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Since 1992, NAB has had environmental credit risk assessment policies and processes.
These help protect our investment, and are consistent with our broader CR objectives to understand and minimise the indirect impacts potentially created by our lending activities.
Our lending and investment policies and processes reflect our corporate principles, changing regulatory requirements, our approach to risk management and our commitment to meeting voluntary standards such as the Equator Principles - which apply to project finance.
Lending transactions across the Group are covered by our environmental credit risk policies.
At the Group level, our policy provides a framework to ensure each of our businesses has policies and processes to identify, assess and manage environmental risks in dealing with customers. Among other things, these policies require that each of our businesses is able to:
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identify environmentally sensitive industries1
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identify relevant environmental legislation and regulatory requirements and assess a customer's compliance with these requirements
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assess how our customers' manage environmental risks
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consider the impact of changes in legislation and regulations on a customer's business
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consider the impact of changes in societal expectations on a customer's business and reputation risk that may be associated with a customer
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assess the risk of liability for environmental issues being transferred to the Group entity.
Our businesses screen general credit applications to see if the environmental credit policies should be applied. They are applied if the lending has the potential to involve environmental risks due to:
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the nature of the industry in which the borrower is involved; or
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the location or nature of the property owned by the borrower - for example, environmentally sensitive sites; or
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an adverse comment made by a valuer in regard to an environmental risk.
Each of our businesses is also required to develop and maintain an environmental risk assessment checklist to guide our bankers through the environmental credit risk assessment process. These checklists are updated as required to reflect changing regulatory requirements and regional operating contexts.
Key elements of our environmental risk assessment include understanding the:
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customer's current operations
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historical uses of a customer's site
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customer's environmental practices, management systems and compliance records
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risk of liability transfer in regard to environmental issues
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nature of any licences, permissions or consents held by a customer
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outcomes of any previous site investigations, environmental surveys or audits
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community concerns in relation to the customer's operations.
Our assessment may also include expert third-party reports, environmental impact assessments, and site visits. This may result in the inclusion of covenants in lending contracts with annual reviews.
It is our policy to encourage customers to establish good environmental management practices and to seek reliable advice on environmental matters. It is also our practice to review and reassess the environmental risk of our lending. Environmental risks and opportunities are discussed in the normal course of customer-relationship management and may be reviewed annually. Through the use of our policies, bankers are able to better identify and manage risks specific to a particular customer.
Credit and risk managers in corporate and business banking units oversee credit quality and provide on-the-job training to bankers so that they can properly apply the environmental risk policy.
Group level policy also requires that we should avoid lending to certain industry sectors. For example:
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industries with which our Group, for ethical reasons, does not wish to be associated. Examples include pornography, arms dealing, and testing on animals.
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non-government regulated gambling.
1 Environmentally sensitive industries or activities are those that: (1) have capacity to contaminate land, water, air or other natural resources; (2) require a licence or permit to use natural resources, without which they cannot operate; (3) require a licence for emissions and discharges, without which they cannot operate; (4) may incur penalties for environmental reasons; (5) may need to remediate contaminated land or install equipment to treat waste
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