Bank of Montreal 2010 Annual Report Download - page 92

MANAGEMENT’S DISCUSSION AND ANALYSIS
MD&A
Environmental Risk
Environmental risk is addressed in our board-approved sustainability
corporate policy. Environmental risk management activities are overseen
by both the Corporate Sustainability and Environmental Sustainability
groups, with support from our lines of business and other Corporate
Support areas. Executive oversight of our environmental activities is
provided by BMO’s Sustainability Council, comprised of executives
representing the various areas of the organization. Senior management
committees are provided with reports on the progress of activities
mandated by our environmental strategy, as appropriate. Our environ-
mental policies and practices are outlined in detail in our annual
Corporate Responsibility Report and Public Accountability Statement
and on our Corporate Responsibility website.
Environmental risk covers a broad spectrum of issues, such as
climate change, biodiversity and ecosystem health, unsustainable
resource use, pollution, waste and water. We work with external
stakeholders to understand the impact our operations have in the
Environmental risk is the risk of loss or damage to BMO’s
reputation resulting from environmental concerns related to
BMO or its customers. Environmental risk is often associated
with credit and operational risk.
context of these issues, and we use this understanding to determine
the consequences for our businesses.
In addition, specific line of business guidelines outline
how environmental risks inherent in lending activities are managed.
Environmental risks associated with lending transactions are
managed within BMO’s credit and counterparty risk framework. Specific
guidelines related to climate change are applied to transactions with
clients operating in emissions-intensive industry sectors, and we adhere
to the standards set out in the Equator Principles, a framework for
evaluating social and environmental risk in project finance transactions
based on the World Bank’s International Finance Corporation
Performance Standards.
In 2010, we achieved carbon neutrality relative to energy con-
sumption and transportation emissions across the company worldwide.
This was done by engaging in consumption reduction measures,
purchasing renewable energy for our operations in Canada and the
United States and purchasing high-quality carbon offsets to neutralize
the remaining emissions. BMO committed $10 million over five years to
the Greening Canada Fund, the first voluntary carbon emissions reduction
fund open only to Canadian corporations. The fund provides direct access
to greenhouse gas emission offset credits and helps BMO invest in
Canadian-based emission reduction projects.
Caution
This Enterprise-Wide Risk Management section contains forward-looking statements.
Please see the Caution Regarding Forward-Looking Statements.
Reputation Risk
BMO’s reputation is one of its most valuable assets. By protecting and
maintaining this reputation, we can increase shareholder value, reduce
the costs of capital and improve employee engagement.
Fostering a business culture in which integrity and ethical
conduct are core values is key to effectively protecting and maintaining
BMO’s reputation.
Reputation risk is the risk of a negative impact to BMO that
results from the deterioration of BMO’s reputation among stake-
holders. These potential impacts include revenue loss, reduced
client loyalty, litigation, regulatory sanction or additional
oversight, and declines in BMO’s share price.
We believe that active, ongoing and effective management
of reputation risk is best achieved by considering reputation risk issues
in strategy development, strategic and operational implementation
and transactional or initiative decision-making. Reputation risk is also
managed through our corporate governance practices, code of conduct
and risk management framework.
All employees are responsible for conducting themselves in
accordance with FirstPrinciples, BMO’s code of conduct, thus building
and maintaining BMO’s reputation. The Reputation Risk Management
Committee considers significant potential reputation risks to the
enterprise, including the review of complex credit and structured-
finance transactions as required.
90 BMO Financial Group 193rd Annual Report 2010