Toronto-Dominion (TD) is primarily a retail bank. At the close of 2012, 88% of the company’s lending and credit activities were connected to personal and residential accounts. The remaining 12% relates to wholesale banking undertaken by TD Securities and commercial lending focused on companies based in North America.
Banks that offer lending services have significant exposure to the indirect environmental risks associated with their financing activities. In an effort to analyze and attempt to minimize these risks, banks should have strong environmental and social policies and assessment tools. Banks involved in project finance should also participate in industry initiatives such as the Equator Principles (EP).
TD Bank has embedded the Equator Principles within its Environmental and Social Risk Policy to ensure they are applied to all forms of wholesale and commercial banking transactions, not just project finance. Additional sector-specific guidance has been developed for environmentally sensitive sectors. For example, TD will not finance transactions relating to activities within World Heritage sites, activities involving the purchase of timber from illegal logging operations, or mountaintop removal coal mining.
According to a 2012 Global Sustainable Investment Alliance report, at least $13.6 trillion worth of professionally managed assets incorporate ESG concerns into investment selection and management.1
TD Bank offers the TD Global Sustainability Fund, a fund that invests primarily in companies around the globe that are viewed as best in class with respect to ESG factors and environmental specialists in the areas of clean energy, water, and resource efficiency.
Banks can encourage environmental stewardship through their products and services. For instance, banks can offer green mortgages with better rates or terms to buyers with energy efficient homes. Green credit cards can be used to support local charities and green checking accounts may reward customers with higher rates for personal behaviors that reduce individual impacts.
TD Bank offers a range of green products. For instance, in 2010 the company launched an innovative financing program for the development of small-scale renewable projects by home and business owners, farmers, and building contractors. TD also offers insurance discounts for customers owning hybrid or electric vehicles.
TD publishes a sustainability report, however the bank does not report absolute or normalized metrics across its key performance indicators. Portfolio 21 has requested that the company provide these metrics and set future reduction targets aimed at minimizing the company’s direct environmental impact.
Despite TD’s strong ESG risk assessment tools and procedures and the Bank’s Global Sustainability Fund, TD is not a signatory to the UNPRI. Portfolio 21 believes this to be an opportunity for TD to further reduce its ESG risk, specifically across its investment portfolios.
To the best of our knowledge the above information is accurate and was obtained from sources we believe to be reliable. Neither the information presented above nor any opinion expressed shall be construed as an offer to sell or a solicitation to buy the security. The views expressed are those of portfolio management as of 5/31/14 and may not reflect current opinions or subsequent events.