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About RBC > Community & Sustainability > Environment > Responsible Financing

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 the RBC Corporate Environmental Affairs Group, which includes professionals responsible for environmental and social risk management at RBC.

We proactively review and update our 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 Assessment. 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 seven 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 on our implementation of the Equator Principles in our annual Corporate Responsibility Report and Public Accountability Statement. This report also provides information about our environmental and social policies, lending, emerging issues, stakeholder engagement, and environmental performance and initiatives.

View all Reporting and Performance

You are on: Policies

We maintain a suite of environmental risk management 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 aboriginal 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.

Project Finance: The Equator Principles

RBC is a signatory to the Equator Principles which means that all project finance activities in any sector that have a total capital cost of US$10 million or more, regardless of our own financial commitment or role, are subject to a special review. This review is designed to ensure that projects meet the intent of the Equator Principles, an international set of voluntary guidelines that address environmental and social risks associated with project finance. RBC was the first Canadian bank to sign the Equator Principles in 2003, and we recommitted to the revised Principles in 2006.

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 in Canada and the United States. 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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