Lending, Credit and Project Financing

Environmental and Social Credit Risk Process

Equator Principles

Carbon Sensitivity

Carbon Sensitivity of TD’s Lending/Credit Portfolio

Environmental and Social Risk Assessment

Lending, Credit and Project Financing
Performance

TD’s Environmental & Social Risk Policy for Non-Retail Credit Business Lines establishes common standards for identification and management of environmental and social risk across non-retail lending operations, including due diligence requirements. The policy applies to general corporate purpose, project and fixed-asset financing. Within the Wholesale Bank, the policy is implemented through the following approach:

Step 1

High-Level Screen

A high-level screen is applied against all borrowing accounts to identify any activities that are prohibited under TD’s Environmental Management Framework.

Step 2

Social and Environmental Assessment (SEA)

This step assesses a client’s commitment, capacity and track record based on regulatory issues and other material environmental risks, stakeholder engagement and, where applicable, issues relating to free prior and informed consent of Aboriginal Peoples.

Step 3

Equator Principles Categorization Tool

This tool is applied where a project or fixed asset is being financed.

Step 4

Sector-Specific Due Diligence Guides

Guides have been developed for environmentally sensitive sectors.
TD’s Environment team maintains tools and resources to support credit risk managers.

Step 5

Escalation

If an application scores high for environmental sensitivity, TD Environment help assess if any action can be taken to reduce the environmental or social risk.

In cases where risk remains high the escalation process moves through Credit Risk Management and may proceed ultimately to TD’s Reputational Risk Committee.

This process is designed to ensure that environmental and social risk is proactively managed across TD; a scaled-down version is applied to most other TD businesses involved in credit and lending. All clients and projects are screened for adequacy of environmental and social policies, management systems and performance.

TD has been a signatory to the Equator Principles since 2007. We’ve incorporated the Equator Principles within our Social and Environmental Credit Risk Policy.

Find out more about the Equator Principles.

While there is currently no federal legislation in North America relating to carbon emissions, we have identified potential business risk associated with high levels of carbon emissions. This risk occurs through exposure to future federal regulations, state or provincial regulations, energy or electricity costs and reputational risk. We have assessed the carbon sensitivity of our lending portfolio, by sector.

Sectors that rate high for carbon sensitivity include: automotive, chemical, pipelines, oil and gas, power and utilities.
Sectors that rate moderate for carbon sensitivity include agriculture, construction, food and beverage, forestry, manufacturing, metals and mining, and transportation.

		2010	2009
Low	(%)	91.5	89.1
Moderate	(%)	5.3	6.4
High	(%)	3.2	4.5
Total Lending	($ millions)	267,352	264,844

TD continues to have low overall exposure to high-carbon emitting industries. We also saw an increase of 100% in our Cleantech lending book, between 2009 and 2010. This increase is largely due to more investment in renewable energy by integrated energy companies.

Equator Principles Category A

Equator Principles Category B

Equator Principles Category C

Total Projects

The following North American projects were reviewed according to the Equator Principles.

In addition to the Equator Principles review, four potential financing deals were escalated to TD Environment through the credit risk process. These deals were in the power generation and mining sectors.

Risk Mitigation		2010
Number of escalated financing deals reviewed by TD Environment		4

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