STRATEGY
Climate change-related impacts continue to evolve at a rapid pace, presenting both risks and new opportunities that could impact our strategic and financial performance.
Climate risks and opportunities We are exposed to both physical risks related to extreme weather events or chronic impacts of changing weather patterns, as well as transition risks related to the move to a low carbon economy. These risks have the potential to impact our operations and the operations of our clients, disrupt supply chains, cause physical damage and impact the cost of goods and services. At the same time, climate change presents an opportunity to deepen our client relationships as we support them through Canada’s transition to net-zero emissions by offering targeted product and service offerings, advisory services, sustainable financing options and education opportunities. In 2021, we commenced the development of our approach to climate change, supported by our Sustainability team. We are committed to consider climate risks and opportunities within our strategy in order to manage our climate impact, support the ongoing success of our clients as they strive to achieve their climate goals and mitigate the risks associated with climate change. As we progress, our strategy will incorporate short-, medium-, and long-term goals targeted to address specific climate-related issues that could have a significant financial impact on our operations, or the operations of our clients. Enhancing our ability to identify climate risks and opportunities We recognize that not all sectors are impacted equally by climate risks and opportunities. In addition to continued efforts to measure and manage our own carbon footprint, which is further discussed in the Metrics and targets section, we are focused to develop a deeper understanding of the risks and opportunities that climate change presents for our clients. During 2022, we developed and launched a process to measure our Scope 3 financed GHG emissions. A key priority for 2023 is the development of an industry-level heatmap assessment to identify the physical and transition impacts of climate change within our lending portfolios. When considered in combination with our Scope 3 financed GHG emissions estimates, the heatmap will provide us with a more detailed understanding of how our lending portfolios may be impacted by climate risks. The heatmap will also be a useful tool to inform our business decisions towards potential opportunities and areas to support our clients in their climate journeys, in alignment with our growth strategy and prudent risk appetite. We are committed to expand our knowledge and assess climate risks and opportunities as industry standards, data quality, tools and our approach mature. Climate scenario analysis As we move forward, we will develop our capabilities to perform climate scenario analysis that incorporates short-, medium- and long-term impacts and plausible scenarios to support the development of resilient strategies aligned with Canada’s transition to net-zero emissions. We expect our approach to climate scenario analysis will evolve over time as methodologies are further developed and more robust climate data becomes available. Our participation in industry working groups provides opportunities to share insights and formulate best practice approaches to climate-related risk management.
Embedding climate considerations within executive compensation The ongoing development and execution of our approach to sustainability, including a climate transition plan, was included in the performance criteria of the PSUs granted under our executive LTIP this year. As our approach to sustainability evolves, we will continue to explore further integration of ESG factors into our compensation programs.
60 2022 SUSTAINABILITY REPORT AND PUBLIC ACCOUNTABILITY STATEMENT
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