SOCIAL AND ENVIRONMENTAL RISK Social and environmental risk is the potential for loss or harm resulting from social or environmental impacts or concerns related to our business or customers. This risk involves a broad spectrum of issues, including pollution, energy and other resource usage, climate change, human rights, labour standards, the strength of communities we operate in, and minority rights and inclusion. We recognize the importance of social and environmental risk management practices and processes. Our Board of Directors provides oversight to consider these risks as part of our enterprise-wide strategy. Under the leadership of the CFO, we implemented a cross-functional sustainability team that is responsible to identify and prioritize social and environmental risks based on engagement with our clients, people and investors, and develop an implementation plan for our overarching sustainability approach, aligned with our strategic direction. The sustainability team reports progress on the development of this roadmap to the Board of Directors and provides education on emerging trends related to social and environmental risks, and market developments. Identified social risks are managed through our business policies and procedures across CWB. Environmental risks within our lending portfolio are managed through our credit granting process (see the Credit Risk section above). Further information on our approach to environmental risks specifically related to climate change are included in the Climate Risk section below. Further information on our corporate social responsibility activities is available on our website at www.cwb.com/corporate-social-responsibility in our Corporate Social Responsibility and Public Accountability Statement reports, and other materials that outline our activities related to community investment, inclusion, corporate governance, and the environment. Climate Risk Climate risk is a subset of environmental risk that encompasses the risk of financial loss or reputational damage that results from the physical and transition impacts of climate change, which may adversely impact our operations, or the operations of our clients. Transition to a lower-carbon economy may entail extensive policy, legal, technology, and market changes to address mitigation and adaptation requirements related to climate change. Depending on the nature, speed, and focus of these changes, transition risks may pose varying levels of financial and reputation risk to organizations over time. Physical risks related to climate change can be event-driven or due to longer-term shifts in climate patterns. Physical risks may have financial implications for organizations, such as direct damage to assets and indirect impacts from supply chain disruption. We have limited direct physical risk exposure based on our modest physical footprint through banking centres and corporate office space across Canada and minimal indirect physical and transition risk exposure through our current lending activities, although we expect this risk will evolve and emerge over time. We believe that transparent and timely communication on our exposure and approach to manage climate risk is important to our stakeholders. We support the disclosure recommendations provided by the TCFD, which aim to facilitate consistent and comparable reporting of climate risks and opportunities across all industries. In 2021, we began to enhance our climate risk disclosures and we are committed to adopt the TCFD’s recommendations with a phased approach. Our 2021 disclosures provide foundational information about our approach to climate risk governance and strategy development. As we move forward and advance our understanding of the climate risks that impact our business, teams, communities and clients, we will continue to advance our disclosures on our climate strategy, climate risk management, and relevant metrics and targets. Climate Risk Governance Governance of ESG risks is provided by our Board of Directors, which includes a focus on climate change. The Board of Directors receives reporting on and discusses current and emerging trends related to climate risk, and monitors progress on the integration of climate factors into our ongoing strategy. As the topic of climate change requires a multidisciplinary approach, oversight will also be provided by the following Board committees: • Risk Committee: Provides oversight of key risks, including those that may be affected by climate change. This includes review of risk appetite limits and policies, which are expected to evolve over time to incorporate direct consideration of climate risk. • Audit Committee: Provides oversight of climate change-related disclosure included in our MD&A. Under the leadership of the CFO, our sustainability team is responsible to design and execute an approach to address climate change in our strategy and operations, as part of the development of a comprehensive approach to sustainability. The continued development of a climate change approach will focus on how CWB may best support the transition to a less carbon intensive economy and address climate change. The sustainability team engages internal stakeholders and works with the Executive Risk Committee to establish appropriate committees tasked with the development of various components of our approach to manage climate risk. To remain well-informed on climate-related issues and emerging trends, our sustainability team provides representation on national and local climate-related programs. Nationally, we participate in the Sustainable Finance Action Council, which advises on movement towards mandatory climate change disclosures, the development of a climate risk taxonomy within the context of Canada’s capital markets and addressing the climate data needs and capacity within the financial sector. On a quarterly basis, our sustainability team reports to the Board of Directors on progress made on our sustainability roadmap and current and emerging trends, specifically related to climate risk. Climate Risk Strategy To manage our environmental footprint, we have implemented practices targeted to benchmark and reduce the amount of energy we consume, increase materials recovered and recycled, and manage ecological maintenance products. Through sound environmental management, we follow acknowledged standards, adhere to applicable regulations, and operate our premises in a sustainable manner. As we expand our banking centre footprint and upgrade existing locations, we maintain a focus on sustainability and opportunities to reduce our environmental impact. In addition to continued efforts to manage our own carbon footprint, we are focused to develop a deeper understanding of the risks that climate change present to our clients. As we progress on development of our sustainability approach, 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. We have engaged a third-party service provider to assist in the development of a climate strategy that considers climate risks and opportunities and the needs of our stakeholders. Our climate strategy will include: • A comprehensive GHG measurement and reduction strategy, and procedures to support accurate disclosure of GHG emissions across our full operational footprint, measured against internal targets; • Enhanced internal capabilities for climate risk management; and, • An approach that considers how we may best support our clients through a transition to a less carbon intensive economy.
60 | CWB Financial Group 2021 Annual Report
Powered by FlippingBook