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

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

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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 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.
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 Commercial Bank of Ethiopia

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

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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.
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

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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 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

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

6. Monitoring and Evaluation

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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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