Waste and Environmental Risk in Lending and Investment

About this course

Waste sits quietly inside many loan books: a factory with no plan for its sludge, a recycler with no record of where its material came from, a warehouse built on contaminated land. This course shows lenders and investors how waste becomes credit, legal and reputational risk, which Nigerian and international frameworks apply, how to run practical due diligence on manufacturers and recyclers, and how to structure and monitor finance for the circular economy. It is written by a working Nigerian recycling company that buys, sorts and sells the materials your borrowers produce.

Who it's for: Credit, risk, sustainability and relationship teams in commercial banks, development finance institutions such as the Bank of Industry, microfinance banks and investors in Nigeria.

What you'll be able to do

• By the end you will be able to explain the main ways poor waste management turns into credit, collateral, legal and reputational risk for a lender.
• By the end you will be able to describe what the Nigerian Sustainable Banking Principles, the IFC Performance Standards, the Equator Principles and IFRS S1 and S2 ask of a lender when waste is involved.
• By the end you will be able to run a basic waste and environmental due diligence on a manufacturer or recycler, including documents, a site visit and a simple risk rating.
• By the end you will be able to recognise the cash-flow pattern of a recycling business and structure equipment, working capital and green or sustainability-linked finance around it.
• By the end you will be able to set practical covenants and action plans, use digital operating records to monitor them and offer borrowers training and technical assistance as added value.

Course outline

1. Module 1: Why waste is a financial riskAbout 10 minutes
   1. How waste turns into credit risk
   2. Collateral, stranded assets and the opportunity side
   3. Check your understanding
2. Module 2: The frameworks that applyAbout 10 minutes
   1. Nigerian frameworks: the Sustainable Banking Principles, NESREA and EPR
   2. International frameworks: IFC Performance Standards, Equator Principles and IFRS S1 and S2
   3. Check your understanding
3. Module 3: Due diligence on borrowersAbout 10 minutes
   1. Questions to ask and documents to request
   2. The site visit and red flags
   3. A simple waste risk rating
   4. Check your understanding
4. Module 4: Financing the circular economyAbout 10 minutes
   1. What recycling businesses need money for, and how their cash moves
   2. Managing price risk and offtake
   3. Green, sustainability-linked and results-based finance in plain words
   4. Check your understanding
5. Module 5: Monitoring the portfolio and adding valueAbout 10 minutes
   1. Covenants and action plans that work
   2. Data, digital records and portfolio reporting
   3. Training and technical assistance as added value
   4. Check your understanding

Standards and frameworks covered

• Nigerian Sustainable Banking Principles (Central Bank of Nigeria and the Bankers' Committee, 2012)
• IFC Performance Standards on Environmental and Social Sustainability, especially Performance Standards 1, 2, 3 and 4
• World Bank Group Environmental, Health and Safety (EHS) Guidelines
• Equator Principles
• IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures, with the Financial Reporting Council of Nigeria's phased adoption roadmap
• National Environmental Standards and Regulations Enforcement Agency (NESREA) regulations, including its Extended Producer Responsibility programme for packaging
• National Policy on Solid Waste Management and National Policy on Plastic Waste Management
• State environmental protection and waste management agencies
• Producer responsibility organisations such as the Food and Beverage Recycling Alliance (FBRA)
• GHG Protocol Corporate Standard and Scope 3 Standard
• GRI 306: Waste 2020
• ISO 14001 Environmental management systems and ISO 45001 Occupational health and safety management systems
• ISO 59004, ISO 59010 and ISO 59020 Circular economy (published 2024, guidance standards, not certifiable)
• Loan Market Association Green Loan Principles and Sustainability-Linked Loan Principles
• Basel Convention on the Control of Transboundary Movements of Hazardous Wastes