1. TBC has established an Environmental and Social Management System (ESMS) to manage the environmental and social impacts and risks of its investment activities. It takes into account performance standards and requirements established by its shareholders IFC, EBRD as well as FMO and DEG. Consistent with international practice, the ESMS classifies investments by the severity of environmental and social risks into categories A, B, and C. TBC has appointed in its Credit Risk Department an Environmental and Social (ES) Coordinator responsible for overseeing the operation and maintenance of its ESMS, an ES Risk Manager responsible for the day to day management of the ESMS, and an ES Reporting Manager responsible for reporting to IFIs. TBC has conducted training of 40 loan officers in the categorization and monitoring of high and medium risk investments. The international standard exclusion list for financial institutions is the first filter after which projects are classified and any remedial actions identified by dealing officers before being reviewed and approved by TBC's risk department as a standard package for consideration by the credit committee. The ESMS foresees the use of specialists if any issues warrant categorization into project category B or A.
2. The loan to TBC Bank (TBC) is classified as category FI on environment, FI treated as C on involuntary resettlement, and FI treated as C on Indigenous Peoples. Subloans under environment category A, and involuntary resettlement (IR) and Indigenous Peoples (IP) categories A and B will not be financed under the Loan. The proceeds of the loan will be used to finance small working capital and investment loans to SMEs, microenterprises, individual entrepreneurs and farmers normally not exceeding GEL 10 million. While these transactions are expected to have adverse impacts, these impacts are low and could range from minimal to those that can be readily predicted, prevented and/or mitigated.
3. An assessment of TBC's existing ESMS, commitment and capacity was conducted, and modifications identified and agreed with TBC are outlined in the linked document describing the ESMS arrangements. In summary, the agreed modifications with TBC include (i) incorporating two ADB prohibited activities in TBC's IFI Exclusion List and minor revisions of certain items in the list to ensure that the combined list appropriately takes into account ADB's PIAL, (ii) inclusion of appropriate references to ADB's Safeguard Requirements, in identified sections of the ESMS, to among others, clarify that for environment category B and C and IR and IP category C transactions funded using the proceeds of ADB loan, ADB requires compliance of these transactions with the Prohibited Investment Activity List or TBC's IFI Exclusion List, and with the applicable national laws on environment, health and safety, (iii) strengthening of the Environmental and Social Risk Management Procedures including the due diligence procedures, and the need for the Environmental and Social Risk Manager to review the dealing officers' due diligence findings prior to submission of such findings to the credit committee. In addition to the substantial training undertaken so far, two of TBC's staff participated in ADB's training for financial intermediaries in Georgia on 15 October 2012.
4. The existing ESMS established by TBC and agreed modifications are adequate to comply with ADB's safeguards requirements. The Bank has committed to update and make its ESMS responsive to ADB's Safeguard Policy Statement (2009) and to have it in place prior to ADB's first disbursement for subproject financing.
B. Other Social Dimensions
5. The loan is categorized with no gender element. TBC services will be offered equally to men and women. As of September 2012, it is noted that 67% of TBC retail clients are women. The ratio of women availing of TBC retail products will be tracked during project implementation.
6. The loan promotes social inclusion by creating job opportunities through expansion of financial services to the SME's and individual businesses in the rural areas, including the farmers. As Georgia has ratified the core labor standards, supported under its national laws, TBC is expected to comply with the relevant national labor laws, take measures to comply with the internationally recognized core labor standards, and ADB's Social Protection Strategy (2001).