Site visits

1. Overview

  • Why are site visits valuable?
    Site visits can be valuable to:

    • Outline expectations: Explain the FI’s requirements and expectations relating to environmental and social (E&S) issues.
    • Understand actual risks/impacts: Develop a first-hand understanding of a client’s operations and performance. Deepen the client’s and FI’s understanding about which E&S impacts and risks might be material to the client’s ability to pay back its loan and what measures can be put in place to manage such risks or impacts.
    • Assess the implementation of the client’s environmental and social management system (ESMS): Test the implementation of the ESMS and how it is applied in practice as well as management commitment, capacity and track record (CCTR).
    • Identify opportunities: Assess the client’s willingness to drive value add through improved E&S management and look for opportunities to engage with them on such topics.
    • Strengthen/maintain a good relationship: Establish or strengthen the relationship between the FI and its clients (including with mid-level/operational staff) and support the client in addressing any outstanding action items or challenges in meeting FI expectations set and contained in legal agreements.

  • At which stage of the credit cycle should site visits be undertaken?

    • Screening: Site visits are pre-dominantly performed during due diligence (DD) unless there are major questions/issues which need to be answered/clarified and require a site visit during the screening stage.
    • Due diligence: During the DD phase, site visits can be used to evaluate a client’s compliance with applicable regulations and the FI’s requirements, E&S performance and CCTR.
    • Monitoring and reporting: During the monitoring and reporting phase of the credit cycle, on a routine basis, site visits can assess a client’s E&S performance and compliance with the E&S requirements included in the loan agreement (e.g. following up on an environmental and social Action Plan (ESAP)). Site visits may also be required to address more specific issues such as:
      • The response to an accident, incident or concerns raised by stakeholders, media reports or enquiries, or action by law enforcement authorities.
      • When an acquisition or major development/extension to operations is being considered.
      • A substantial change in the management team.
      • Where geographic or sector trends present potential new E&S concerns.

2. Preparing for site visits

  • Who should perform site visits?

    Who will carry out the site visits depends on the specific circumstances of each transaction and the degree of specialism within the FI’s team. The following should be considered when deciding who will perform the site visit:

    • Inherent E&S risks associated with credit application: The following approach is indicative and each FI shall determine under which circumstance a site visit is merited and who shall conduct the site visit:
      • FI transaction team, including credit analysts, relationship managers or other staff assigned with E&S responsibilities as part of the transaction cycle: Generally, for transactions with medium to high E&S risks / impacts. These staff should join the visits performed by the E&S Coordinator / E&S Officers.
      • E&S Coordinator and/or Qualified E&S Officers: Generally, for transactions with high and, as appropriate, medium E&S risk transactions.
      • Consultants: For ‘High’ and ‘Medium-high’ risk transactions and/or whenever in-house capacity is lacking. Also, external advisors may be engaged to assist with certain E&S areas, geographies or situations the FI does not have sufficient experience in or in case of travel restrictions. There are significant benefits to the FI team accompanying consultants in their site visits and with client engagements.
    • Status of client’s company or projects: Greater oversight is advisable during a project’s construction phase,  in case of significant expansion of existing facilities, or during the early months of an approved loan to help integrate the ESAP into the client’s company or project decision-making. If certain stages of a project present more material risks (e.g. construction stage of a large greenfield Project), FIs should assess whether external experts and/or a qualified E&S Officer should perform the site visits.

    Even when external studies are commissioned during the DD phase, FIs are strongly recommended to accompany consultants on site visits to capitalise on these relationship-building opportunities with client or project management, to get first-hand insights and provide context when reviewing the findings of the external specialist. It may also serve as an opportunity for the E&S professionals in the FI to build in-house capacity on how to conduct site visits.

  • Planning site visits. Which sites should be visited?

    When planning site visits, the following should be considered (please also refer to Due Diligence):

    • Range of client or project sites / operations: If the client has several sites, it is usually not possible for a FI or its consultant to visit all the sites (e.g. this may be the case in a corporate loan transaction with a borrower owning and operating many assets). In these instances, sites should be selected to include the range of existing client activities / operations / facilities. Visiting the client or project head office is also important to see how central management oversees the management of its individual sites. E&S performance at remote sites may not be as strong as at more accessible sites, and it may be advisable to visit these more distant sites as well to understand how E&S risk management is implemented in different/more challenging locations.
    • Client company / group structure: If providing a credit line to a group of companies or at holding company level, at least a representative sample of the subsidiaries (whether wholly or partially owned) should be visited. This is because there might be a financial or reputational risk exposure in those parts of the business that could affect the group or holding company.
    • Prioritise sites: Priority should be given to sites / operations that pose the greatest E&S risks and impacts.
    • Duration: Sufficient time should be spent at each site to gain an understanding of the E&S risks and impacts and the adequacy of the client’s ESMS and CCTR. Duration of the site visit will depend on the number of facilities to be visited as well as different teams to be met in relation to their E&S function e.g. HR, HSE, Community Relations, Environmental Management etc. More time should be allocated for credit applications presenting higher E&S risks. Site visits should normally occur during working hours of the site to observe and have a clear picture of regular operations.
    • Repeat visits: Several visits may be necessary to some sites or facilities, particularly those where critical or urgent issues are identified.
    • Review any publicly available information (refer to the Information Sources in Screening and categorisation section) about the client activities or project. This might include:
      • Google typical examples of operations / activities / assets (e.g. production lines of the facility) that will be visited (if not visited before) in order to get an initial idea of site processes and procedures and the sector ‘jargon’.
      • Search YouTube for a short film on the above e.g. ‘typical process flow large-scale foam mattress manufacture’.
      • Locate the site on Google Earth and observe the client’s company or project operations layout and neighbouring land-use, nearby water bodies, natural habitats, transport arteries and any other significant landmarks, etc.
      • Read the relevant Sector profile.
    • Review any client company or project level information including:
      • For similar clients in the FI portfolio, review previous E&S documentation, focusing on the client’s internal documentation e.g. E&S screening memorandum, DD report and particularly its ESAP.
      • Review reports generated by any previous site visits, or deal team interactions, and any follow up action recommended.

    Usually, the client should be notified in advance of the proposed site visit, its purpose and any recommended preparations. However, while prior notification is courteous it does allow for a rapid preparatory ‘clean up’. Therefore, there may be E&S issues not observed during the site visit and it is important to cross-check site visit findings through interviews with relevant teams and document review e.g. if observation on site suggest good H&S measures but the number of accidents is high, further action may be needed in relation to H&S.

Conducting site visits

  • E&S aspects to be assessed/observed during a site visit

    The graphic below outlines what FIs should be aiming to understand or verify during site visits of client company or project operations (i.e. inputs, process, outputs and potential receptors). The point is not to become overly concerned about the technical production process per se (e.g. how to mix paints in paint manufacturing facility) but instead to focus on the inputs to that process such as raw materials/labour, how inputs are used on site and what outputs emerge from the system (e.g. product safety, emissions, pollution).

    In addition, see Resources for checklists and templates that gives a sense of possibly questions to be asked during E&S DD and monitoring of transactions.

    While on site, check whether the operation is comfortable with photos being taken. These can be used to illustrate any gaps and help to track continuous improvement.

    Click to view diagram

  • Who should be interviewed during the site visit?

    Location Who to interview/meet and why?
    Head office Chief Executive Officer/General Manager and/or representative of senior management to explore their awareness of E&S risks and opportunities and CCTR.
    Operations:  Consider which personnel are available, including:

    • Operations Manager/Production Manager and Site Supervisors/Foremen: To understand and crosscheck how production works, where key processes and raw material use and waste generation could offer cost reduction, and to understand process improvement opportunities.

    and those responsible for:

    • Occupational health and safety (OHS): To determine their competence, record and how well any policies and systems are applied.
    • Environment: To determine their competence, record and how well any policies and systems are applied. Opportunities for improvements identified by the FI or the client and the client’s willingness to make changes.
    • Human resources: To assess labour policies and how these are applied and how staff are protected, retained, incentivised, and trained.
    • Contracted staff: If significant numbers of contracted employees are used, it is important to get their views on how E&S matters are managed and any concerns they have.
    • Stakeholders: Community Liaison Officers as well as representatives of affected communities, key stakeholders, and local authorities. If time is short, a separate stakeholder meeting can be arranged to meet all key parties together.
    Other sites (e.g. suppliers, distribution, secondary processing, supplementary packaging, power supply).

    As above, with a focus on specific E&S issues material to the operation of the primary business.

    Guidance and examples are provided in the applicable sector profiles and World Bank Group EHS Guidelines.

  • Follow up on site visits
    After each site visit, it is advisable to:

    • Hold a close-out meeting with the client: Discuss key issues identified, preliminary findings and likely corrective actions to develop or modifications to any ESAP. Note that where the site visit has been carried out by an external consultant without a member of the FI’s relationship management team, the team should talk through the findings with client management to make sure they understand it and to demonstrate the FI’s commitment to supporting the client in managing material E&S issues.
    • Write up the site visit: The findings onsite and outcomes of interviews and discussions should form the core of the DD report and set the tone for ongoing engagement and relationship building with the company. Site visits during monitoring and reporting stage are important to track performance and should be written up to allow easy comparison with previous or subsequent visits.

    The findings of the site visit(s) should feed into a formal DD report (if carried out at that stage) and inform the Credit Committee papers, or form part of standard monitoring practices (if carried out during the monitoring stage of the credit cycle).