Social and environmental risk management
Effective risk management supports our ability to create maximum value for our clients, people, investors and communities. Evolving and emerging risks related to social and environmental factors have the potential to impact our business and the businesses of our clients and we recognize the importance of continued enhancement of our risk management practices and processes.
Social and environmental risk is the potential for loss or harm resulting from social or environmental impacts or concerns related to our business or our clients. This risk involves a broad spectrum of issues, including climate change, pollution and waste, energy and other resource usage, human rights, diversity, equity and inclusion, labour standards, and the strength of the communities we operate in. Our Board of Directors and its Committees provide oversight of these risks and their impacts on our organization-wide strategy. Our Sustainability team is responsible to identify and prioritize social and environmental issues based on engagement with internal and external stakeholders, and to develop an implementation plan for our overarching approach to sustainability, aligned with our strategic direction. Our Sustainability team provides regular updates and education on emerging trends related to social and environmental risks and market developments to our Board.
Refer to pages 44 – 59 of our 2022 Annual Report to learn more about our Risk Management framework.
CURRENT LENDING PRACTICES
We face certain environmental risks, including the risk of loss if a borrower is unable to repay loans due to environmental clean up costs and the risk of damage to our reputation resulting from the same. To manage these risks, and help mitigate our overall impact on the environment, we evaluate potential environmental risks as part of the credit granting process. If potential environmental risks are identified that cannot be resolved to our satisfaction, the loan application will be denied. Where financing is provided, Internal Audit provides periodic review of the adherence to related lending policies.
2022 PROGRESS
Industry practices related to the identification, assessment and management of emerged and emerging social and environmental risks, particularly related to risks resulting from the physical or transition impacts of climate change, are evolving at a rapid pace and we continue to monitor evolving regulatory and supervisory frameworks, guidance and consultations. Our Group Risk Management (GRM) function is responsible for the ongoing development of policies and processes to identify, assess, monitor, and report on social and environmental risks. In 2022, we: • Updated our Risk Management framework to incorporate social and environmental risk into our risk universe; and, • Added climate risk to our Risk Register to facilitate the assessment of the level of inherent risk, control effectiveness and residual risk.
54 2022 SUSTAINABILITY REPORT AND PUBLIC ACCOUNTABILITY STATEMENT
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