Manage our impact responsibly
Table of Contents
Maintain a foundation of trust
Obsessed with your success
Supplemental reporting
Appendices and Glossary
Overview
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 to our Board on emerging trends related to social and environmental risks and market developments. Our Group Risk Management (GRM) team is responsible for the ongoing development of policies and processes to identify, assess, monitor, and report on social and environmental risks, and also provides quarterly updates to the Enterprise Risk Committee and Board Risk Committee on the progress of integrating climate risk into our risk management practices.
2023 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 regulatory and supervisory frameworks, guidance and consultations. In 2023, we: • Completed an initial Climate Risk heatmap exercise to identify risks related to the physical and transition impacts of climate change within our key lending portfolios through a qualitative analysis that incorporates short-, medium- and long-term impacts and plausible scenarios (refer to page 64 ); and, • Updated our Environmental Risk Protocol to include the identification of potential physical and transition climate-related risks in the risk assessment lifecycle process.
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. We have a protocol in place to ensure that in-scope credit transactions are assessed for environmental risks, assigned an Environmental Risk Classification to determine the appropriate monitoring requirements that corresponds to the risk classification. If potential environmental risks are identified that cannot be resolved to our satisfaction, the loan application will be denied. Internal Audit provides independent, objective assurance on the adequacy and effectiveness of governance, risk management and internal controls across both First and Second Lines of defence, including alignment with, and adherence to risk appetite, policies, standards and protocols.
Refer to pages 41 – 57 of our 2023 Annual Report to learn more about our Risk Management framework.
Refer to the Risk Management section of our climate related disclosures on page 66 for further information on our approach to environmental risks specifically related to climate change, including the results of the initial climate heatmap exercise.
55 2023 SUSTAINABILITY REPORT AND PUBLIC ACCOUNTABILITY STATEMENT
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