Outline of the Social and Environmental Management System Policy

Outline of the Social and Environmental Management System Policy followed by the Islamic Commercial Bank of Iraq

The bank’s responsibility towards implementing the social and environmental management system :

• The Bank has made every effort to ensure that all projects are managed in compliance with applicable local laws and the performance standards of the International Finance Corporation .
• The Bank acknowledges that its corporate clients are aware and understand the policy commitments it provides and applies in this area .
• Has the bank committed to making all reasonable efforts to comply with the performance requirements of the social and environmental management system in cases where the bank is a minority investor ?

The bank's necessary procedures to preserve society and the environment :

• The bank shall review the general information to verify the existence of any environmental or social issues related to the project .
• The bank shall review the project and the environmental and social documents related to the project .
• The bank is negotiating with the project officials .
• The bank visits the project site and holds discussions with its employees .
• The bank needs external advice on some technical matters within the scope of industrial projects .

Classification of offers :

The bank classifies all its financing offers and foreign investments according to the following categories:

Procedures required by heads of work units according to the conditions in force regarding projects within category (C ) :

• Ensure that the activities are not part of the list of excluded activities referred to in Appendix No. (2) of the policy, and inform the client and terminate the financing if his activity is included in the above list .
• The client’s acknowledgement, disclosure and commitment that the requirements of his project are in accordance with local Iraqi laws and in accordance with social , environmental, health and safety regulations .
• Visiting the client’s work site and preparing a report on his overall evaluation and the extent of his commitment to the submitted statements .
• The Social and Environmental Management System Coordinator shall review the above report and, if necessary, may impose additional conditions for accepting the credit application .

Conditions applicable to projects within category (A) or (B ) :

• Adherence to the list of exceptions of the Iraqi Commercial Islamic Bank for all projects .
• Compliance with the environmental and social laws and regulations of the host country .
• Adherence to the IFC Performance Standards on social and environmental sustainability of corporate and project finance transactions .
• Adherence to the Guidance Notes on the Performance Standards of the International Finance Corporation .
• Adherence to the World Bank Group's Environmental, Health and Safety Guidelines .
• The Bank undertakes to make all reasonable efforts to ensure the implementation of the social and environmental management system policy and procedures by its affiliates .

Procedures required by heads of work units according to the conditions in force regarding projects within category (A) or (B ) :

• Ensure that the work unit applies the list of exceptions of the Islamic Commercial Bank of Iraq to the financing offer in coordination with the manager/coordinator of the social and environmental management system. The financing request is stopped and the customer is notified if it includes any exempted activity .
• The client will be notified by the business unit if the Social and Environmental Management System Coordinator approves the project and ensures that it is free of any activity excluded under the evaluation process .
• The Director or Coordinator of the Social and Environmental Management System (or the consultant who replaces him) undertakes to take the necessary measures to preserve the community and the environment in accordance with the guidelines contained in the Social and Environmental Management System Policy .
• The client company must agree to abide by the terms of the agreement on the proposed corrective action plan by specific dates set by the Social and Environmental Management System Coordinator in order to follow up on the financing procedures .
• Clients must provide all required information, and the ESMS Coordinator must decide whether the project is expected to meet all applicable conditions and proposed corrective actions before the bank proceeds with financing the project .
• Environmental performance is evaluated annually, and the performance criterion will be the extent of compliance with the applicable conditions as follows : 
• The bank’s client companies are requested to submit annual reports confirming their continued “compliance with regulations and laws related to society and the environment” and to conduct additional inquiries and visits to the sites of the funded projects .
• The manager or coordinator of the social and environmental management system undertakes to submit performance reports to the bank’s executive management and the International Finance Corporation, which are prepared based on the client’s annual reports submitted to the bank and the necessary measures to preserve society and the environment .
• Ensure that all financing agreements include appropriate guarantees and undertakings that acknowledge compliance with the conditions and laws of the host country regarding the environment, health and safety .

note //

• The policy and procedures of the social and environmental management system of the Islamic Commercial Bank of Iraq are followed in the event that it is The main financing party in a syndicated financing transaction (syndicated loans) The bank’s share of the financing is more than 50% of the crowdfunding .
• However, if the Islamic Commercial Bank of Iraq’s share of joint financing is less than 50% of the collective financing, it will make every effort to ensure that the transaction is within the framework of the requirements of the applicable social and environmental management system .

Organization and responsibilities under the Social and Environmental Management System :-

• Under normal circumstances, the Risk Management Manager or Credit Risk Manager is considered the manager of the social and environmental management system in the bank, whose authority includes evaluating financing operations and the extent of their commitment to social and environmental matters , as well as signing the company’s annual performance report regarding the social and environmental management system submitted to the International Finance Corporation .
• The first official of the Credit Risk Committee at the Islamic Commercial Bank of Iraq must approve any change in the manager or coordinator of the social and environmental management system .
• and Environmental Management System Manager or Coordinator :

1. Implementing the procedures of the social and environmental management system in the bank .
2. Evaluating companies’ clients and their commitment to the social and environmental management system policy .
3. Supervising projects in investment portfolios and ensuring their continuity in compliance with applicable conditions .
4. Maintaining records of reviews conducted within the framework of the social and environmental management system .
5. Preparing the annual environmental performance report submitted to the International Finance Corporation .

• The Social and Environmental Management System Manager or Coordinator undertakes to ensure that all funding decisions are supported by appropriate documentation .

• The Bank undertakes to notify the International Finance Corporation if the Director or Coordinator of the Social and Environmental Management System leaves his position, and undertakes to provide the name of the new Director or Coordinator to the International Finance Corporation .
• Conditions and qualifications that the director or coordinator must have :

1. The Social and Environmental Management System Manager or Coordinator undertakes to work with management to ensure that appropriate resources are committed to the Bank, which allows for the effective implementation of the Bank’s Social and Environmental Management System policy and procedures .
2. The manager or coordinator of the social and environmental management system must be technically qualified to carry out the tasks or review the work .
3. The director or coordinator of the social and environmental management system undertakes to maintain a file containing data on qualified environmental consultants for the purpose of assistance .
4. Keeping private records .
5. Preparing reports on the necessary measures to preserve society and the environment 
6. Keeping records of the management and environmental system for the projects being supervised .
7. Reports submitted to the bank's management 
8. Reports submitted to the International Finance Corporation .

• Financing Offers Classification 

Category (A) There are several factors that affect the classification of any project in terms of (size , location, sensitivity and extent of impacts), as Category (A) includes work activities that include extremely negative environmental and social risks with unprecedented and unavoidable impacts, such as causing the loss of a basic natural habitat or affecting vulnerable groups or ethnic minorities or forced displacement and resettlement or affecting cultural heritage sites. Therefore, a comprehensive environmental impact assessment is required .

Category (B ) Business activities that involve environmental and social risks with potential negatives of limited impacts. The negatives can be easily identified and largely avoided under risk mitigation criteria. The potential negative environmental impacts on the population or on environmentally important areas are less negative than projects included in Category (A). An environmental assessment must be conducted that focuses on expected impacts and not a comprehensive assessment.

Category (C ): Work activities that do not involve environmental or social risks or significant negative impacts, i.e. without risks.

List of exceptions

The list of exceptions for the Islamic Commercial Bank of Iraq has been determined in light of the list of exceptions at the International Finance Corporation, as follows:

The Islamic Commercial Bank of Iraq does not finance the following projects: 

• Producing or trading in any product or activity that is considered illegal under the laws and regulations of the host country or international treaties and agreements, or subject to international prohibitions, such as pharmaceuticals, pesticides, agricultural pesticides, ozone-depleting substances, polychlorinated biphenyls , wildlife, or products subject to CITES ( the Convention on International Trade in Endangered Species of Wild Fauna and Flora ) .
• Production or trade in arms and ammunition.
• Production or trade of alcoholic beverages (except beer and wine).
• Production or trade of tobacco.
• Gambling, discos and similar enterprises.
• Production or trade in radioactive materials. This does not apply to the purchase of medical equipment, quality control (measurement) equipment and any equipment considered by the International Finance Corporation to have a low radiation source and/or is adequately shielded.
• Production or trade in loose asbestos fibres. This does not apply to the purchase and use of cement-bonded asbestos coverings where the asbestos content does not exceed 20%.
• Trawl fishing in the marine environment using nets longer than 2.5 km.
• Activities that involve any type of harmful or exploitative forced labour, such as child labour.
• Production or trade in timber or any other forest product other than products under sustainable forest management.
• The production, trade, storage, or transportation of large quantities of hazardous chemicals, or the use of a commercial quantity of hazardous chemicals.
• Production or activities that affect lands owned, or claimed by judicial order, by indigenous peoples, without the documented consent of those peoples.

test is applied in amending the list of exceptions in light of the activities provided by the project company and the extent of the significance of the impact of those activities on the development.

IFC Performance Standards

The following eight performance standards (IFC Performance Standards) represent the standards that borrowers and project finance applicants must adhere to during the period of the facilities or financing provided to them by the bank.

Performance Standard 1: Assess and manage environmental and social risks and impacts.

Performance Standard 2: Employment and Working Conditions

Performance Standard 3: Resource Efficiency and Pollution Prevention.

Performance Standard 4: Community Health, Safety and Security.

Performance Standard 5: Land Acquisition and Involuntary Resettlement.

Performance Standard 6: Conservation of biodiversity and sustainable management of natural life resources.

Performance Standard 7: Indigenous People.

Performance Standard 8: Cultural Heritage.

 The purposes of each performance standard

Performance Standard 1: Assess and manage environmental and social risks and impacts

• Identify and assess the environmental and social risks and impacts of the project .
• Adherence to the risk mitigation hierarchy to be able to anticipate, avoid, or mitigate risks .
• Promote improved environmental and social performance of clients through effective use of management systems .
• Ensure that complaints from affected communities are handled and managed appropriately .
• Promote and provide appropriate means of engagement of affected communities throughout the project cycle, with disclosure and dissemination of relevant environmental and social information .

Performance Standard 2: Employment and Working Conditions

•  Promoting fair treatment, non-discrimination, and equal opportunities for workers .
• Establish and maintain the foundations of labor management relations and develop them .
• Promote compliance with local labor laws and employment laws .
• Protecting workers, including vulnerable groups of workers such as children, migrants, and workers engaged in work by others .
• Promote safe and healthy working conditions, while preserving the health of workers .
• Avoid the use of forced labor .

Performance Standard 3: Resource Efficiency and Pollution Prevention

• Reducing pollution resulting from project activities and negative impacts on human health and the environment .
• Promote more sustainable use of resources, including energy and water .
• Reducing project-related greenhouse gas emissions .

Performance Standard 4: Community Health, Safety and Security

• Avoiding negative impacts on the health and safety of the affected community during the project period .
• Ensure the protection of staff and property in accordance with human rights principles and reduce risks to affected communities .

Performance Standard 5: Land Acquisition and Involuntary Resettlement

• Reducing displacement by exploring alternative project designs .
• Avoid forced eviction .
• Reducing the negative social and economic impacts arising from land ownership by :

1. Insurance to compensate for the loss of assets at their replacement price .
2. Ensure that resettlement activities are implemented with appropriate disclosure of information .

• Re-securing the livelihoods and standards of displaced persons .
• Improving the living conditions of displaced persons by providing adequate housing and securing secure tenure in resettlement sites .

Performance Standard 6: Conservation of biodiversity and sustainable management of natural life resources

• Protect and preserve biodiversity .
• Maintaining benefits from ecosystem services .
• Promoting sustainable management of natural resources by adopting practices that combine environmental conservation requirements with development priorities .

Performance Standard 7: Indigenous People

• Ensure that the development process takes into account the human rights, dignity, aspirations, culture and natural resource-dependent livelihoods of indigenous peoples .
• Avoiding negative impacts of projects on indigenous communities .
• Promote the benefits and opportunities for sustainable development for indigenous peoples in a culturally appropriate manner .
• Maintaining consultative and participatory relationships with indigenous people affected by any project throughout the life of the project .
• Respect and preserve the culture and practices of indigenous peoples .

Performance Standard 8: Cultural Heritage

• Protecting cultural heritage from negative impacts arising from project activities and supporting its preservation .
• Promoting equal participation in the benefits of the use of cultural heritage .