Environmental and social risk
Environmental and social risk (E&S risk) is the potential for loss or harm, directly or indirectly, resulting from environmental or social impacts or concerns, including climate change related to BMO, our customers, suppliers or clients. Environmental and social factors may give rise to the risk of both direct and indirect impacts over both the short and long term, including but not limited to:
- Climate change
- Pollution and waste
- Energy, water and other resource usage
- Biodiversity and land use
- Human rights
- Diversity, equity and inclusion
- Labour standards
- Community health, safety and security
- Land acquisition and involuntary resettlement
- Indigenous Peoples’ rights
- Cultural heritage
We may indirectly be exposed to financial loss or reputational harm if our customers, suppliers or clients are affected by E&S risk. Our approach to managing E&S risk is part of our Enterprise-wide Risk Management Framework (ERMF).
In 2022, the Bank introduced a new, board-approved Environmental & Social Risk Corporate Policy (E&S Risk CP). The E&S Risk CP provides the foundation for BMO to more fully integrate E&S risk considerations into and across our existing ERMF, as well as increase our ability to identify, assess, manage, monitor, and report on E&S risk. The E&S Risk CP further cements the importance the Bank places on the management of E&S Risk, including by: outlining the board’s expectation regarding integration of E&S risk considerations across the ERMF and noting how E&S risk will be articulated in existing policy documents.
The Enterprise Risk and Portfolio Management and Sustainability teams work with the lines of business and Corporate Services to manage BMO’s E&S risk. This includes integrating E&S risk into our operational and business decision-making processes, including financing and lending activities, and procurement of goods and services. We regularly report to various management committees, forums and Board committees on key developments, including emerging risks, related to sustainability and climate change.
Corporate Audit independently evaluates the quality and effectiveness of internal control, risk management and governance systems and processes within BMO using a dynamic, risk-based plan. Audit results are reported to management regularly. Each quarter the Chief Auditor reports results to the Audit and Conduct Review Committee together with key themes, trends and views of matters of high criticality to the bank.