In depth

Among the most relevant aspects of the Project, we recommend considering the following aspects:

• Implementation of policies and procedures: Supervised entities shall implement policies and procedures to identify, measure, control and monitor environmental, social and climate risks based on their potential impact on the entity's financial situation and its business model.
• Proportionality principle: According to the Project, environmental, social and climate risk management should be based on the information reasonably available to each entity and shall be consistent with its risk appetite profile and framework, business plan, and the nature, size, complexity and diversity of its activities.
• Relevance principle: The Project establishes that entities are not required to apply environmental, social and climate risk management policies and procedures to investment products, services and activities involving clients, users, territories or economic sectors with low exposure to these risks. In addition, entities may set materiality thresholds to determine which investment products, services and activities may be excluded from the management of these risks.
• Stages in risk management: Entities must develop the following stages in risk management: (i) identification; (ii) Measurement; (iii) Control; and (iv) Monitoring. All these activities must be developed in accordance with the information available at each stage considering the activities, operation, business, asset and/or investment.
• Training: The Project includes the obligation to execute training plans on these risks, which must be directed to the officers of each entity in charge with risk management, Senior Management and the Board of Directors.
• Reporting obligation: According to the Project, those in charge of performing the risk management function must submit annually (unless a lesser periodicity is established) to the Board of Directors and Senior Management a report containing (i) the identification of the economic sectors and territories where it provides or offers its services or performs investment activities vulnerable to the risk factors described in the Project and, (ii) the entity's exposure to the risks. Additionally, these reports must be kept available to the SFC.
• Specific guidelines for credit operations: The Project establishes special guidelines for credit operations regarding environmental, social and climate risk, which are applicable to the following entities: (i) Banking Institutions; (ii) Financial Corporations; (iii) Finance Companies; (iv) Cooperative Entities with a Financial Nature; (v) Higher-Level Cooperative Organizations; among others. These guidelines also establish the obligation to submit a report semi-annually to the Board of Directors and Senior Management, which must be documented and available to the SFC.

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