Commercial Bank of Ethiopia

Environmental and Social Policy

ADDIS ABABA

2/24/2020
 Commercial Bank of Ethiopia

Table of Content
1. Introduction................................................................................................................................................................. 3

2. Scope of the Policy..................................................................................................................................................... 3

3. Vision and objectives of the policy ............................................................................................................................. 4

3.1 Vision ................................................................................................................................................................. 4

3.2 Mission .............................................................................................................................................................. 4

3.3 Objectives .......................................................................................................................................................... 5

4. Policy Statement ........................................................................................................................................................ 5

4.1 Management of Environmental and Social Policies: from CBE’s Operation ...................................................... 5

4.2 Environmental and Social Risks and its Associated Management .................................................................... 6

5. Implementation Strategies .......................................................................................................................................... 7

6. Monitoring and Evaluation .......................................................................................................................................... 8

7. Transparency Act ....................................................................................................................................................... 8

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 Commercial Bank of Ethiopia

1. Introduction
Commercial Bank of Ethiopia (CBE) is one of the oldest public banks established in 1942 as a State Bank. Since then,
CBE has gone through different reforms and mergers coming out as one of the most reputable and biggest commercial
banks in the country. It has more than 22 million account holders in its 1500 plus branches stretching throughout the
country. Its outreach to individual depositors, small and medium scale businesses and private and public mega investment
projects has made it the largest single bank in the country to have a significant impact on the economy of the country.
CBE played a significant role as both the engine of the country’s economic growth and mobilizing savings for further
investment. In its effort in being part of the solution for the environmental degradation and its subsequent impact on
individual citizens and businesses, CBE has the capacity to reach out to millions in both increasing awareness and building
adaptive capacity through providing environmentally friendly credit lines. Furthermore, as a responsible corporate institute,
CBE has the mandate to formulate Environmental and Social internal policies that reflect the current local and global
climate change realities and its subsequent impacts particularly on its business customers and partners throughout the
country.

CBE strongly believes and understands that there is an impact on communities and the environment due its business
activities which in turn will have a significant risk on its credit lines and the overall economic growth of the country. There
need to be a comprehensive policy and guidelines that incorporates the bank’s direct and indirect activities which creates
impact on economies, communities and the environment in which it operates. There is also a common consensus among
the executive management, if these impacts are not timely addressed in a systematic and comprehensive way, there could
be a significant question on the sustainability of the bank’s finance and reputation not to mention its contribution to the
economic growth of the country.

Therefore, this Environmental and Social Policy is stipulated in anticipation of the current Environmental and Social risks
while contributing its fair share towards the national agenda of building the resilient capacity of the climate change victim
communities, businesses and projects. Furthermore, CBE as a giant commercial bank in the country would like to be a
pioneer and role model for other public and private institutions in creating awareness of its internal activities and reducing
its environmental carbon footprints.

The stipulated Environmental and Social Policy will be fundamental component of CBE’s Environmental and Social
Management System (ESMS), which will be led by pool of experts after it gets approval by the board of the bank. The
framework of ESMS will incorporate the specific Environmental and Social policy and it’ll also sets the pace for suitable
procedures and work.

2. Scope of the Policy

The scope of Environmental and Social Policy of CBE is outlined on the basis of the bank’s Environmental and Social
issues. These activities could be seen from two angles, where CBE itself has a direct impact on the environment it operates

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 Commercial Bank of Ethiopia

in the usage of resources such as electricity, oil, lighting, paper, toners, logistics, own waste treatment and others. The
other angle can be considered as indirect impacts related to all kinds of activities through which CBE can secondarily have
influence on the society and environment through its business interactions.

Environmental and Social Policy of CBE also implies the incorporation of Environmental and Social indicators in the risk
assessment and control process of its credit lines. Incorporated within this policy, requires the creation of an appropriate
environmental risk management procedures, where the following important guidelines will be defined:

➢ Environmental and Social risk assessment procedures and strategies;

➢ Importance of Environmental and Social risk assessment outcome for the loan approval;
➢ Environmental and Social risk follow-up upon loan disbursement;
➢ Measures that are going to be taken by the bank in case the client proves to fall out of compliance with the
Environmental and Social requirements of the bank related to the risk performance;
➢ Roles and responsibilities related to Environmental and Social risk management in the bank; and
➢ Reporting to the top management on the exposure of the loan portfolio has to this risk and etc.

By the implementation of such a procedure, CBE, even if it does not support a full line of green services and products,
actually act as a green bank, because it places specific requirement on its client to abide by certain Environmental and
Social criteria. In such a way, depending on the strictness of these criteria, CBE has the power to restrict access to finance
to polluting industries and to give preferential terms to businesses that are socially just and environmentally-friendly.

Therefore, CBE’s Environmental and Social Management Systems (ESMS) has two major components, which are “Internal
Environmental and Social Management system” and “Environmental and Social Risk Management in Lending”; which
ascertains that CBE will be pushing towards more sustainable changes in its daily business activities and operations
gradually offsetting its Environmental and Social footprints; and CBE’s credit lines and lending will be more towards
projects or business initiatives that are commercially viable, socially acceptable and environmentally friendly providing a
fertile ground for a sustainable development of the country.

3. Vision and objectives of the policy

3.1 Vision
To become world class commercial bank with reduced environmental footprint, leading by example in 2025

3.2 Mission
We are committed to best realize stakeholders’ needs without compromising the well being of our environment and society
through Enhanced financial intermediation globally, supporting national development priorities, deploying highly motivated,
skilled and disciplined employees as well as state-of-the-art technology. We strongly believe that winning the public
confidence and developing sustainable business model are the basis of our success.
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3.3 Objectives
The main objectives of Environmental and Social Policy of Commercial Bank of Ethiopia are the followings:

(i) Be the avant-garde of Environmental and Social issues among financial institutions in East African
region implementing environmental treaties and conventions and leading by example;
(ii) Understand its entire carbon footprint and create an internal mechanism and external auditing
system to significantly reduce it;
(iii) Create an environmental department that looks after the bank’s direct and indirect Environmental
and Social management systems;
(iv) Evaluate businesses and projects for their Environmental and Social compliance with its own internal
experts and give equal weight for financial, Environmental and Social sustainability;
(v) Enhance the Environmental and Social awareness and understanding of its employees to help them
make an informed decision in relation to internal environmental footprints and external customer
dealings;
(vi) Ensure the different levels of CBE’s management and staffs are taking appropriate responsibility
for the implementation of the policy through making an informed decision.

4. Policy Statement
Ethiopia is signatory to many different global environmental treating and protocols, from Rio 1992 Earth Summit to COP
15 Paris climate change agreement. CBE will be using these international treaties and conventions as a bench mark to
endorse and implement its Environmental and Social policies. Furthermore, CBE will critically consider national legislatives
in connection with environmental and social agendas. It’ll also work with other stakeholders particularly the financial sectors
closely to implement the sustainable development agenda and Climate Resilience Green Economy (CRGE) strategy of
the country. Sustainable financing will be its core working modality in line with the national bank policy of the country and
the following underline points also has been taken in to consideration;

4.1 Management of Environmental and Social Policies: from CBE’s Operation

There will be a strong and coherent operation within CBE’s management system that can smoothly manage
Environmental and Social policies that has a very good track record in conventional banking. In the CBE operation system,
this new business model will also ensure that the bank is making profit by encouraging socially and environmentally
responsible behavior in close cooperation with Depositors, Businesses and Individual Clients

CBE’s effort is not only limited in mitigating or abating its Environmental and Social footprints but also in spreading the
model to its clients and businesses to have the same policy in their operations. In addition to this, CBE in an effort to create
an inclusive business environment would avail its services and products even to companies with medium and high

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environmental risks in case they wish to finance with these credit products improvement in their operations which will lead
to reducing the harmful impact of their activities have on the environment.

4.2 Environmental and Social Risks and its Associated Management

As mentioned earlier, Ethiopia as a signatory to international conventions and treaties pertaining to environment and
climate change, it’s also the first country in Africa in having its own strategic plan that stipulates clear strategy that
incorporates climate resilience, sustainable development and zero net emission by the year 2025. This goes in line with
CBE 2025 vision of becoming a world class bank by 2025. In this age of tough competition from internal and external
financial institutions, it’s impossible to excel regionally and/or globally without having clear Environmental and Social
policies with a strong institutional capacity to implement it. Further CBE critically believes the reputation risk that will come
across in being reluctant for the environmental and social agendas will be beyond measure. Thus, CBE will manage the
risk associated with Environmental and Social issues in the following manner;

(i) Pertinent to the international treaties and conventions on environment and the subsequent ratification
of Ethiopia to these treaties, CBE would confirm its full acceptance of these conventions. The
Environmental and Social policies and its related management including risk management will be treated
within reference to these conventions;
(ii) Cognizant of international treaties and conventions and their local ratifications, CBE will not provide any
of its services or products that are not in line with the globally agreed and locally ratified conventions
and treaties on the basis of clear knowledge and understanding;
(iii) CBE understands the relevance of global and local Environmental and Social policies and it also
understands the ramification of going outside these policies on its projects. Therefore, CBE confirms its
compliance to these policies while financing different levels of projects within the dominion of the territory
of the country. CBE will assign a dedicated organ that thoroughly looks at the Environmental and Social
impacts of the project design and provide recommendation if it’s outside the set guidelines and
standards. If it happens to deviate from the set standard CBE recommends for the redesign of the project
to meet the requirement before proceeding to the financial aspects of the project;
(iv) CBE has working relationships with a number of international financial institutions having different
standards and guidelines. CBE will make sure that these external guidelines are sufficiently incorporated
within its Environmental and Social Policies and any necessary amendments will also be done
depending on the engagement of the bank with these financial institutions;
(v) With its ambitious plan of excelling in the region, CBE would apply its Environmental and Social policies
for lending to businesses and projects outside Ethiopia. Regardless, CBE will be abided by the
guidelines and regulations of the host country;

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(vi) CBE will have a strong Environmental and Social impact assessment team led by an expert in the area
that will recommend the clear impact of the project to be financed. Without the full recommendation of
the team of experts, CBE will not commit itself to any project that is doomed to have negative
Environmental and Social impacts or will cause any long term impact that will harm the natural habitat
or social and cultural values;
(vii) CBE always strives to lead by example; it’ll exhaustively study its Environmental and Social carbon
footprints and implement efficient strategies that will minimize its environmental carbon footprint and
gradually its expenditure. CBE will also create an environmental procedure and brand to provide
services and products to its customers in a such a way that its customers’ are also in line with its
environmental ambitions;
(viii) There is a clear understanding and recognition of the danger caused by climate change which requires
developing adaptation and mitigation mechanisms to form a resilient community. For this, CBE is able
and willing to provide financial incentives for projects with clear adaptation and mitigation potentials both
as corporate social responsibility and to grow as a “Green” bank.

5. Implementation Strategies
CBE strongly believes there has to be proper institutional arrangement, capacity, and resource in an adequate
and coherent manner for the smooth implementation of the policy. In light of this, the following activities are identified as
primary tasks to be given priority:

(i) Provide continuous awareness on social, environmental and climate change issues for the top
management of the bank for a clearer understanding of Environmental and Social Management System
and Risk Management procedures ;
(ii) For proper and smooth implementation of the Environmental and Social Risk Assessment, CBE will
establish a set of guidelines, tools and procedures;
(iii) Revise and strengthen the existing training centers of CBE to incorporate the Environmental and Social
agendas;
(iv) Develop an online dynamic digital system such as websites and create a hotline to help and receive
comments and complaints from its customers;
(v) Provide extensive training and capacity building to its staffs mainly credit performers, branch
managers, marketing and public relations officers throughout its branches;
(vi) Strengthen working relationships with local and international financial institutions working in a similar
area to share experiences and knowledge and gradually create a network of green banks for a wider
Environmental and Social impacts; and

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(vii) Ensure the existence of the right collaboration, coordination and synergies between and among
different stakeholders in the sector.

6. Monitoring and Evaluation

CBE will pay attention to the monitoring and evaluation of the Environmental and Social Policy through allocating proper
internal human resources and external independent auditors for annual auditing purposes. There will be regular data
collection regarding the policy that include administrative data, qualitative and quantitative information that will provide
feedback on the effectiveness and efficiency of the policy information. Monitoring and evaluation will be a continuous
performance against the set objectives and goals of the policy ensuring that financed projects are in compliance with the
local governing requirements, global standard and any external appropriate principles in a continuous way.

As part of the monitoring and evaluation, the Environmental and Social Policy shall be reviewed annually in accordance
with already established practice of CBE’s annual review meetings. And this responsibility also, including the responsibility
of formulating, incorporating and introducing new policies will be given to the board of directors of the bank.

7. Transparency Act
CBE’s environmental and social policy performance and the transparency of and the measurement of social and
environmental risk of the Bank’s lending activities will be reflected through the annual reports. Further, this document itself
will be on CBE’s official website so that all the relevant stakeholders will be communicated in such a manner.

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