Section 7 – Application and approval phase

Executive Summary

Section 7 focuses on translating climate risk due diligence into actionable requirements during credit application and approval. It introduces climate risk clauses and Climate Action Plans (CAPs) for credit agreements, enabling FIs to align lending terms with identified climate risks and encourage proactive client responses. CAPs set minimum expectations for climate risk management and transparency, outlining ambitions, risks, actions, responsibilities, and timelines. Climate-related covenants can mandate annual updates, metric disclosures, and remedial actions if milestones are missed. FIs may offer CAP templates and technical guidance, integrating CAPs with existing Environmental and Social Action Plans (ESAPs).

Section 7 is especially useful for credit officers, legal teams, and relationship managers seeking to embed climate risk management into lending processes and client engagement, supporting regulatory alignment and long-term resilience.