Skip Header Navigation

Skip Breadcrumb Links  
About RBC > Community & Sustainability > Environment > Responsible Financing

Responsible Financing

Managing Social and Environmental Risk

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.

 

Rationale

A client’s environmental and social issues can affect their cash flow, their ability to operate, or the ability to grow their business. Our experience and knowledge along with 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, regulatory and legal risk. By incorporating environmental and social issues in the credit risk assessment process, we also help to promote the importance of maintaining superior environmental and social practices in the client’s business.

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

Example:

Client is a gas station operator with a history of spills | Client faces increased costs related to fines and site cleanup | Client cannot pay increased costs and defaults on loan

 

Environmental and Social Risk Management Policies

Our environmental and social risk management (ESRM) process is designed to ensure we apply a suitable level of due diligence on a transaction. We maintain a suite of 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.

We proactively review and update our ESRM policies and procedures to address regulatory changes, emerging and evolving issues, and international best practices.

 

Environmental and Social Risk Management Policies

You are on: Enterprise-wide

Enterprise-wide

We consider the impact of environmental and social issues in all our activities, not just financing. Our Enterprise-wide ESRM 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 completion of a thorough review and analysis when RBC may be exposed to risks due to environmental or social issues.

 
 

Due Diligence Process

We consider the size and type of transaction, loan to value ratios, term of the loan, and the sector or industry in which the client operates when conducting environmental and social due diligence on a transaction. We perform our analysis using a range of tools such as site visit checklists, client questionnaires, and environmental assessments by third-party environmental specialists, the outcome of which we then evaluate and incorporate into our standard credit process. Our environmental and social 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.

Based on the outcome of our investigations, we may require clients to manage or mitigate environmental and social issues before we proceed with financing. Transactions flagged as having unclear or higher risk are reviewed by RBC’s Environmental Risk Management team, which includes professionals responsible for environmental and social risk management at RBC.

Expand Environmental Consultants

 

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 also track loan losses resulting from environmental issues. For external audiences, we report annually on our implementation of the Equator Principles (opens PDF in new window) on our website. We report on environmental risk in our Annual Report. We also produce information about our environmental and social policies, lending, emerging issues, stakeholder engagement, environmental initiatives and performance.