Bank of Montreal 2013 Annual Report Download - page 88

Environmental and Social Risk
Environmental and social risk is the risk of loss or damage to
BMO’s reputation resulting from environmental and social concerns
related to BMO or its customers. Environmental and social risk is
often associated with credit, operational and reputation risk.
Environmental and social risk is addressed in our board-approved corpo-
rate responsibility and sustainability policy. Environmental and social risk
management activities are overseen by the Environmental, Social and
Governance (ESG) group and the Environmental Sustainability group,
with support from our lines of business and other Corporate Support
areas. BMO’s Sustainability Council, which is comprised of executives
representing the various areas of the organization, provides insight and
guidance for our environmental and social initiatives.
As part of our enterprise risk management framework, we evaluate
the environmental and social impact of our clients’ operations, as well as
their industry sectors. Environmental and social risk covers a broad spec-
trum of issues, such as climate change, biodiversity and ecosystem health,
pollution, waste and the unsustainable use of water and resources, as
well as risks to the livelihoods, health and rights of communities and their
cultural heritage. We work with external stakeholders to understand the
impact of our operations and financing decisions in the context of these
issues, and we use this understanding to determine the consequences for
our businesses. BMO has developed and implemented specific financing
guidelines on environmental and social risk for specific lines of business.
Environmental and social risks associated with lending transactions are
managed within BMO’s credit and counterparty risk framework. Enhanced
due diligence is applied to transactions with clients operating in environ-
mentally sensitive industry sectors.
BMO is a signatory to the Equator Principles, a voluntary credit risk
management framework for determining, assessing and managing
environmental and social risk in project finance transactions. These
principles have been integrated into our credit risk framework. We are
also a signatory to and participate in the Carbon Disclosure Project,
which provides corporate disclosure on greenhouse gas emissions and
climate change management.
In 2013, BMO implemented ESG training for BMO Capital Markets
employees to ensure that there is consistency in the understanding of
environmental and social risks across the enterprise. The training
includes identification of emerging issues, an overview of BMO’s due
diligence procedures and tools to assist employees in identifying and
managing environmental, social and governance risks. We review our
environmental and social risk policies and procedures on a periodic basis.
To ensure that we are informed of emerging issues, we participate in
global forums with our peers, maintain an open dialogue with our stake-
holders and continuously monitor and evaluate policy and legislative
changes in the jurisdictions in which we operate. Our environmental and
social policies and practices are outlined in detail in our annual Environ-
mental, Social and Governance Report and Public Accountability State-
ment, and on our Corporate Responsibility website. Our Environmental,
Social and Governance Report also reports on our environmental and
social performance according to the Global Reporting Initiative.
MD&A
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