An increasing need to manage E&S risks
As we celebrate the Global Climate Partnership Fund’s 10th anniversary, we are featuring personalities who brought this Fund into being and have shaped it over the past decade. Here is Clive Mason, long-time consultant for GCPF, on the Fund’s approach to managing E&S risks.
Clive Mason, adviser on E&S risk management to GCPF’s investment manager responsAbility Investments AG, World Bank, ADB and several private equity funds, has over 40 years international experience in more than 90 countries. He has headed various environmental agencies and co-authored a number of publications on environmental management, sustainability and risk. Since 2002, he has worked exclusively with the financial sector on E&S risk management and was responsible for the development and management of E&S sustainability initiatives, capacity building and support tools for IFC’s financial sector clients.
How has the approach to E&S risk evolved over the last 10 years and how does this impact GCPF?
Over the past few years banks and funds have become much more familiar with the commercial, economic and technological risk issues of renewable energy projects. Credit committees are now considering the E&S risks of a transaction at an equal level to financial and credit risks. GCPF is working very closely with partner banks and providing technical support wherever needed. This includes reviewing project documentation and helping to ensure that projects meet the required standards. There are now numerous support tools out on the market to help banks, but much of this will still come down to professional judgement and the need for carefully balancing the E&S risks of a project with the commercial benefits. Communities are increasingly involved, vocalizing their concerns and this has led to much more effective community consultation during E&S assessment studies.
Why is it important to manage E&S risks in GCPF’s projects?
The need for more investment in clean energy is ever greater as the global economy trends away from fossil fuel energy production. It is important to remember that almost all projects will produce E&S impacts. Responsible investors want to make sure that one set of environmental problems is not simply substituted for another. For some projects the risks simply outweigh the benefits and, in such cases, GCPF will not finance them. For most though, proper assessment and effective project E&S management, combined with ongoing community engagement, will provide a social license to operate. As the drive for more renewable energy continues there will be pressure to build projects in increasingly difficult locations with more complex environmental and social issues to tackle. GCPF recognizes this and is up for the challenge.
What are the key projects you have worked on for GCPF?
Since 2014 I’ve been working with more than 20 of our bank partners and the numerous projects financed by them, or directly by GCPF. These have taken me to some remote and fascinating locations in Georgia, India, Bangladesh, Armenia and El Salvador. Notable projects that I’ve assessed include the 30 MW solar PV project in a rural location near Bellary, Karnataka State, India and the 1.3 MW Zod wind power project in Armenia (wind turbines).