TD's green policy will link credit reviews, environmental action
With the publication of its new, comprehensive environmental strategy, the Toronto-Dominion (TD) Bank Financial Group has served notice that its review of clients' credit worthiness will be based in no small part on their commitments to environmental action, particularly with regard to climate change and protection of the Boreal forest.
Building on TD's 2005 environmental policy, the new environmental management framework is the first comprehensive pubic environmental policy from a major Canadian bank that specifically recognizes and commits to actions relating to its financing practices and its own operations as they relate to climate change, biodiversity conservation and indigenous rights. The policy recognizes the global significance of Canada's Boreal forest and begins to address the specific threats and opportunities associated with this unique resource.
"As responsible corporate citizens, we recognize that environmental and social sustainability are important to all of us," said Fred Tomczyk, TD Financial Group's vice-chair, corporate operations. "The publishing of our framework helps us to reflect the values of our stakeholders, in addition to being fundamental to risk management and our long-term economic growth," he added.
The framework outlines how TD will manage and minimize the impact of environmental risks and issues arising from its business operations. It sets out specific commitments regarding the assessment of environmental risks as part of its due diligence process, including adoption of the Equator Principles in its wholesale banking group.
Based on the policies of the World Bank and its private sector arm, the International Finance Corporation, the Equator Principles provide a template for determining, assessing and managing environmental and social risks in relation to project financing. (Full details on the Principles may be viewed on-line at www.equator-principles.com.)
TD's strategy commits the bank to enhancing its analysis of financing transactions involving industries with high potential for environmental impacts, i.e. oil and gas, forestry, metals and mining, and utilities in all regions where it does business. For these sectors, industry-specific due diligence procedures will be developed for the review of critical environmental and social issues. These procedures will be based on the Equator Principles and will include categorizing transactions according to their environmental and social risk profiles.
The remainder of the policy document is organized around forest biodiversity, climate change, Aboriginal peoples and the bank's own operational footprint. Among other things, the bank will not provide credit, underwriting or advisory services for operations in World Heritage sites or for those that degrade critical natural habitats. Nor will TD knowingly provide financing to clients that obtain timber from illegal logging operations. The policy's biodiversity section also commits TD to financing forestry operations only for clients who have obtained, or are in the process of obtaining, Forest Stewardship Council (FSC) certification (or a comparable assessment process for a conservation plan).
The policy recognizes the long-term nature of climate change and its potential adverse economic impacts. It defines the bank's role in the context of its interaction with clients regarding this issue, and commits TD to working with clients in carbon-intensive industries (e.g. oil and gas, coal, electricity generation, metals production) to improve its understanding of their climate-related risk and associated mitigation plans.
TD will expand its analysis of transactions in carbon-intensive industries to include a review of elements such as the greenhouse gas emissions of the particular sector and the operations of a given company, management's strategy for operating in a carbon-constrained economy, and the possible impact of carbon regulations or prices on a borrower's ability to repay or the value of collateral.
Other climate change commitments in the policy include: development and incorporation of a climate risk assessment into TD's existing industry review processes for carbon-intensive sectors; and a review of developments and opportunities related to carbon trading markets, renewable energy and clean power technologies.
As part of its policy, TD will measure, report on and improve its own environmental footprint, including an assessment of its own greenhouse gas emissions and the establishment of reduction targets (expected in 2008). The bank will also seek to reduce paper consumption across its operations and will itself obtain paper only from certified sources. It will develop environmentally sound procurement practices for its major purchase categories as well.
The framework was developed in consultation with a range of relevant interests, including shareholders, research centres, customers and non-governmental organizations (NGOs), notably the Rainforest Action Network (RAN) and ForestEthics. TD also worked with Sustainable Finance, a firm that advises the financial sector on sustainability opportunities.
"Managing our business in a way that takes account of environmental risks and opportunities is simply good business," said Tomczyk. "We know it's going to take hard work, resources, and a willingness to act, yet we believe issues such as biodiversity, climate change and the health of forest ecosystems are important and we're confident that by doing our part, we can make a difference."
Since 1990, the TD Friends of the Environment Foundation has provided more than $40 million in funding to support community-based environmental and wildlife conservation projects. Beginning in February 2008, TD's Corporate Responsibility Report will outline the progress it has made in the implementation of its new environmental management framework.
The framework document may be viewed on TD's corporate Web site, www.td.com/environment. More information is also available from Matthew Cram at the TD Bank Financial Group, 416/983-1514.