Circulars/Notifications / Infrastructure, Housing & SME Finance Department  

 IH&SMEFD Circular Letter No. 12 of 2022
November 09, 2022

The Presidents/ Chief Executives,
All Banks and DFIs

Dear Sirs/Madams,

Environmental & Social Risk Management (ESRM) Implementation Manual for Financial Institutions

       This is with reference to IH&SMEFD Circular No. 08 dated October 09, 2017, wherein SBP issued Green Banking Guidelines (GBGs) with a view to safeguard against environmental risks emerging from banks’ and DFIs’ businesses and operations.

2.    To ensure compliance of minimum standard for environmental & social risk management in the financial sector under GBGs, SBP is pleased to issue the Environmental and Social Risk Management (ESRM) Implementation Manual, attached as Annex-I. The Manual provides tools and procedures to strengthen and accelerate the implementation of the risk management section of GBGs.

3.    The ESRM Implementation Manual contains the following key features:

  • In addition to environmental risks, the manual is also focusing on social and climatic risks, which are becoming relevant and crucial for Pakistan.
  • The manual provides a comprehensive Environmental & Social Management System (ESMS) for systematic guidance to banks/DFIs on assessing and managing environmental and social risks.
  • The manual provides a robust, quantitative risk rating system.
  • The E&S Due Diligence (ESDD) Checklist (Annex - II) in the manual incorporates guidance notes to assist banks/DFIs in performing E&S due diligence.
  • The manual also includes Supervision Checklist to assist banks/DFIs in supervising compliance of E&S related issues in the financing project.
  • The manual provides a Green Banking Monitoring & Evaluation (M&E) Reporting Template (Annex - III) for reporting of banks/DFIs’ GBGs implementation progress (including ESRM activities) to SBP, on annual basis.

4.    Please note that the ESRM Implementation Manual, being a procedural guide, will be used by banks/DFIs as a tool for compliance of GBGs (with addition of social risk). FAQs document is attached to facilitate the banks/DFIs in the implementation of ESRM (Annex - IV).

5.    SBP expects that the banks and DFIs will fully implement the ESRM within three (03) years of issuance of this Manual. SBP will also play its due facilitative role in implementation of ESRM through trainings, awareness sessions and other support measures.

Annex-I: Environmental & Social Risk Management (ESRM) Implementation Manual
Annex-II: Environmental & Social Due Diligence (ESDD) Checklist for SMEs/Corporate Finance Projects
Annex-III: Green Banking Monitoring & Evaluation (M&E) Reporting Template
Annex-IV: Frequently Asked Question (FAQs)


Yours sincerely,

(Dr. Mian Farooq Haq)


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