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Sustainability

HBOR Sustainability
In its work as an export bank and export credit agency of the Republic of Croatia, HBOR, when considering loans and/or export credit insurance, encourages all participants in export business to respect the principles of corporate social responsibility by considering issues of environmental protection, human rights, sustainable export credits and combating bribery in international trade. HBOR has regulated its conduct in this part of corporate social responsibility through internal documents:
(1) Ordinance on the Implementation of OECD Recommendations on Environmental Protection and Social Impact and Sustainable Export Credits and
(2) Ordinance on the Implementation of OECD Recommendation of the Council on Bribery and Officially Supported Export Credits,

which provide for compliance with three recommendations of the Organisation for Economic Cooperation and Development (OECD) that regulate these areas.
  • a) OECD Recommendation of the Council on Common Approaches for Officially Supported Export Credits and Environmental and Social Due Diligence - The “Common Approaches“, OECD/LEGAL/0393, which was adopted on 28 June 2012, and revised on 6 April 2016 and on 20 March 2024,
  • b) OECD Recommendation of the Council on Sustainable Lending Practices and Officially Supported Export Credits, OECD/LEGAL/0442, adopted on 30 May 2018, revised on 17 June 2024 and
  • c) OECD Recommendation of the Council on Bribery and Officially Supported Export Credits, OECD/LEGAL/0447, adopted on 14. 12. 2006, latest version 13. 3. 2019).
These recommendations apply to export credit and export credit insurance products where the risk of non-payment is on the foreign buyer, whereby the OECD Recommendation of the Council on Common Approaches for Officially Supported Export Credits and Environmental and Social Due Diligence and the OECD Recommendation of the Council on Sustainable Lending Practices and Officially Supported Export Credits are applied to products  that fall within the scope of the OECD Arrangement on Officially Supported Export Credits, or to state support for the export of capital goods and/or services with a repayment period defined by each recommendation, whereas the OECD Recommendation of the Council on Bribery and Officially Supported Export Credits is applied to products regardless of the repayment periods. The recommendations do not apply to export credits and export credit insurance products where the risk of non-payment under the credit and the risk of guarantee issued is on the exporter (e.g. issuing and/or insurance of export bank guarantees, loans for pre-export finance/working capital/liquidity etc.) in accordance with the application of the OECD Arrangement, OECD Recommendation of the Council on Common Approaches on Officially Supported Export Credits and Environmental and Social Due Diligence and the OECD Recommendation of the Council on Sustainable Lending Practices and Officially Supported Export Credits also do not apply to export of military equipment and agricultural products. By applying these recommendations, HBOR, in the process of analysing individual applications for loan and/or insurance of export transactions, takes into account relevant international requirements and standards, including local standards and guidelines of the importing countries, regulations of the European Union, the United Nations, the World Bank Group and other major multilateral financial institutions, and in accordance with relevant domestic and international regulations, takes appropriate measures to prevent bribery in export transactions.

  • OECD RECOMMENDATION OF THE COUNCIL ON COMMON APPROACHES FOR OFFICIALLY SUPPORTED EXPORT CREDITS AND ENVIRONMENTAL AND SOCIAL DUE DILIGENCE

The OECD Recommendation of the Council on Common Approaches for Officially Supported Export Credits and Environmental and Social Due Diligence includes recommendations and related to environmental protection and human rights, which are adhered to by state export credit agencies and export banks when considering applications for loans and/or insurance of export transactions that are within the scope of the OECD Agreement, with a repayment period of two years or longer. The Recommendation envisages certain actions of lenders and/or insurers when considering the abovementioned requests for state support to exports, from the aspect of the impact of export business on the environment and nature conservation, the local community directly involved in this business, people involved in its implementation and human rights. HBOR has incorporated the procedure provided for in the Recommendation into its internal documents, in such a way that, when considering loan applications and/or applications for insurance to which the Recommendation applies, it takes, among others, the following steps:
  1. Procedure for verifying applications and determining the need for further action - classification of export transactions and/or detailed assessment of their impact on the environment and society in the following cases:
  • Exports within or near sites, the environment of which is sensitive to changes (e.g. national parks, nature parks and other protected areas, as well as other sensitive sites such as wetlands, forests of great biodiversity, areas of archaeological or cultural significance for indigenous population or other vulnerable groups),
  • Significant impact of the transaction on human rights violation or
  • When the share of the state in lending and/or export insurance is higher or equal to 10 million SDR.
The verification procedure is carried out on the basis of information collected through the Questionnaire on Environmental Protection and Social Impact which is an attachment to loan application and insurance application.
  1. Classification procedure - for cases for which the need for further action has been determined in the application verification procedure, implies identification of potential positive and negative impacts of the export transaction on the environment and society, thus classifying export transactions into 3 categories:
  • category A: have or could have potentially significant adverse effects on the environment and/or society,
  • category B: possible environmental and/or social impacts are less harmful than category A impacts,
  • category C: have negligible or no adverse impact on the environment and society.
No further action is required for category C, while a more detailed impact assessment is performed for categories A and B.
  1. Detailed assessment of the impact of export transaction on the environment and society - includes comparison of environmental and social effects of export business with prescribed international standards, consideration of measures that can be taken to prevent, reduce or eliminate adverse effects and/or to improve environmental and social effect of export business, consideration of a more detailed analysis of human rights etc. As part of this process, statements and reports published publicly by the National Contact Point for Responsible Business Conduct (NCP) are also taken into account. NCP is a body established by each country that has acceded to the OECD Guidelines for MNEs as a permanent mechanism for their promotion and application, and the resolution of specific cases related to non-compliance with the recommendations of these Guidelines. The Government of the Republic of Croatia established the NCP in 2019.
  2. Evaluation, decision-making and monitoring of project - information on the verification, classification and impact assessment procedures carried out are taken into account when deciding on project application approval or rejection, where ex-ante or ex-post conditions are determined if necessary (e.g. measures taken for the purpose of preventing occurrence, mitigating or eliminating environmental and social risks, monitoring the implementation of such measures, submission of periodic reports on project implementation and effects, etc).
  3. Exchange and publication of information and reporting - information on projects classified into categories A and B, for which loans and/or insurance have been approved or are planned to be approved, are exchanged, if necessary, with other export banks and export credit agencies, they are reported to the relevant authorities and are published on HBOR’s website, where the prescribed deadlines, the obligation to maintain business secrets and the applicable relevant restrictions on the right of access to information are obeyed.
One of the tools for responsible business conduct (RBC) used to achieve the objectives of this Recommendation are the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct (OECD Guidelines for MNEs, OECD/LEGAL/0307, adopted on 27. June 2000, revised on 8. June 2023), the non-binding recommendations addressed to multinational enterprises by governments on RBC. They acknowledge and encourage the positive contributions that business can make to economic, environmental and social progress, and also recognise that business activities can result in adverse impacts related to workers, human rights, the environment, bribery, consumers and corporate governance. The OECD Guidelines for MNEs therefore recommend that businesses carry out risk-based due diligence to avoid and address such adverse impacts associated with their operations, their supply chains and other business relationships, in accordance with the OECD Due Diligence Guidance for Responsible Business Conduct (OECD/LEGAL/0443, adopted on 30 May 2018).


More information on OECD Recommendation of the Council on Common Approaches for Officially Supported Export Credits and Environmental and Social Due Diligence and the standards set in it can be found on the following links:  

Export transactions classified into the categories A and B

HBOR classifies export transactions for which a loan and/or insurance application has been received into the categories A, B and C in accordance with the OECD Recommendation on Common Approaches for Officially Supported Export Credits and Environmental and Social Due Diligence. Information on export transactions classified into categories A and B are published for category A no later than 30 days before the decision on loan and/or insurance approval is made, and for category B within 35 days from the execution of the loan and/or insurance contract.
List of export transactions classified into the categories A and B in the approval consideration procedure
None.
List of export transactions classified into the categories A and B, for which loan and/or insurance has been approved
None.
 

  • OECD RECOMMENDATION OF THE COUNCIL ON SUSTAINABLE LENDING PRACTICES AND OFFICIALLY SUPPORTED EXPORT CREDITS

Low Income Countries* often face high public debt that may exceed their ability to reduce poverty or provide basic government functions (e.g. health care, education, etc.). Given this, there is a possibility that the granting of export credits to public sector debtors could contribute to the accumulation of unsustainable levels of external debt in these countries, and therefore this risk should be taken into account before approving new export credits to these debtors. OECD Recommendation of the Council on Sustainable Lending Practices and Officially Supported Export Credits contains recommendations adhered to by state export credit agencies and export banks when considering applications for a loan and/or insurance for export transactions that are within the scope of the OECD Arrangement, that have repayment periods of one year or longer and where clients are public debtors or debtors guaranteed by the state from low income countries. This Recommendation stipulates that, in the decision-making process for approving export credit and/or insurance applications to which the Recommendation applies, account should be taken of the obligations of each country of debtor towards the World Bank and the International Monetary Fund and whether invested funds promote the economic and social progress of a low income country without jeopardising its financial future and long-term development. HBOR has incorporated these procedures into its internal documents with respect to such applications as follows:
  1. When analysing export credit or insurance applications:
  • Consideration of the results of the Debt Sustainability Analysis (DSA) carried out by the IMF/World Bank for individual countries under the IMF-World Bank Joint Debt Sustainability Framework (DSF) as well as the programme/policies and other relevant documentation related to the placement for which export credit and/or insurance is considered;
  • Taking into account existing restrictions on public sector borrowing without subsidised interest rate (i.e. non-concessional loan) in accordance with the methodology applied by the World Bank and the IMF, i.e. the IMF’s Debt Limits Policy (DLP) or the World Bank’s Sustainable Development Finance Policy (SDFP).
  1. When making approval decisions:
  • No support to debtors subject to zero limit on non-concessional borrowing, and
  • If a loan exceeds SDR 5 million or SDR 1 million in very small countries with a level of national income lower than USD 1 billion: requesting confirmation from relevant government bodies that the export transaction/cost is in line with IMF or World Bank policies for that country and reporting to the IMF and the World bank.
* Low Income Country is a country that meets the conditions for finance under the IMF’s Poverty Reduction and Growth Trust - PRGT or a country that has access to interest-free loans or grants of the International Development Association, World Bank Group, IDA (IDA only country). The list of these countries is available on the websites of the OECD, the World Bank and the IMF.

More information on the OECD Recommendation of the Council on Sustainable Lending Practices and Officially Supported Export Credits and the documentation it covers can be found on the following links:  
  • OECD RECOMMENDATION OF THE COUNCIL ON BRIBERY AND OFFICIALLY SUPPORTED EXPORT CREDITS
OECD Recommendation of the Council on Bribery and Officially Supported Export Credits contains recommendations adhered to by state export credit agencies and export banks in their business operations when considering applications for a loan and/or export credit insurance when the risk of payment is on a foreign buyer, regardless of the type of export goods and/or services and the agreed repayment terms. The respective Recommendation prescribes the taking of appropriate measures to prevent bribery in export transactions that are officially supported through credits and/or export credit insurance. HBOR has incorporated this procedure in its internal documents, in the way that it, among others:
  1. Implements general measures to prevent bribery, such as:
  • Informing exporters and other parties in the export transaction about the legal consequences of bribery in export business transactions in accordance with national legislation;
  • Encouraging exporters and other parties to the export transaction to develop, apply and document appropriate management control systems that prevent and detect bribery;
  • Raising awareness of the need to comply with all relevant anti-bribery legislation in the countries where the parties to the export transactions operate;
  • Promoting responsible business conduct among exporters and other parties involved in fulfilling and/or submitting applications for loan and/or export credit insurance etc;
  1. On the basis of information submitted as part of application for loan and/or export credit insurance, publicly available information and other information received during the application processing, upon receipts of these applications implements a due diligence procedure to identify possible irregularities related to bribery, e.g. requests the delivery of all necessary information, submission of statements on non-bribery in international trade etc.;
  2. In the event of an increased risk of bribery, implements an enhanced due diligence procedure, e.g. verifies whether the parties involved in the export transaction are listed on the publicly available blacklists of the multilateral financial institutions (The World Bank - International Bank for Reconstruction and Development, European Bank for Reconstruction and Development, Asian Development Bank, Inter-American Development Bank and African Development Bank), extends the due diligence to other parties involved in export transaction etc.;
  3. When making a decision on approval, takes into account the information on the implemented procedures of verification, due diligence and enhanced due diligence and, if necessary, defines the previous or subsequent terms and conditions for financing and/or insurance of the project.
INFORMATION TO PARTIES INCLUDED IN EXPORT TRANSACTIONS ON LEGAL CONSEQUENCES OF GIVING A BRIBE
Giving a bribe to a public official or responsible person and giving a bribe to a foreign public official is considered a criminal offence of bribery under Article 294 of the Criminal Code (“Narodne Novine“,  Official Gazette of the Republic of Croatia Nos. 125/11, 144/12, 56/15, 61/15, 101/17, 118/18, 126/19, 84/21, 114/22, 114/23, 36/24; hereinafter: the Criminal Code), for which a person shall be punished by imprisonment from one to eight years for the so-called real bribery (a bribe is offered, promised or given in order that he/she performs an act which he/she should not perform, or fails to perform an act which he/she should perform) i.e. the imprisonment of six months to five years for the so-called unreal bribery (a bribe is offered, promised or given in order that he/she performs an act which he/she should perform, or fails to perform an act which he/she should not perform).
Giving a bribe to representatives in the Croatian Parliament, the European Parliament, in a legislative body or a representative body of a foreign country or international public organisation or a councillor of a representative body of a unit of local or regional government to vote in a certain manner in a legislative body or a representative body is considered a criminal offence of bribing representatives  referred to in Article 339 paragraph 2 of the Criminal Code, for which a person shall be punished by imprisonment from one to eight years.
The obligation of everyone to report a criminal offence, for which proceedings are initiated ex officio, about which he/she was informed or about which he/she learned, arises from Article 204 of the Criminal Procedure Act (“Narodne Novine”, Official Gazette of the Republic of Croatia, Nos. 152/08, 76/09, 80/11, 121/11, 91/12, 143/12, 56/13, 145/13, 152/14, 70/17, 126/19, 126/19, 130/20, 80/22, 36/24). The report is submitted to the competent state attorney in writing, orally or by other means.
Article 301 of the Criminal Code (failure to report the preparation of a criminal offence) prescribes imprisonment of up to one year for everyone who knows that the commission of a criminal offence referred to in Article 294 of the Criminal Code or Article 339, paragraph 2 of the Criminal Code is being prepared and does not report it at a time when it is still possible to prevent its commission, and the offence is attempted or committed.
Article 302 of the Criminal Code (failure to report the commission of a criminal offence) prescribes imprisonment of up to three years for a public official or a responsible person who fails to report the commission of a criminal offence about which he/she learns in the course of performing his/her duties, provided that the criminal proceedings for the criminal offence in question cannot be initiated only by private action or upon request.
 
More information on the OECD Recommendation  of the Council on Bribery and Officially Supported Export Credits and other documentation used in its implementation is available at the following links:

CONTACT

odrzivost@hbor.hr