DBJ and the Equator Principles

Background to DBJ's adoption of the Equator Principles

DBJ's corporate philosophy is to apply financial expertise to design the future: to gain the trust of our customers with creative financial solutions, and to work together for future prosperity. Based on this philosophy, we contribute to Japan's international competitiveness and regional development through the supply of high-quality risk money and proprietary knowledge.

Also in accordance with our corporate philosophy, we have established a Basic Sustainability Policy under which we work to solve the issues of our customers and the larger society as we move toward sustainable development for Japan and the world. Basing our activities on a unique business model featuring integrated investment and loans, we aim for a balance of economic and social value.

We believe that in evaluating credit for project finance and other instruments, we must follow our corporate philosophy and Basic Sustainability Policy, adhering to clear guidelines developed by identifying, evaluating, and managing each project's environmental and social risks. Our adoption of the Equator Principles in July of 2020 was in line with this reasoning.

The Equator Principles

The Equator Principles are a framework, designed to ensure that financial institutions take full account of potential impacts on the natural environment and local society when financing large-scale projects.

Based on the Equator Principles, DBJ identifies a project's environmental and social risks and assesses their impact. When these are deemed significant, the bank will ask the project operator to take mitigating steps.

Applicable projects

The Equator Principles are applied to the following financial instruments and processes.

Regions Worldwide
Industries All industries
Business types ① New projects
② Expansion of existing projects (when these have potential environmental and social impacts)
Financial instruments and services Project Finance with total project capital costs of USD 10 m or more
Project Finance Advisory Services (FA services) where total project capital costs are USD 10 m or more
Project-Related Corporate Loans where all of the following three criteria are met:
i. The majority of the loan is related to a Project over which the client has Effective Operational Control (either direct or indirect).
ii. The total aggregate loan amount and the Equator Principle Financial Institution's individual commitment (before syndication or sell down) are each at least USD 50 m.
iii. The loan tenor is at least two years.
Bridge Loans with a tenor of less than two years that are intended to be refinanced by Project Finance or a Project-Related Corporate Loan that is anticipated to meet the relevant criteria described above.
Project-Related Refinance and Project-Related Acquisition Finance, where all of the following three criteria are met:
i. The underlying Project was financed in accordance with the Equator Principles framework.
ii. There has been no material change in the scale or scope of the Project.
iii. Project Completion has not yet occurred at the time of the signing of the facility or loan agreement.

DBJ's management structure for the Equator Principles

Upon adopting the Equator Principles, we created the Environment & Social Assessment Office to evaluate environmental and social risks and confirm that they are taken into account.

In accordance with the bank's internal procedures for establishing a process for identifying environmental and social risks and evaluating their impact under the Equator Principles, we conduct a primary screening based on project information provided by the client to our business units. The Environmental & Social Assessment Office then identifies the project's environmental and social risks and conducts an impact assessment.

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Environmental and social risk assessment

Based on project information received from the client, the business units and Structured Finance Department (specifically, the Environment & Social Assessment Office) carry out an environmental and social risk assessment to determine whether the project operator's consideration of environmental and social factors meets the criteria established in the Equator Principles.

When evaluating environmental and social risk in line with the first of the Equator Principles, we assign projects to the following categories according to their potential environmental and social risks or impacts.

Category Description
A Projects with potential significant adverse environmental and social risks and/or impacts that are diverse, irreversible or unprecedented
B Projects with potential limited adverse environmental and social risks and/or impacts that are few in number, generally site-specific, largely reversible and readily addressed through mitigation measures
C Projects with minimal or no adverse environmental and social risks and/or impacts

Depending on the category assigned in accordance with Equator Principles 2 through 10, we include a pledge in the loan agreement that the client will give consideration to environmental and social factors as required by the Principles, and that DBJ will confirm the client's adherence to the pledge.

When a project has been assigned to Category A or B, the items required in Principles 2 through 10 are as follows.

Principle 2 Conduct of an environmental and social assessment
Principle 3 Compliance with applicable environmental and social standards
Principle 4 Develop or maintain an environmental and social management system
Prepare an environmental and social management plan and, where necessary, an Equator Principles action plan
Principle 5 Demonstrate effective stakeholders engagement
Principle 6 Establish a grievance mechanism
Principle 7 Carry out an independent review by an independent environmental and social consultant
Principle 8 Incorporation of covenants linked to compliance with the Equator Principles
Principle 9 Monitoring and reporting by an independent environmental and social consultant
Principle 10 Disclosure of information and ensuring of transparency

Internal training

To foster an understanding of the concepts behind the Equator Principles and DBJ's internal processes related to environmental and social impact assessment, we will make continuing efforts (e.g. multiple training sessions for all employees) to raise awareness, particularly within the business units, of the importance of environmental and social considerations.