point for environment related activity and will provide the required
expertise whenever needed. Credit officers will have to incorporate the estimate of cost
for dealing with environmental issues in working of the credit requirement of the
borrowers. They will have to provide a summary of the information given by onsite
inspection. EA, risk assessment, etc., and give their conclusion and recommendations to
(i) Documents
Terms and conditions can be incorporated into loan documents to minimise banker's risk
(a) "Loan covenants" can be included that the borrower will comply with all central, state
and local environment laws; remedy any present or future contamination; immediately
notify the bank if they receive any notice of potential environmental violations or
enforcement proceeding.
(b) "Arrangement letter" should specify that charges will be borne by borrower for EIA or
(c) "Indemnity" from borrowers indemnifying banker from the costs or damages resulting
from hazardous waste clean up; damages due to storage, disposal of materials; cost and
pending.
(ii) Collateral
The borrower may be asked for additional collateral security against future impairment of
upon.
(iii) Costing
All this is going to increase the cost for the bank. The credit rating exercise, which
decides the interest rates, can incorporate environmental aspect with provision of
negative marks based on the risk assessment. This may slightly downgrade the rating and
etc. The Reserve Bank of India inspections as well as in-house inspections/audit to check
The framework outlined above can be implemented in case of large corporate borrowers.
The SSI sector is not in a position to bear the additional expenses on account of
environment audit, etc. However, the approach has to change and the banks should
Steps undertaken or proposed for disposal of solid, liquid and gaseous wastes, etc.
Conclusion
Banks are profit making organisations. If they are to be actively involved in assisting the
environment protection efforts, they also need certain incentives for the same. One
incentive can be to classify the lending of banks to manufacture and purchase of pollution
control equipments; R&D activities for pollution control, environment consultancy
With the liberalisation process there is a spurt in industrial activity and inflow of capital.
Attempts need to be made to mitigate the adverse effects on the environment and society.
Due to their effective say in the industrial sector, banks can play a major role in the
Thus, by liberally financing the activities encouraging pollution control and restricting
flow of finance to Industries which are using polluting technologies and by assisting and
monitoring the pollution control by Industries, banks can play a very important role in
Bibliography
The project has been compiled after gathering useful information from the following
sources:
1. legal-dictionary.thefreedictionary.com
2. www.worldbank.com
3. www.ecosystemmarketplace.com