ITAÚ UNIBANCO S.A.

Adoption Date: 12 August 2004
Country of Headquarters: Brazil
Region of Headquarters: Latin America
Institutional Reporting Hyperlink: https://www.itau.com.br/_arquivosestaticos/RI/pdf/
en/Itau_RAC_2015_ing.pdf
Current EPFI Reporting Year/Period: 2015
EPFI Reporting in Compliance: Yes

 

Please read the important notes and disclaimer for further information on 'EPFI Reporting', compliance and publication on the Equator Principles Association website.


Further information on this EPFI may be obtained through the Institutional Reporting Hyperlink above.


PROJECT FINANCE ADVISORY SERVICES


Total number mandated in the reporting period: 19

Sector
Total
Mining 1
Infrastructure 4
Oil & Gas 1
Power 13
Others
Sub Total
19

 

Region
Total
Americas 19
Europe, Middle East & Africa
Asia Pacific
Sub Total
19

 

PROJECT FINANCE TRANSACTIONS


Total number that reached financial close in the reporting period: 3

Totals
0
3
0
Sector
Category A
Category B
Category C
Mining


Infrastructure
1
Oil & Gas


Power
2
Others


Region
Category A
Category B
Category C
Americas
3
Europe, Middle East & Africa


Asia Pacific


Country Designation
Category A
Category B
Category C
Designated1
1
Non-Designated
2
Independent Review
Category A
Category B
Category C
Yes
2
No
1
Totals
0
3
0

1Designated Countries are those countries deemed to have robust environmental and social governance, legislation systems and institutional capacity designed to protect their people and the natural environment. For the list of Designated Countries, go to: http://www.equator-principles.com/index.php/ep3/designated-countries


PROJECT NAME REPORTING FOR PROJECT FINANCE TRANSACTIONS

3 projects were not disclosed as per the disclosure conditions specified in Annex B of the Equator Principles.


PROJECT-RELATED CORPORATE LOANS


Total number that reached financial close in the reporting period: 1

Totals
0
1
0
Sector
Category A
Category B
Category C
Mining


Infrastructure


Oil & Gas


Power


Others
1
Region
Category A
Category B
Category C
Americas
1
Europe, Middle East & Africa


Asia Pacific


Country Designation
Category A
Category B
Category C
Designated1


Non-Designated
1
Independent Review
Category A
Category B
Category C
Yes
1
No


Totals
0
1
0

1Designated Countries are those countries deemed to have robust environmental and social governance, legislation systems and institutional capacity designed to protect their people and the natural environment. For the list of Designated Countries, go to: http://www.equator-principles.com/index.php/ep3/designated-countries


IMPLEMENTATION OF THE EQUATOR PRINCIPLES

Since 2004, Itaú has been a member of the Equator Principles, a risk management framework adopted by more than 80 financial institutions around the world. The Equator Principles is a benchmark for determining, assessing and managing E&S risk in Project Finance deals that reach at least US$10 million in total investment. The Equator Principles is also triggered in Corporate Related Project Loans when the following criteria are reached simultaneously: (1) the investment is primarily for a single project over which the client has operational control; (2) total debt reaches at least US$100 million; (3) individual lender commitment is at least US$50 million; and (4) the length of the deal is more than 2 years. When acting in project financial advisory service or when providing bridge loans that will be refinanced by Project Finance or Corporate Related Project Loans that reach the above criteria, we also apply the guidelines established by the Equator Principles.

Projects submitted to the application of the Equator Principles may require the hiring of an independent consultancy to execute the environmental evaluation for the signing, disbursement and monitoring phases. An external (independent) evaluation is mandatory for all high risk projects and for some medium risk projects, if the Itaú Unibanco environmental team considers it necessary. In projects with medium or low risk, the analysis could be executed by our Equator Principles Reviewers (EP Reviewers) which is comprised by social and environmental technical professionals.

The analysis according to the criteria of the Equator Principles occurs throughout the tenure of the financing. A detailed due diligence is undertaken before financial close and conditions precedents are established to every single disbursement. Further, EP Reviewers, supported by external consultants when applicable, develops an Action Plan and the client must agree to make the project reach these standards. The monitoring phase of both Category A and B projects is always supported by an Action Plan. Some Category C do also count on an Action Plan to address eventual gaps identified during the initial due diligence. Everything is formalized under the loan agreement. The Action Plan can be amended from time to time in order to fully reflect the current status of the project. Such revision occurs under the monitoring phase which happens at least annually until the tenure of the deal. The extent of Itaú Unibanco social and environmental diligence applied for both contracting and monitoring phases was disclosed in 2015, when we published the article “The Equator Principles and the IFC Performance Standards – Itaú Case Study in energy project financing”. Using the energy sector as a background, we presented not only some challenges faced by our team, but also lessons learned over the past 10 years in applying the Equator Principles.

1. IMPLEMENTATION

1.1. Roles & Responsibilities

Under Itau business model, a team – so-called “Project Finance” – is exclusively dedicated to financial transactions in which EP is applied. Its professionals are specialized and organized by sectors, and lead the management of a variety of risks inherent in complex banking products, such as those associated with macroeconomic and regulatory aspects. Specifically to manage social and environmental risks, the Project Finance team counts on the support of EP Reviewers. Highly trained, the Project Finance team informs EP Reviewers whenever they identify a transaction under the EP scope. Then, EP Reviewers proceeds with the EP assessment.

The E&S Risk team is divided into two different groups. The first is dedicated to a broad social and environmental corporate analysis of the Client. The second is dedicated to Structured Finance deals, which is group where EP Reviewers are allocated. The Structured Finance group is composed by ten social and environmental specialists –engineers, lawyer, geographer, economist, biologist and a physicist. The members of this group are specialized in industry, infrastructure and energy sectors and assess all the transactions under EP scope, regardless of their E&S categorization (level of E&S risk, Categories A, B or C), type of E&S impacts involved and geographical location. Further, all transactions under EP scope originated in our international branches are subject to assessment by headquarters E&S Risk team, without regard to the appointed Category.

Further, EP reviewers are part of the risk department, which clearly guarantee independence from the business team and reflects the approach adopted by Itau to fully incorporate this commitment in our risk management strategies, also integrating E&S assessment in the high level bank decision making process. As a result, bank decisions take into account the level of exposure associated not only to traditional financial aspects, but also to E&S aspects. Accordingly, Itau senior management is directly involved in decisions related to EP assessment process.

1.2. Policies & Procedures

Since the adoption of EP, Itau´s commitment to implement its criteria in our internal policies and procedures has been enhanced in order to guarantee notable technical expertise, unquestionable independence of EP Reviewers and higher effectiveness in risk manangement. Itau E&S Risk Policy for Credit formalizes E&S risk assessment process and guidelines in the loan grating decision process. Please, refer to www.itau.com.br/_arquivosestaticos/RI/pdf/en/POLICY_FOR_SUSTAINABILITY_RI_2015__ING_.pdf in which we reinforce our commitment with the EP and establish other E&S guidelines.

After screening the project to submit it to Credit Committee decision – which includes categorizing its E&S risk – the EP Reviewers proceed with a complete and deep E&S assessment for the closing of the transaction, when an E&S action plan is established to mitigate risks and impacts identified. Then, the fulfillment of these conditions is monitored throughout the agreement´s term through a joint work between the EP Reviewers and a team dedicated to register, control and contact the client in time to require the presentation of evidence of the fulfillment of agreed E&S covenants. For projects categorized as high risk, and sometimes for projects categorized as medium risk, an independent consultant is hired to proceed with EP assessment, which includes desk review, site visit, monitoring report and amendments to the Action Plan, that are, then, fully reviewed by Itau EP Reviewers.

Such guidelines and procedures are applied to all Itau transactions under the scope of the EP including the ones originated in our international branches.

1.3. Training

In 2015, our EP Reviewers attended over 340 hours of training sessions. This training, with national and international scale, includes courses, lectures, forums and workshops, as well as symposiums and discussion groups on E&S issues involved in development projects, with an emphasis on the Infrastructure sector.

Furthermore, the team was also involved with the training of the bank’s own employees and professionals from other institutions. We developed an Environmental Risk e-learning course, which was taken by more than 75% of professionals in the Credit, Commercial and Products areas.

 

Further information can be found at:

https://www.itau.com.br/_arquivosestaticos/RI/pdf/en/Itau_RAC_2015_ing.pdf