Deutsche Bank

Corporate Responsibility
Report 2015

Case study: smelter financing Asia

Background

When asked to provide financing for the expansion of an aluminum smelter in Asia, we applied our internal ES risk standards. We also conducted an independent review for compliance with International Finance Corporation (IFC) Performance Standards.

ES risk evaluation

Although aluminum smelting is considered sensitive within our ES Policy Framework, we do not apply specific sectoral guidelines. Instead, we refer to our general environmental and social provisions. In this instance, we also undertook further due diligence with the support of a third-party expert. This focused on:

  • benchmarking existing operations and those under construction against eight IFC Performance Standards and the IFC’s Environmental, Health, and Safety Guidance for Base Metal Smelting and Refining;
  • the smelter’s emission performance against IFC performance ranges and local emissions standards; and
  • recommendations for an Environmental and Social Action Plan (ESAP) as part of the deal.

The evaluation process involved multiple interactions with the client and a site visit by an external environmental and social consultant. The area surrounding the smelter was also reviewed in terms of land use, proximity of settlements, and density of surrounding industrial development.

Findings and actions

The national approvals for existing operations and planned expansion were granted based on the results of local Environmental Impact Assessments (EIA), which complied with local state and provincial laws by independent and locally licensed third-party advisors. These covered air, surface water, groundwater, ecosystem, and social impacts. They also identified environmental risks, proposed mitigation strategies, and provided an environmental management and monitoring plan framework, alongside an emergency response plan. Stakeholder engagement was also undertaken as part of the EIA process.

Decision and
follow-up

Based on the independent review, the aluminum smelter was found to be compliant with local laws and standards, and generally compliant with the IFC guidelines. In total, ten gaps were identified and recommendations made to rectify the gaps in line with IFC guidelines. Areas identified for additional actions included:

  • Storage of waste oil – improvements required
  • Greenhouse gas emissions – calculation required
  • Monitoring of emission parameters – expand to cover all parameters in accordance with the IFC guidelines
  • Occupational health and safety policies for subcontractors – amendment required

The financing was approved and the ESAP was included in the loan agreement, subject to regular monitoring throughout the life of the financing.