Reporting – Banco Mercantil del Norte S.A. (2018)

Adoption Date:12 March 2012
Country of Headquarters:Mexico
Region of Headquarters:North America
Institutional Reporting Hyperlink:EP Annual Report 2018
Current EPFI Reporting Year/Period:2018
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: 0

PROJECT FINANCE TRANSACTIONS

Total number that reached financial close in the reporting period: 5

Totals113
Totals113
SectorCategory ACategory BCategory C
Mining
Infrastructure
Oil & Gas11
Power
Others12
RegionCategory ACategory BCategory C
Americas113
Europe, Middle East & Africa
Asia Pacific
Country DesignationCategory ACategory BCategory C
Designated1
Non-Designated113
Independent ReviewCategory ACategory BCategory C
Yes113
No

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: https://www.equator-principles.com/index.php/ep3/designated-countries

PROJECT NAME REPORTING FOR PROJECT FINANCE TRANSACTIONS

5 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: 2

Totals020
SectorCategory ACategory BCategory C
Mining
Infrastructure
Oil & Gas
Power
Others2
RegionCategory ACategory BCategory C
Americas2
Europe, Middle East & Africa
Asia Pacific
Country DesignationCategory ACategory BCategory C
Designated1
Non-Designated2
Independent ReviewCategory ACategory BCategory C
Yes2
No
Totals020

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: https://www.equator-principles.com/index.php/ep3/designated-countries

IMPLEMENTATION OF THE EQUATOR PRINCIPLES

Social and Environmental Risk Management System (SEMS)

The SEMS is the analyzing tool for the social and environmental risks and impacts generated by the activities we finance. It is based on the Equator Principles and the IFC Performance Standards, its objective is to promote that our clients develop socially and environmentally responsible projects, in compliance with the law and applying best practices.

The analysis process was integrated into Banorte’s regulations in 2015, operating as part of the credit process of Corporate and Commercial Banking.

Organizational Structure

The SEMS is in charge of the Social and Environmental Risk Department (Área de Riesgo Socio-Ambiental, ARSA), a team which is part of the Direction of Sustainability and Responsible Investment, integrated by specialists in environmental and social matters, who are dedicated to the operation and continuous improvement of the process.

The ARSA is supported by the Champions of Sustainability, a group of Credit department partners who act as a link with the Business areas of the Bank to promote at national level, an adequate social and environmental risk management.

Social and Environmental Risk Analysis Process

The analysis follow a process of identification, categorization, evaluation and management of risk and impacts that is documented in a due diligence submitted to the Credit Committees, prior to the authorization of the credits. The process is detailed below:

Identification

The ARSA identifies the potential environmental and social risks and impacts of the credits and verifies that none of the activities to be financed are on the exclusion list (Annex 1), that is, they are not risky or prohibited activities.

Categorization

The ARSA assigns a level of socio-environmental risk 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 A category (high risk), B category (medium risk) and C category (low risk).

Evaluation

Once the financings are categorized, the ARSA selects 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 the ARSA asks customers for information related to permits, resolutives, licenses, plans, programs, specialized studies and good practices to elaborate the due diligence.

Management

Risk management refers to monitoring the socio-environmental performance of the credits evaluated, during the life cycle of the financing. Mainly considers the credits analyzed under the Equator Principles and includes annual reviews, continuous advice for clients and business executives, site visits and reputational risk monitoring of the projects.

Review of the implementation of the Equator Principles.

As a part of the SEMS continuous improvement process, the Direction of Sustainability and Responsible Investment together with the ARSA verify the operation of the System and the application of the Equator Principles through annual reviews. These consider the achievement of objectives, the identification of improvement opportunities and the feedback of areas like Credit, Risks, Regulations, HR-Training, Communication and Specialized Areas.

Training

The Credit and Business areas play a key role in environmental and social risk management, therefore, raising awareness and developing expertise in these issues is essential. Addressing this need, ARSA provides training for analysts, executives and directors in person mode, online and by telephone. In addition, it publishes biweekly informative pieces that address cases of high socio-environmental risk at the national and international level, success stories and relevant issues related to the SEMS operation.

During 2018, we reached to train 12, 095 employees in topics such as sustainability in the financial sector, social and environmental risk management, SEMS operation, sensitive sectors, reputational risk, sustainable and responsible customers. Of these, 485 are executives directly involved in the risk analysis and receive detailed training on the Equator Principles.

As mentioned above, ARSA is formed by a team with specialized education and experience in social and environmental matters, who in addition receive periodically training on specific topics for the adequate risk management, such as biodiversity, climate change, human rights, among others.

Further information can be found at: https://investors.banorte.com/~/media/Files/B/Banorte-IR/financial-information/annual-reports/en/2018/Equator%20Principles%20Annual%20Report%202018.pdf