Our approach to responsible business lending
We finance some socially and environmentally sensitive industries, and our increasing presence in the Asia Pacific region means doing business in some countries with developing legal and governance frameworks.
Our aim is to make balanced, informed and transparent decisions and work with our clients to help them improve their management of business, social and environment risks and to make the most of opportunities.
Our approach is supported by clear policies and guidelines; screening tools and resources; and staff training and education. Our approach, and the decisions that we make are wherever possible informed by stakeholder engagement, and governed by our Reputation Risk Committee.
This Group-wide committee oversees management of social, environmental and reputational risks, particularly in our Corporate and Institutional client portfolio. Complex and controversial issues involving clients, transactions and products are also considered by this committee. The committee is supported by regional and divisional subcommittees to provide global and sectoral coverage wherever ANZ is represented.
ANZ's approach in action
In 2010 we published “Respecting people and communities: ANZ’s approach to human rights” - a set of standards that guide how we interact and promote a culture of respect with employees, customers and communities.
Our standards complement our support for the UN Global Compact, OECD Guidelines for Multinational Enterprises and our application of the Equator Principles to all project finance transactions. They also reflect our commitment to monitor and manage our client’s performance in protecting and promoting human rights, and take consideration of human rights impacts when evaluating prospective clients.
We have embedded our human rights standards into the development and review of client screening tools, lending policies and training initiatives that support and guide our business lending decisions. During 2011, we “rolled out” mandatory social and environmental risk training for all Client Relationship Managers with credit approval discretion, including a module that aims to improve understanding and application of our human rights standards in decision making.
|Resources and Mining|
ANZ had a potentially significant relationship with a mining and resources customer until events through 2009 and 2010 led us to exit the relationship.
We engaged with NGO stakeholders which raised concerns about a prospective project’s impact on the environment and on indigenous peoples. We sought to discuss these issues with our client.
ANZ attended a site visit to the project in early 2010 – but requests to bring independent experts were declined. Similarly, the client had commissioned an independent social and environmental assessment report in 2009, but was unwilling to provide it to ANZ.
Our Reputation Risk governance process provided the framework for us to examine the issues, allegations and client actions at the highest levels of the bank. As a result of this deliberation ANZ decided to exit the relationship with the customer in 2010.
Our stakeholder engagement identified issues of concern regarding the manufacture of cluster munitions by a client. We encouraged and facilitated direct engagement between our client and its stakeholders to discuss the issues.
Subsequently, the client signalled its intention to “wind down” and exit from the production of components used in cluster munitions.
ANZ subsequently revised its Military Equipment policy to reflect a change in expectations of our customers:
“[ANZ] will not be involved with direct financing or contract bonding related to the sale or manufacturing of controversial weapons (specifically cluster munitions and anti-personnel land mines)" and "does not wish to be involved more broadly with customers that are involved in the production of components designed for specific use in these weapons."
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Screening our clients
We work with our corporate customers to assess social or environmental risk.
All new customer relationships are assessed for social and environmental risk. Existing customer relationships are considered on an annual basis, or more frequently if necessary.
Where social and environmental issues are identified, we work with the customer to manage these issues. In some instances we may work with the customer to employ an independent third-party to undertake assessments, and work with our clients to address any impacts. These actions become part of the terms of products or services provided by ANZ.
If a customer relationship is considered to have the potential to impact our reputation or involves material issues of concern to our stakeholders, the lending decision is considered by ANZ senior management through avenues such as our Reputation Risk Committee structure.
We monitor developments and work closely with the client, as well as external stakeholders that have raised specific concerns.
There may be some situations where we are unable to work with a client to manage social and environmental issues. Where the risks identified, or where the risks identified cannot be managed in accordance with ANZ's social and environmental risk requirements, the product or service may be declined.
We are refining our existing suite of resources to create a single screening tool to simplify the practical application of our social, environmental and reputational risk policies and processes. This will better enable the identification and escalation of controversial issues to senior management, including the Reputation Risk Committee.
We have developed a number of screening tools to help to reduce and/or mitigate social and environmental risk in our lending. These include:
- Our Early Alert Review: Our Institutional Relationship Managers are provided with externally sourced social and environmental information relating to current and prospective clients, projects and relevant issues. Depending on the nature and impact of the issue, or an allegation against an ANZ client, our Early Alert Review Committee may request that the business work closely with the client to ensure that mitigating strategies are in place where required.
- Our Reputation Risk Radar: The Radar assists the Early Alert Review Committee to determine next steps in considering a client relationship or specific project.
The Radar is a database of issues and actions whereby social and environmental issues and related clients (existing and prospective) are monitored and ranked (Red, Amber, Green). The information for the Radar is externally sourced from InvestAssure (UK-based consultancy), mainstream and social media, and other publicly available sources.
- For project finance we assess all projects against the Equator Principles
Staff training and education
We have developed training programs to help our staff identify and manage any social or environmental risks in our Corporate and Institutional lending decisions.
In particular, we have developed a mandatory online training program for our corporate relationship managers with the authority to make credit decisions. The training is designed to provide them with an awareness of ANZ’s policies regarding social, environmental and reputation risk. It will also help them identify and implement better processes when dealing with customers.
All Corporate Relationship Managers are required to complete this training module by August 2011.
|Case study: Responsible decisions in our Institutional lending portfolio|
We have facilitated a visit by a respected Australian faith-based organisation to a hydroelectric project in the Mekong region in Laos after representatives of the organisation approached ANZ concerned about social and environmental aspects of the project.
Supported by our customer, a senior official of the organisation undertook a three-day visit to the hydroelectric project in Laos. Prior to the visit, we worked with our customer and the organisation to identify social and environmental issues of concern to the organisation.
ANZ has specific policy settings to guide our involvement in sensitive sectors such as energy, mining and defence. In addition, we also work closely with our customers and stakeholders to better understand issues of concern and facilitate dialogue.
With our support, our customer provided the stakeholder organisation with the opportunity to see first-hand how issues of concern are being managed, and how our customer is working with local people, and seeking to make a positive contribution to the economic and social development of impacted communities.
Importantly, our engagement has also opened an ongoing discussion between the customer and the stakeholder to help ensure issues are brought to our customer's attention in a timely way.
Partnering with WWF-Australia
ANZ’s Institutional division has a partnership with WWF-Australia that is designed to increase awareness and understanding of the environmental sustainability issues that impact the sectors and geographies we operate in and the clients we serve. The following three programs of work will be implemented globally over the duration of the partnership:
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