Responsible business lending

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

Human rights

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.

Implementation priority

Progress to date

Integrating our human rights standards into our Institutional customer lending screening and sustainability training programs.

We have rolled out a mandatory online training program to help our Client Relationship Managers (CRMs) identify and manage any environmental and social (including human rights) risks in our lending decisions. More than 2000 CRMs are required to complete this training by August 2011.

Embedding our standards into our Global Sourcing Policy and Supplier Code of Practice; and working with stakeholders to develop a robust and pragmatic approach to implementation, verification and compliance across our region.

We have strengthened and expanded our Global Sourcing Framework to further embed our Code of Conduct and Ethics, business values and human rights standards.

A new Global Sourcing Policy defines the principles and acceptable behaviours expected of all employees, consultants and contractors when engaging in Sourcing Activities on behalf of ANZ. Mandatory compliance with our human rights standard is explicitly stated within the ‘Employee roles and responsibilities’ section
A new Supplier Code of Practice sets out our minimum principles in the areas of governance; workplace relations, occupational health and safety, ethical business practices and environmental management. The Code is to be integrated into all new supplier agreements across our global operations.
We have established a partnership with International Business Leaders Forum (IBLF) to develop a robust approach to implementation, verification and compliance of our Code of Practice across our region - ensuring that our human rights standards are applied in a manner which is respectful of local conditions and cultures.
We have commenced a multi-stakeholder dialogue involving IBLF and Australian security service providers to inform the development of a global process to monitor compliance against our human rights standards in this category.
In the coming months we will conduct sustainability training for all sourcing category managers, which includes a dedicated human rights module.

Reviewing our Group-wide People policies to ensure global alignment and clear governance processes are in place.

We have completed a review of our People policies and reduced the total number of policies from 2047 to 109. Over 60 of these are global in scope (some of which include country specific schedules), including a Global Equal Opportunity, Bullying & Harassment Policy, Global Parental Leave Policy, Global Study Assistance Policy. The remaining policies are country specific, taking into account differing cultures and legislative requirements across the 32 countries in which we operate.

For many of our employees, particularly in the Asia Pacific region, this is the first time that we have made such entitlements available. An example of this is having access to study assistance and leave to aide in professional development.

Throughout May, we will be conducting training sessions with our human rights team in all 32 countries of operation. This training aims to ensure any future People policy development aligns with the principles of our Global Policy Governance Framework and our human rights standards.

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. Read about ANZ’s Reputation Risk Management Committee

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.

Read about ANZ’s Reputation Risk Management Committee

Military equipment
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." Read ANZ's Defence Policy (PDF 30kB)

Military equipment

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."

Read ANZ's Defence Policy (PDF 30kB)

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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.

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:

Programs	Goal
Awareness	Aims to raise ANZ Institutional’s awareness of environmental sustainability issues in the sectors and geographies in which Institutional operates, including issues with potential impact on clients and ANZ Institutional’s business. The program includes briefings on current emerging issues for senior Institutional management.
Education	WWF-Australia will work with ANZ Institutional in developing specific training programs aimed at enhancing the consideration and understanding of sustainability issues in ANZ Institutional’s decision making. The program includes training for key Institutional staff working in high environmental risk sectors.
Information	The program includes the development of sector/geography information sheets on environmental issues relevant to Institutional and our clients. The program also aims to utilise WWF-Australia as a source of reference to provide information on specific environmental sustainability issues relating to clients, transactions, sectors and jurisdictions.