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Responsible Financing

RBC clients have a broad array of financial needs, from traditional operating loans, to debt and equity underwriting. Whatever the nature of the financing, we work with our clients to identify, assess and mitigate the environmental and social risks associated with their business activities. Throughout this process we provide valuable advice to clients to help reduce their risk while promoting environmental and social interests. This is consistent with our leadership role in environmental and social risk management, and reflects our commitment to a balanced, responsible approach to business.

You are on: Rationale

A client’s environmental and social issues can affect their cash flow, their ability to operate, or their ability to grow their business. Our policies and processes help us identify and manage risks associated with a client’s environmental and social issues, minimizing our exposure to credit, reputational and legal risk. By incorporating environmental and social issues in the credit risk assessment process, we also help to promote the importance of good environmental and social standards in all types of business.

The scenario below shows how a client’s environmental risk may translate into a risk for RBC.


You are on: Approach

Our environmental and social risk management process is designed to ensure we apply a suitable level of analysis on a transaction. We consider the size and type of transaction, conditions of the loan, and the sector or industry in which the client operates. We perform our analysis using a range of tools such as client questionnaires, site visits, checklists, and assessments by internal and third-party environmental specialists, the outcome of which we then incorporate into our standard credit process. Our due diligence requirements are often based on international best-practices such as the International Finance Corporation (IFC) Performance Standards as well as standards set by the Canadian Standards Association (CSA) and ASTM International, formerly known as the American Society for Testing and Materials.

Based on the outcome of our investigations, we may require clients to manage or mitigate issues before we proceed with financing. In cases where a transaction is flagged as having unclear or higher risk, it is reviewed by RBC’s Corporate Sustainability Group, which includes professionals responsible for environmental and social risk management at RBC.

We proactively review and update our environmental and social risk management (ESRM) policies and procedures to address regulatory changes, emerging and evolving issues and international best practices.

Environmental Consultants

RBC and our clients routinely use third-party environmental consultants to perform environmental investigations, which may involve a Phase I, II, III or IV Environmental Site Assessments. In large-scale project financing, consultants are responsible for carrying out environmental impact assessment reports, and an independent engineer may be appointed to monitor and report on environmental and social issues. All investigations carried out as part of the financing process must be performed by environmental consultants that meet the rigorous standards of RBC. RBC maintains a list of pre-qualified environmental consultants from across North America in order to ensure information is reliable and credit approval is efficient.

RBC pre-qualified environmental consultants must have at least three full-time licensed professionals (Professional Engineer or Professional Geoscientist) with degrees in civil, chemical, environmental or geological engineering, hydrogeology, geology or environmental science. At least one of those professionals should possess an advanced degree and 10 years of experience in order to be classified as an expert witness. The focus of the firm must be on environmental assessments. RBC will consider qualifying firms that don’t meet requirements on an exceptional basis in under-serviced regions.

Reporting and Performance

We report on environmental and social risks to various internal and external stakeholders. Our Board of Directors and senior management committees receive periodic reports and analyses on these risks. We track loan losses resulting from environmental issues and report these to senior management. For external audiences, we report annually on our implementation of the Equator Principles on our website at We also provide information about our environmental and social policies, lending, emerging issues, stakeholder engagement, environmental initiatives and performance.

View all Reporting and Performance

You are on: Policies

We maintain a suite of environmental and social risk management (ESRM) policies designed to identify, assess and mitigate the environmental and social risks associated with financing our clients. We believe these policies are in keeping with our leadership role in environmental and social risk management, and are reflective of our commitment to a balanced, responsible approach to business.

Enterprise-wide ESRM Policy

We consider the impact of environmental and social factors in all our activities, not just financing. This policy applies to our own operations, any acquisitions or projects, and to the development of new financial products or services, to name a few. It requires that a thorough review and analysis be done where RBC may be exposed to risks due to environmental or social issues.

Capital Markets ESRM Policy

We screen all our debt and equity underwriting activities and corporate credit facilities for environmental and social risk, regardless of whether the use of proceeds is known. In addition, our policy requires that clients operating in industries of elevated environmental risk be subject to an Environmental and Social Risk Review of the following social and environmental factors:

  • Environmental management systems
  • Record of environmental compliance
  • Future environmental legislation such as carbon regulations
  • Labour standards
  • Approach to community engagement
  • Approach to consultation with indigenous communities, and the degree to which the principles of free, prior and informed consultation are applied
  • Impacts on water
  • Operations in environmentally sensitive areas and UNESCO World Heritage Sites
  • FSC, SFI, CSA or any other applicable certification of logging operations

Examples of industry sectors with elevated risk include chemicals, energy, waste management, forestry and paper, mining and metals, and power generation.

Financing Projects: The Equator Principles

The Equator Principles are a voluntary framework for financial institutions to identify, assess, manage, and mitigate environmental and social risks in Projects. RBC was the first Canadian Bank to formally adopt the Equator Principles in July 2003. The Equator Principles were revised and re-issued in July 2006 (EP II) and in June 2013 (EP III).  RBC has re-signed and committed to the revised Principles.

RBC has adopted the Equator Principles to ensure Projects we finance and advise on are developed in a manner that is socially responsible and reflects sound environmental management practices. Before financing a proposed Project, RBC must ensure the client has complied with the Equator Principles, and that any environmental and social issues associated with the Project have been adequately considered and minimized, mitigated, or offset.

RBC lenders and risk managers are obligated to adhere to our enterprise-wide Policy for Social and Environmental Risk Management for Projects in accordance with our commitment to the Equator Principles. In accordance with the Equator Principles, RBC’s Policy applies to the following four financial products and services: (i) Project Finance Advisory Services, (ii) Project Finance, (iii) Project-Related Corporate Loans, and (iv) Bridge Loans.  The relevant thresholds and criteria for application are detailed in the Equator Principles, June 2013 (opens external website in new window).

RBC reports annually on our implementation of the Equator Principles. In 2014, RBC participated as an advisor on four projects and provided financing for nine projects that qualified under the Equator Principles.

Information on RBC’s Equator Principles transactions for 2014 can be found here (opens PDF in new window).

Commercial and Business Markets

The purpose of this policy is to ensure that we identify and address environmental risks in our commercial loans and mortgage transactions. We follow a detailed environmental due diligence process to ensure we apply a suitable level of analysis on a transaction. We consider a number of factors including the size and type of transaction, conditions of the loan, and the nature of the client's business.

Agriculture Lending

This policy applies to our agriculture lending activities in Canada and is tailored to reflect environmental risks unique to the sector. We perform varying levels of due diligence depending on the size of the farm and whether it is crop or livestock.

Public Sector Lending

We have a specialized policy for lending to public sector entities in Canada. It takes into account the different risk profile of public sector entities and the fact that often, credit facilities are unsecured.


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