Banco Mercantil del Norte S.A. (2023)

Signing Date 12 Mar 2012
Region of Headquarters: North America
Current EPFI Reporting Year/Period: 2023
Institutional Reporting: Link to Report

 

Please read the important notes and disclaimer for further information on ‘EPFI Reporting’, compliance and publication on the EP website.

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

Project Finance Advisory Services

Total number mandated in the reporting period: 0

Project Finance Transactions

Total number that reached Financial Close in the reporting period: 20

Equator Principles Category A1 B2 C3
Sector
Mining
Infrastructure 3 4
Oil & Gas
Power
Others 5 8
Region
Americas 8 12
Europe, Middle East & Africa
Asia Pacific
Country Designation
Designated Country 4
Non Designated Country 8 12
Both
Independent Review
Yes 8 12
No
Totals 8 12
1

Category A – Projects with potential significant adverse environmental and social risks and/or impacts that are diverse, irreversible or unprecedented.

2

Category 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.

3

Category C – Projects with minimal or no adverse environmental and social risks and/or impacts.

4

Designated 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.

Project-related Refinance & Project-related Acquisition For Project Finance

This information is required under EP4. EP4 applies for those transactions mandated after 1 October 2020 and that have reached Financial Close by the end of the period being reported.

Project Name Reporting For Project Finance (And Project-related Refinance & Project-related Acquisition Finance For Project Finance)

Number of projects that were not disclosed as per the disclosure conditions specified in Annex B of the Principles: 20

Under EP4, project name reporting is required for Project Finance transactions that have reached Financial Close and encouraged for Project-Related Corporate Loans that have reached Financial Close.

Project-Related Corporate Loans

Total number that reached Financial Close in the reporting period: 1

Equator Principles Category A1 B2 C3
Sector
Mining
Infrastructure
Oil & Gas 1
Power
Others
Region
Americas 1
Europe, Middle East & Africa
Asia Pacific
Country Designation
Designated Country 4
Non Designated Country 1
Both
Independent Review
Yes 1
No
Totals 1
1

Category A – Projects with potential significant adverse environmental and social risks and/or impacts that are diverse, irreversible or unprecedented.

2

Category 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.

3

Category C – Projects with minimal or no adverse environmental and social risks and/or impacts.

4

Designated 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.

Project-related Refinance & Project-related Acquisition For Project-related Corporate Loans

This information is required under EP4. EP4 applies for those transactions mandated after 1 October 2020 and that have reached Financial Close by the end of the period being reported.

Project Name Reporting For Project-related Corporate Loans (And Project-related Refinance & Project-related Acquisition For Project-related Corporate Loans)

Number of projects that were not disclosed as per the disclosure conditions specified in Annex B of the Principles: 1

Under EP4, project name reporting is encouraged for Project-Related Corporate Loans that have reached Financial Close and required for Project Finance transactions that have reached Financial Close.

EP4 applies for those transactions mandated after 1 October 2020 and that have reached Financial Close by the end of the period being reported.

Implementation of the Equator Principles

IMPLEMENTATION OF THE EQUATOR PRINCIPLES IN BANORTE

Social and Environmental Risk Management System

The Social and Environmental Risk Management System (SEMS) was created to identify, categorize, evaluate, and monitor the social and environmental risks and impacts of the financing we provide in Corporate Banking, Commercial Banking, and Infrastructure. SEMS is an integral part of the bank’s credit process and is based on national legal frameworks, institutional regulations, and the Equator Principles, the highest standard for social and environmental risk management in the financial sector.

Organizational structure

The Socio-Environmental Risk Area (ARSA), made up of a team of experts in the field, belongs to the Sustainability Direction, which in turn reports to the Executive Direction of Sustainability and Investor Relations and is responsible for the operation and continuous improvement of the SEMS.

The SEMS is supported by the Sustainability Champions, a group of collaborators from the Credit area who serve as a link between ARSA and the bank’s territories, to permeate the adequate management of socio-environmental risks at the national level.

Social and Environmental Risk Analysis Process

The Due Diligence process consists of the identification, categorization, evaluation, and management of social and environmental risks and impacts that include potential impacts on human rights, which are communicated to the Credit Committees, prior to the authorization of financing.

Identification

We identify the potential social and environmental risks and impacts of the loans and verifies that none of the activities to be financed are on the exclusion list (Annex 1), that is, they are not risky or forbidden activities.

Categorization

We assign a socio-environmental risk level to the credits depending on the magnitude of their impacts and the possibility of mitigating them. The risk is classified according to the Equator Principles in category A (high risk), category B (medium risk) and category C (low risk).

Evaluation

Once the financings are categorized, we select those that must be evaluated through a due diligence, depending on the amount of credit, the financial product, and its destination. All sectors will be subject to evaluation, especially sensitive sectors.

The evaluation consists in verifying the compliance of the projects to be financed with the national legal framework and the guidelines of the Equator Principles, the IFC Performance Standards and the SEMS Evaluation, so we ask customers for information related to permits, resoluteness, licenses, plans, programs, specialized studies, and good practices to elaborate the due diligence.

Management

We monitor the socio-environmental performance of the loans evaluated during the life cycle of the financing. We consider the financings analyzed under the Equator Principles and include annual reviews, continuous advice for clients and Credit and Business executives, site visits, as well as a monitoring of the reputational risk of the projects.

Climate Change

GFNorte acknowledges its essential role in combating climate change by acting as a financial intermediary between various economic agents and climate mitigation and adaptation efforts. We understand the significant importance of incorporating physical and transition risks into decision-making. Currently, GFNorte evaluates the physical and transition risks of its credit portfolio, the details of which can be found in the Report on Climate Risk and Opportunities – TCFD 2023.

Nature

Banorte believes in the value of Nature as an essential asset that enables life and provides the goods and services necessary for societies to thrive and economies to grow. Additionally, it understands that responsible management of natural resources, as well as the conservation of ecosystems and biodiversity, are crucial for the profitability and resilience of businesses.

In 2019, we incorporated a dependency and impact approach into our Natural Capital Policy.

Furthermore, with the aim of preventing resource depletion and biodiversity loss, the SEMS identifies projects located within 5 Km of Protected Natural Areas (ANP), biological corridors, mangroves, reefs, among others, using a georeferencing tool that utilizes information from the National Commission of Natural Protected Areas (CONANP), the National Commission for the Knowledge and Use of Biodiversity (CONABIO), and the National Water Commission (CONAGUA), which are governmental entities in Mexico. The SEMS validates the correct application and compliance with applicable environmental impact regulations through an evaluation that integrates the following aspect:

Environmental Impact Assessment.

In the case of projects that meet the eligibility criteria, an Environmental Impact Assessment (EIA) is requested, aiming to prevent, mitigate, and restore environmental damage.

Clients are requested to share the following documents as appropriate:

  • Environmental Impact Statements (EIS) with programs for the prevention, minimization, mitigation, restoration, and compensation of environmental and social impacts and risks included.
  • Resolution of the Environmental Impact Statement by the Ministry of Environment and Natural Resources (SEMARNAT).
  • Preventive Report (IP).
  • Resolution of the Preventive Report by the Ministry of Environment and Natural Resources (SEMARNAT).

Human rights

Banorte recognizes the value and importance of Human Rights, through the General Direction and the Specialist Direction of Sustainability and Responsible Investment, promotes policies and procedures aimed at the respect and protection of these for its collaborators, suppliers, clients, and groups of interest in general.

There is a Human Rights Policy, which is based on national and international agreements and initiatives on Human Rights of which Mexico and Banorte are part. Currently, work is being done to review the policy to update Banorte’s commitments, reference framework and guidelines on Human Rights; This update can be consulted in the 2024 Integrated Annual Report.

Additionally, with the objective of guaranteeing that these rights are considered and that communities are an active in the planning and execution processes of the projects, the SEMS, offers continuous advice to promote, the correct application and compliance with applicable regulations, as well as the establishment of best practices throughout the financing period, through an evaluation that integrates the following aspects:

 

Reputational risk monitoring.

The Socio-Environmental Risk Area (ARSA) analyzes the reputational risk of clients and projects that have been evaluated under the Equator Principles with a monthly monitoring of controversial issues in social and environmental matters with the use of artificial intelligence tools. If there are relevant findings, the area establishes contact with the stakeholders to clarify or, where appropriate, establish the necessary conditions to mitigate the risks and impacts.

 

Hiring policies and terms of employment.

Clients are requested to promote a culture of employment equality and non-discrimination in the workplace through the implementation of hiring policies and terms of employment so that equal opportunities are granted to collaborators, regardless of: race, color, religion, gender, sexual orientation, marital or marital status, national origin, disability, or any other status protected by federal, state or local laws, ensuring that the workplace is free of discrimination and other forms of intolerance and violence.

 

Social Impact Assessment.

For those projects that belong to the energy sector, the application of a social impact evaluation is requested, and its objective is to implement necessary actions to guarantee the sustainability of the project and respect for human rights during its useful life.

Local populations have legitimate rights to a healthy environment, to participate in the decision-making process that affects them and to be consulted in an informed and culturally appropriate manner in advance about the projects that will be developed in their territories. This contains the identification of the communities and towns located in the Area of Influence, as well as the identification, characterization, and measurement of the consequences to the population that could arise from it and the mitigation measures and social management plans. Periodic evidence of its correct application is requested.

 

Land acquisition and involuntary resettlement.

Projects that have generated some physical or economic displacement of populations are identified and, if so, it is verified if the client considered any alternative with the purpose of minimizing the displacement or if any compensation was offered to the affected groups.

 

Grievance mechanism.

In cases where there is a presence of affected communities due to their location, the client is encouraged to establish a Grievance Mechanism to receive concerns and complaints from the communities about the projects or the client and facilitate their resolution. This must be adapted to the risks and adverse impacts of the project. Efforts should be made to resolve concerns promptly through an understandable and transparent consultation process that is culturally appropriate and easily accessible, and without cost or retaliation to those who raise the issue or concern. Additionally, the client is requested to inform the affected communities about the mechanism and evidence of its correct application is periodically requested.

 

Public consultation.

The application of a public consultation is requested with the objective of guaranteeing a transparent process to inform the communities involved so they can express their comments, doubts and concerns and these do not represent a risk in more advanced stages of the process.

 

Free prior and informed consent.

Based on the International Finance Corporation’s Performance Standard 7, indigenous peoples are particularly vulnerable if their lands and resources are significantly modified, occupied, or deteriorated and their languages, cultures, religions, spiritual beliefs and institutions may be threatened and could be more vulnerable to adverse impacts associated with project implementation.

When it is proposed to locate a project or commercialize natural resources on lands traditionally owned or under customary use by indigenous peoples, adverse impacts or possible resettlement could arise, ARSA requests the client to obtain free, prior and informed consent. (FPIC) to ensure that the rights of indigenous peoples are guaranteed in any decision that may impact their lands, territories, or livelihoods. It guarantees the right of these peoples to give or deny their consent to these activities, without fear of reprisals or coercion, within a period of time and with adequate resources.

 

Review of the Equator Principles implementation

The Sustainability Direction, together with the Socio-Environmental Risk Area, annually review the application of the Equator Principles and the optimal operation of the System, as part of the continuous improvement process of the SEMS. The review considers the achievement of objectives, the identification of areas of opportunity and feedback from areas such as Credit, Risks, Regulations, HR-Training, Communication and Specialized Areas.

 

Training

Continuous training of the Credit, Business and Risk areas is a priority objective to consolidate the culture of social, environmental and climate risk management at Banorte. We are sure that awareness and the development of skills are aspects that contribute to adequately managing the related risks and impacts. For this reason, in 2023 we trained 1,710 employees in the previously mentioned areas.

Similarly, with the aim of ensuring capacity improvement and the functioning of the system, in 2023, the ARSA was trained in sustainable accompaniment, application of environmental legislation, management of social and environmental risks in financial institutions, legislation and legal protection of cultural and natural heritage, as well as climate change and nature employing the frameworks of the Taskforce on Climate-related Financial Disclosures (TCFD) and the Taskforce on Nature-related Financial Disclosures (TNFD).