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Initiatives for the Equator Principles

In April 2019, Nippon Life adopted the Equator Principles.

The Equator Principles

The Equator Principles (EPs) is a risk management framework, adopted by financial institutions, for determining, assessing and managing environmental and social risk in projects and is primarily intended to provide a minimum standard for due diligence and monitoring to support responsible risk decision-making.
Based on the “Performance Standards” of IFC (International Finance Corporation), a member of the World Bank Group, and “World Bank Group EHS (Environmental, Health and Safety) Guidelines”, financial institutions formulate their own guidelines and establish internal management systems for assessing environmental and social impacts of projects.
The EPs are applied to project finance loans, project-related corporate loans, bridge loans, project-related refinance and project-related acquisition finance in all countries and industry sectors, subject to relevant thresholds and criteria for application.
Financial institutions that adopt the Equator Principles (EPFIs) commit to implementing the EPs in their internal environmental and social policies, procedures and standards for financing projects. These institutions will not provide project finance or project-related corporate loans to projects in cases where the client does not comply with the EPs.
As of the end of August 2020, 109 EPFIs in 38 countries have officially adopted the EPs, covering the majority of international project finance debt within global markets.

Please visit the official website for more details on the Equator Principles.

IFC Performance Standards

IFC has created the following eight performance standards (PS) as environmental and social guidelines for its clients.

PS1: Assessment and Management of Environmental and Social Risks and Impacts
PS2: Labor and Working Conditions
PS3: Resource Efficiency and Pollution Prevention
PS4: Community Health, Safety, and Security
PS5: Land Acquisition and Involuntary Resettlement
PS6: Biodiversity Conservation and Sustainable Management of Living Natural Resources
PS7: Indigenous Peoples
PS8: Cultural Heritage

Please visit IFC's official website for more details.

World Bank Group Environmental, Health and Safety (EHS) Guidelines

The World Bank Group has created technical reference documents for environmental, health and safety that should be observed when carrying out projects. They consist of General EHS Guidelines for all industries and Industry Sector EHS Guidelines with additional guidance for specific industrial sectors.

Please visit IFC's official website for more details.

Background on Adopting the Equator Principles

Over the years, as part of its asset management operations, Nippon Life has emphasized the viewpoint of maintaining a harmonious coexistence with the environment, the community and society, and sharing stable growth together with companies and the economy as a whole. We are bolstering our ESG investments that take into consideration environmental, social, and governance factors according to the characteristics of assets.
Nippon Life initiated engagement in project financing in 2013, set up the Structured Finance Department in 2017, and is rolling out full-scale engagement in overseas project finance. When making project finance decisions, we recognize that environmental and social factors can take on heightened importance above regular financing, given that projects that involve large-scale development could potentially have major impacts on the natural environment and local communities. With this in mind, Nippon Life decided to adopt the Equator Principles in April 2019.

Details on Project Financing Initiatives

Internal management system

In line with the adoption of the Equator Principles, Nippon Life has established internal policies and processes related to loan execution that incorporate the principles, along with policies that consider environmental and social aspects and an Environmental and Social Risk Assessment Manual that designates the assessment processes for such risks. In accordance with the manual, departments in charge of loan activities will implement primary assessments of environmental and social risks, and the Credit Department will carry out secondary assessments.

Implementation of environmental and social risk assessment

For projects that are subject to the Equator Principles, the departments in charge of loans and the Credit Department will implement environmental and social risk assessments that confirm whether or not consideration for the environment and society by the client for the project adequately fulfills the standards requested in the Equator Principles, in accordance with the internal Environmental and Social Risk Assessment Manual.
More specifically, Nippon Life will classify projects into the following categories depending on the results of assessments on the potential level of risk and impact a project could have on the natural environment and society, in line with the first principle of the Equator Principles.

Principle 1 Review and Categorisation
Category Definition
A Projects with potential significant adverse environmental and social risks and/or impacts that are diverse, irreversible or unprecedented
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
C Projects with minimal or no adverse environmental and social risks and/or impacts

Nippon Life will then confirm the status of compliance with the Equator Principles depending on the project's category classification. For instance, if a project has been classified as Category A, we will confirm whether consideration for the environment and society has been incorporated in the project in accordance with Equator Principles 2 through 10.
Depending on the results of that confirmation, we will seek agreements with the client on Equator Principle covenants reflected in the financing contract going forward.

Principle 2 Conduct of environmental and social risk assessment
Principle 3 Compliance with applicable environmental and social standards
Principle 4 Development or maintenance of an environmental and social management system and action plan
Principle 5 Demonstration of stakeholder engagement
Principle 6 Establishment of a grievance mechanism
Principle 7 Carrying out of an independent review by environmental and social consultants
Principle 8 Incorporation of covenants
Principle 9 Implementation of independent monitoring and reporting by environmental and social consultants
Principle 10 Guarantee of information disclosure and transparency

Data Reporting for Application of the Equator Principles

Projects subject to the Equator Principles that Nippon Life signed on to from April 1, 2019 to March 31, 2020 are listed below.
These projects have been verified for fulfilling the Equator Principles through the aforementioned process.

Project finance transactions

From April 1, 2019 to March 31, 2020, Nippon Life signed on to four transactions for project financing. The classification breakdown and chart are listed below.

Transactions by Category
Category A Category B Category C
- 3 1
Breakdown of Transactions by Category
Sector Category A Category B Category C
Mining - - -
Infrastructure - - 1
Oil/gas - - -
Power - 3 -
Other - - -
Region Category A Category B Category C
Americas - - -
Europe/Middle East/Africa - - -
Asia-Pacific - 3 1
Designated/ Non-Designated Countries Category A Category B Category C
Designated Countries - 3 1
Non-Designated Countries - - -
Independent Review Category A Category B Category C
Yes - 2 -
No - 1 1

Project-related corporate loans

Not applicable.

Project financing advisory operations

Not applicable.

Monitoring the status of compliance with the Equator Principles

In terms of reflecting Equator Principle covenants in loan agreements when concluding finance contracts, Nippon Life will confirm the status of compliance with the covenants through regular reports submitted by the client and other information. The covenants include, but are not limited to, compliance with regulations related to the environment and society, and action plans as appropriate.
After the Equator Principles were adopted in 2019, projects compliance with the Equator Principles have been monitored in accordance with the aforementioned principles.

Conduct of internal training

In addition to maintaining internal manuals, the Company will periodically conduct in-house training for employees of departments in charge of lending in order to deepen their understanding of the ideas behind the Equator Principles and the process for assessing environmental and social risks.
Specifically, the Company conducted in-house training sessions a number of times soon after adopting the Equator Principles in April 2019, and has introduced an internet-based training program in 2020.
Going forward, Nippon Life will endeavor to improve corporate awareness of consideration toward the environment and society through conduct of internal trainings and other initiatives.