To support India's transition to a low-carbon economy by increasing the availability of financing for climate mitigation investments.
The Project contemplates up to USD100 million in senior debt financing to IDFC FIRST Bank Limited (IDFC) for on-lending to eligible sub-borrowers in India to support climate change mitigation.
IDFC is a mid-sized Indian private sector bank formed through the merger of IDFC Bank and Capital First in 2018. The merger combined IDFC Bank’s banking license and wholesale banking franchise with Capital First’s technology-driven retail and MSME lending platform. This enabled IDFC to transform from a predominantly wholesale lender into a diversified universal bank with a strong retail orientation. It is publicly listed in India with shares traded on both the NSE (NSE: IDFCFIRSTB) and BSE (BSE: 539437).
Applicable Policy and Categorization: AIIB's Environmental and Social Policy (ESP), and Environmental and Social Standard (ESS) 1, apply to this Project. The Project has been categorized as Category FI because AIIB financing will be provided through IDFC, which will be responsible for identifying, screening, appraising, financing and monitoring eligible subprojects in accordance with agreed eligibility criteria. The financing will exclusively support retail loans to individual end-users for the acquisition of electric vehicles (EVs) for their own use. The underlying transaction is the purchase of an EV by an individual end-user, rather than the financing of an economic activity involving the manufacture, production or processing of goods. Accordingly, the underlying retail transactions are not expected to involve activities covered by AIIB’s Environmental and Social Exclusion List (ESEL), which is therefore not expected to be directly relevant to these transactions. Given the limited scope and nature of the eligible activities, they are expected to have minimal or no adverse environmental and social (ES) risks and impacts.
Environmental and Social Instruments: IDFC's Environmental, Social and Governance (ESG) Policy, Environmental and Social Policy (ESP) Framework and related governance arrangements together provide the overall ES framework for the Project. The ESP Framework serves as the key ES instrument for the facility. Given the retail EV focus, ES risks associated with individual financing transactions are expected to be limited. Accordingly, key ES considerations relate primarily to IDFC’s institutional arrangements including customer protection, fair lending practices, responsible lending and customer grievance redress.
Environmental and Social Aspects: The loan proceeds are expected to support retail EV financing. Environmental risks associated with the finance activities are expected to be limited and largely indirect. Positive environmental impacts are expected through increased adoption of electric mobility and associated reductions in greenhouse gas emissions and local air pollutants. Potential environmental considerations include battery lifecycle management and compliance with applicable national battery and waste-management requirements. Given the retail nature of the facility and exclusion of higher-risk activities, significant environmental impacts are not anticipated. Equally, social risks are expected to be minimal because financing will be provided to individual retail borrowers for EV purchases. In addition, IDFC has established policies relating to equal opportunity, diversity and inclusion, prevention of workplace harassment, human rights, employee welfare and grievance management. IDFC’s ES Policy framework promotes responsible and inclusive business practices and supports equitable access to financial services.
Occupational Health and Safety, Labor and Employment Conditions: As the financing will exclusively support retail EV purchases, material labor and occupational health and safety risks associated with financed activities are not anticipated. IDFC complies with national labor laws and related regulatory requirements and maintains policies and procedures concerning labor and employment conditions, workplace health and safety, employee welfare and employee grievance management for its own operations.
Information Disclosure and Project Grievance Redress Mechanism (GRM): IDFC publicly discloses a summary of its ESP Framework, ESG Policy, Fair Practice Code and sustainability disclosures[1]. Stakeholder engagement is supported through customer engagement processes, grievance mechanisms and public disclosures. IDFC maintains customer grievance and complaints mechanisms, a whistleblower framework and broader governance processes that provide channels for receiving, addressing and resolving concerns raised by customers and other stakeholders. Grievances concerning retail EV financing will be submitted through IDFC's Customer Grievance Redressal Mechanism (GRM). The information about the GRM and the Bank’s Project-affected People’s Mechanism (PPM) will be disclosed in an appropriate manner.
Monitoring and Reporting Arrangements: AIIB has established the monitoring and reporting mechanism with IDFC and will monitor implementation of the facility through periodic supervision. Given the retail nature and limited ES risks of the EV financing, ES monitoring will focus primarily on the FI/portfolio level rather than individual transactions. IDFC will ensure financing remains within the approved scope and maintain applicable customer protection, fair lending and grievance redress arrangements.
[1] https://www.idfcfirst.bank.in/scaling-up-sustainability-effort/reporting-suite
Asian Infrastructure Investment Bank
Neeraj Jain
Senior Investment Officer
Bhavit Sharma
Senior Investment Officer
IDFC FIRST Bank Limited
Tauseef Ahmad
Head, International Financial Institutions Group
