Environmentally Sustainable Environmentally Sustainable Business:Business:

RBC’s Perspective RBC’s Perspective

Environmentally Sustainable Environmentally Sustainable Business:Business:

RBC’s Perspective RBC’s Perspective

Sandra Odendahl

Director, Corporate Environmental Affairs

Royal Bank of Canada

Rotman School of Management

February 22, 2009

OverviewOverview

I. About RBC

II. Why Sustainability?

III. Integrating Sustainability into business

IV. Banking and the Environment

V. Sustainable Business at RBC

VI. What Next?

I. About RBCI. About RBC

• Assets ~ $655 billion; Market capitalization ~ $77.6 billion.

• Approximately 80,000 employees in 50 countries

• Major operations in Canada, US, UK and the Caribbean

• Over 1700 branches and more than 4,800 ABMs

• Business areas:

– RBC Canadian Banking (~44% of revenue)

– RBC Capital Markets

– RBC Wealth Management

– RBC US and International Banking

– RBC Insurance

Largest Canadian bank, 5th largest bank in North AmericaLargest Company on the TSX

II. Why Environmental Sustainability?II. Why Environmental Sustainability?

Our sustainability strategies must reflect these new realities

Challenging economic conditions, heightened

competition, volatile markets

Greater need for breakthrough messagingand clear differentiation; reduce costs, innovate

Society’s priorities have evolved – Baby-boomers want balance of Wealth,

Wellness and World

Company must tap into need for relevance,

authenticity, perspective – clients and employees

Limited government leadership and money

II. Why Environmental Sustainability?What’s in it for BusinessII. Why Environmental Sustainability?What’s in it for Business

Expectation that major companies will fill the void

1. Governance

– Board of directors commitment

– Executive support and leadership

– Staff

– Committees and/or champions

– Policy

2. Strategy

– Priorities

– Initiatives

– Targets

– Performance measures

3. Execution

– Results

III. Integrating Sustainability into Business - ComponentsIII. Integrating Sustainability into Business - Components

The Challenge is Getting the Strategy Right…..

Integrating Sustainability into BusinessStep 1: Who are you?Integrating Sustainability into BusinessStep 1: Who are you?

• Know how your business works. Make sure you are doing your core business well

• All the CSR and environmental programs in the world won’t help if you aren’t paying attention to your core business

• Sustainability includes “financial sustainability”

Integrating Sustainability into BusinessStep 2: Your Company & the EnvironmentIntegrating Sustainability into BusinessStep 2: Your Company & the Environment

Understand your environmental aspects.

• Understand your inputs, operations, and outputs

• Where does the natural environment affect your business?

• How does your business affect the natural environment?

Supply chain(indirect impacts)

Products/Services

Operations

Waste: to air, water, and land

Integrating Sustainability into BusinessStep 3: Who Cares?Integrating Sustainability into BusinessStep 3: Who Cares?

Understand your stakeholders

• Who are they?

• Which ones do you really care about?

• What do they expect?

Clients

Shareholders

Employees

Community

Government & Regulators

NGOs

Media

Competitors

Suppliers

Priority environmental issues for the firm

Integrating Sustainability into BusinessStep 4: Make the PlanIntegrating Sustainability into BusinessStep 4: Make the Plan

For the priority issues:

• Key projects and initiatives

• Targets

• Timelines

• How will you measure success?

Who do you want to be?

• Resources, roles, responsibilities, authorities

• Implementation

• Training

• Communication

• Documentation

• Report to executives

• Continuous improvement

Integrating Sustainability into BusinessStep 5: Roll up your sleevesIntegrating Sustainability into BusinessStep 5: Roll up your sleeves

A good framework:- Environmental Management SystemA good framework:- Environmental Management System

• Policy on the Environment

• Identify environmental aspects

• Identify legal and other requirements

• Objectives and targets

• Resources, roles, responsibilities, authorities

• Implementation

• Training

• Communication

• Documentation

• Report to executives

• Continuous improvement

IV. Banking and the Environment IV. Banking and the Environment

Pop Quiz!Pop Quiz!

• Guess how many of the 9 Global Banks on the CDP’s 2007 “Climate Disclosure Leadership Index” were nationalised, bailed out by taxpayers, or had net losses in 2008?

Most Important thing: Do your core business well

Banking and the EnvironmentUnderstanding Our Environmental aspectsBanking and the EnvironmentUnderstanding Our Environmental aspects

• Emissions trading• Eco-mortgages• Equity Research• SRI funds• Green rewards• E-Statements• Green incentives

• Business loans• Commercial mortgages• Contaminated site development• Corporate lending• Project finance• Clean tech finance• Investment banking

Supply Chain • Paper• Electronics• Office supplies• FurnitureOperations • Electricity use• Paper use• GHG emissions

OperationalFootprint

Responsible Lending

Products & Services

Banking and the EnvironmentUnderstanding Our StakeholdersBanking and the EnvironmentUnderstanding Our Stakeholders

• Climate change and our portfolio

– Financing CO2 intensive versus low CO2 sectors

• Protecting the boreal forest and Indigenous people

– Lending

– Purchasing

– Operations

• Social and environmental review in project finance and underwriting

• Impacts of our Supply-chain (recycled/FSC paper, green power…)

• Do we walk the talk in our daily operations (recycling, energy use..)

• Environmentally-friendly banking options

• Stakeholder relations

• Transparency

• Lower reputation, credit, operational, and legal risk

Service, Strength and Stability

4 year ‘Global Finance Campaign’

Banking and the EnvironmentOur more “Vocal” StakeholdersBanking and the EnvironmentOur more “Vocal” Stakeholders

V. Sustainable Business at RBC V. Sustainable Business at RBC

Avoid LegalLiability

ManageRisks

ReduceCosts

Sell NewProducts& Services

IntegrateInto Strategy

Donate

StakeholdersShareholders

What?

Why?

Why the Environment Matters to RBC ……and what we have to doWhy the Environment Matters to RBC ……and what we have to do

• Risk Management:

– Manage risk in lending & Investment

– Manage environmental risks in our own operations (real estate and purchasing)

• Return

– Develop environmentally-friendly Products and Services

– Improve efficiency in operations

– Engage employees to secure loyalty and retention

• Reputation

– Differentiate ourselves

– Demonstrate thought leadership

– Transparency in Reporting and Communications

– Philanthropy

Sustainable Business at RBCSustainability LeaderSustainable Business at RBCSustainability Leader

Sustainable Business at RBC Environmental StrategySustainable Business at RBC Environmental Strategy

Vision:Vision:• To be the leader among Canadian financial institutionsleader among Canadian financial institutions and top tier

among US peers in identifying, managing, and championing environmental issues, helping make RBC the first choice for clients, shareholders, and employees.

Objectives:Objectives:• RisksRisks managed

• Drive returnsreturns

• Protect and enhance reputationreputation

Implementation:Implementation:• Corporate Environmental Affairs (CEA) is responsible for leading RBC in

responding to environmental issues that give rise to risk, impact returns, or may affect reputation

• CEA Team comprises 4 professionals: Director, Senior Manager Environmental Risk, Senior Manager Environmental Initiatives, Manager Environmental Solutions

Sustainable Business at RBC Our Key StakeholdersSustainable Business at RBC Our Key Stakeholders

• ShareholdersShareholders - made resolutions in 2005, 2006, 2007, and 2008 to Canadian banks on climate change, biodiversity, and linking executive compensation to sustainability performance

• Clients and the General PublicClients and the General Public are requesting CSR info. 40% of Canadians are “Strong Environmentalist Buyers” – Likely to pay more for “green”,

• 91.3% of RBC employeesRBC employees said it was Very Important to work for a company with a strong record of corporate social responsibility. Environmental and CSR initiatives are having a direct impact on firms' attractiveness to potential new recruits and are a determining factor in employee retention and engagement rates (UK-based Research, 2007).

• Analysts & RegulatorsAnalysts & Regulators, including Dow Jones Sustainability Index, Jantzi Research, Carbon Disclosure Project, Desjardins Environment Fund, Securities Regulators, PAS, etc are demanding transparency

• Environmental activistsEnvironmental activists, like Forest Ethics; Rainforest Action Network; and Bank Track want banks to be responsible for who they lend to

Sustainable Business at RBC RBC’s Environmental BlueprintSustainable Business at RBC RBC’s Environmental Blueprint

• RBC has a solid track record of environmental management, starting with first Policy on Environment and Environmental Risk Manager in 1992

• Environmental Blueprint is a summary of RBC’s medium and longer term aspirations and commitments

• Publicly released in October 2007 following review and support from the enterprise

• Includes:

– Updated corporate environmental policy

– Priority environmental issues

– Priority activities

– Stakeholder engagement, philanthropy, governance and reporting

Sustainable Business at RBC RBC’s Environmental BlueprintSustainable Business at RBC RBC’s Environmental Blueprint

Priority issuesPriority issues

Priority ActivitiesPriority Activities

i. Reduce our environmental footprint

ii. Risk Management & Responsible Lending

iii. Environmental products and services

Climate Change Forests/Biodiversity Water

Sustainable Business at RBC

i. Reduce our Environmental Footprinti. Reduce our Environmental FootprintSustainable Business at RBC

i. Reduce our Environmental Footprinti. Reduce our Environmental Footprint

• Energy use and GHG emissions

– Green IT initiative

– Lighting Retrofits

– HVAC upgrades

• Green purchasing standards

– Are we buying from responsible companies?

– Green Energy

– Forest Stewardship Council (FSC) certified

– Energy Star

• Paper and water use

– Default duplexing

– Electronic statements

– Tap water preferres

• Waste management (electronic waste? VTB preference?)

Environmental risk is the risk of loss to financial, operational or reputational value resulting from the impact of environmental issues.

• Environmental Review at the Sector level

• Environmental Review at the Borrower level

– Borrower’s ability to manage environmental matters is discussed and considered in Borrower assessment and risk rating, where appropriate

• Environmental review at the transaction Level

– Procedures depend on size and type of transaction

– If real property involved, Phase I ESA is typical starting point

– Client questionnaire to determine management of on-going issues

– Equator principles for project finance

Sustainable Business at RBC ii. Risk Mgmt and Responsible Lending Sustainable Business at RBC ii. Risk Mgmt and Responsible Lending

Sustainable Business at RBC iii. Offering “Green” Products and ServicesSustainable Business at RBC iii. Offering “Green” Products and Services

• Energy Saver mortgages and loans

– Subsidised energy audit, eco-efficient renovation advice, line of credit

• Retail SRI Mutual Funds

• Financing energy efficacy retrofits

– Solar rooftops

• GHG emissions trading, brokerage

• Renewable energy

– Project finance

– Small renewables

• Renewable power investment banking

• LEED certified affordable Housing

There must be a Business Case

VI. What Next for Business and Environmental Sustainability? VI. What Next for Business and Environmental Sustainability? • Streamlining

– Focus on what makes sense for your company

• Eco-efficiency first

– Is there a business case?

– Can it save money?

• Implications of a price on carbon

• Green Procurement

– Supply chain matters

• Consumers weary of greenwash

– Walk the talk

• Making use of committed volunteers

– Employees who care will be urged to contribute

• There is no finish line

– Constantly evolving area

Thank You!

Questions?

sandra.odendahl@rbc.com

www.rbc.com/environment