Environmentally Sustainable Business: RBC’s Perspective

1. Environmentally Sustainable Business:RBC’s Perspective Sandra Odendahl Director, Corporate Environmental Affairs Royal Bank of Canada Rotman School of Management February 22, 2009

2. Overview • About RBC • Why Sustainability? • Integrating Sustainability into business • Banking and the Environment • Sustainable Business at RBC • What Next?

3. I. About RBC • Assets ~ $655 billion; Market capitalization ~ $77.6 billion. • Approximately 80,000 employees in 50 countries • Major operations in Canada, US, UK and the Caribbean • Over 1700 branches and more than 4,800 ABMs • Business areas: • RBC Canadian Banking (~44% of revenue) • RBC Capital Markets • RBC Wealth Management • RBC US and International Banking • RBC Insurance Largest Canadian bank, 5th largest bank in North America Largest Company on the TSX

4. II. Why Environmental Sustainability?

5. II. Why Environmental Sustainability?What’s in it for Business Challenging economic conditions, heightened competition, volatile markets • Greater need for • breakthrough messagingand clear differentiation; reduce costs, innovate Company must tap into need for relevance, authenticity, perspective – clients and employees Society’s priorities have evolved – Baby-boomers want balance of Wealth, Wellness and World Expectation that major companies will fill the void Limited government leadership and money Our sustainability strategies must reflect these new realities

6. III. Integrating Sustainability into Business - Components • Governance • Board of directors commitment • Executive support and leadership • Staff • Committees and/or champions • Policy • Strategy • Priorities • Initiatives • Targets • Performance measures • Execution • Results The Challenge is Getting the Strategy Right…..

7. Integrating Sustainability into BusinessStep 1: Who are you? • Know how your business works. Make sure you are doing your core business well • All the CSR and environmental programs in the world won’t help if you aren’t paying attention to your core business • Sustainability includes “financial sustainability”

8. Integrating Sustainability into BusinessStep 2: Your Company & the Environment Understand your environmental aspects. • Understand your inputs, operations, and outputs • Where does the natural environment affect your business? • How does your business affect the natural environment? Supply chain (indirect impacts) Products/ Services Operations Waste: to air, water, and land

9. Understand your stakeholders Who are they? Which ones do you really care about? What do they expect? Integrating Sustainability into BusinessStep 3: Who Cares? Clients Shareholders Employees Community Government & Regulators NGOs Media Competitors Suppliers Priority environmental issues for the firm

10. Integrating Sustainability into BusinessStep 4: Make the Plan For the priority issues: • Key projects and initiatives • Targets • Timelines • How will you measure success? Who do you want to be?

11. Integrating Sustainability into BusinessStep 5: Roll up your sleeves • Resources, roles, responsibilities, authorities • Implementation • Training • Communication • Documentation • Report to executives • Continuous improvement

12. A good framework:- Environmental Management System • Policy on the Environment • Identify environmental aspects • Identify legal and other requirements • Objectives and targets • Resources, roles, responsibilities, authorities • Implementation • Training • Communication • Documentation • Report to executives • Continuous improvement

13. IV. Banking and the Environment Pop Quiz! • Guess how many of the 9 Global Banks on the CDP’s 2007 “Climate Disclosure Leadership Index” were nationalised, bailed out by taxpayers, or had net losses in 2008? Most Important thing: Do your core business well

14. Banking and the EnvironmentUnderstanding Our Environmental aspects Products & Services Operational Footprint Responsible Lending • Supply Chain • Paper • Electronics • Office supplies • Furniture • Operations • Electricity use • Paper use • GHG emissions • Business loans • Commercial mortgages • Contaminated site development • Corporate lending • Project finance • Clean tech finance • Investment banking • Emissions trading • Eco-mortgages • Equity Research • SRI funds • Green rewards • E-Statements • Green incentives

15. Banking and the EnvironmentUnderstanding Our Stakeholders • Climate change and our portfolio • Financing CO2 intensive versus low CO2 sectors • Protecting the boreal forest and Indigenous people • Lending • Purchasing • Operations • Social and environmental review in project finance and underwriting • Impacts of our Supply-chain (recycled/FSC paper, green power…) • Do we walk the talk in our daily operations (recycling, energy use..) • Environmentally-friendly banking options • Stakeholder relations • Transparency • Lower reputation, credit, operational, and legal risk Service, Strength and Stability

16. Banking and the EnvironmentOur more “Vocal” Stakeholders 4 year ‘Global Finance Campaign’

17. V. Sustainable Business at RBC What? Reduce Costs Sell New Products & Services Integrate Into Strategy Avoid Legal Liability Manage Risks Donate Why? Stakeholders Shareholders

18. Why the Environment Matters to RBC ……and what we have to do • Risk Management: • Manage risk in lending & Investment • Manage environmental risks in our own operations (real estate and purchasing) • Return • Develop environmentally-friendly Products and Services • Improve efficiency in operations • Engage employees to secure loyalty and retention • Reputation • Differentiate ourselves • Demonstrate thought leadership • Transparency in Reporting and Communications • Philanthropy

19. Sustainable Business at RBCSustainability Leader

20. Sustainable Business at RBCEnvironmental Strategy Vision: • To be the leader among Canadian financial institutions and top tier among US peers in identifying, managing, and championing environmental issues, helping make RBC the first choice for clients, shareholders, and employees. Objectives: • Risks managed • Drive returns • Protect and enhance reputation Implementation: • Corporate Environmental Affairs (CEA) is responsible for leading RBC in responding to environmental issues that give rise to risk, impact returns, or may affect reputation • CEA Team comprises 4 professionals: Director, Senior Manager Environmental Risk, Senior Manager Environmental Initiatives, Manager Environmental Solutions

21. Sustainable Business at RBCOur Key Stakeholders • Shareholders - made resolutions in 2005, 2006, 2007, and 2008 to Canadian banks on climate change, biodiversity, and linking executive compensation to sustainability performance • Clients and the General Public are requesting CSR info. 40% of Canadians are “Strong Environmentalist Buyers” – Likely to pay more for “green”, • 91.3% of RBC employees said it was Very Important to work for a company with a strong record of corporate social responsibility. Environmental and CSR initiatives are having a direct impact on firms' attractiveness to potential new recruits and are a determining factor in employee retention and engagement rates (UK-based Research, 2007). • Analysts & Regulators, including Dow Jones Sustainability Index, Jantzi Research, Carbon Disclosure Project, Desjardins Environment Fund, Securities Regulators, PAS, etc are demanding transparency • Environmental activists, like Forest Ethics; Rainforest Action Network; and Bank Track want banks to be responsible for who they lend to

22. Sustainable Business at RBCRBC’s Environmental Blueprint • RBC has a solid track record of environmental management, starting with first Policy on Environment and Environmental Risk Manager in 1992 • Environmental Blueprint is a summary of RBC’s medium and longer term aspirations and commitments • Publicly released in October 2007 following review and support from the enterprise • Includes: • Updated corporate environmental policy • Priority environmental issues • Priority activities • Stakeholder engagement, philanthropy, governance and reporting

23. Sustainable Business at RBCRBC’s Environmental Blueprint Priority issues Priority Activities • Reduce our environmental footprint • Risk Management & Responsible Lending • Environmental products and services Climate Change Forests/Biodiversity Water

24. Sustainable Business at RBC i. Reduce our Environmental Footprint • Energy use and GHG emissions • Green IT initiative • Lighting Retrofits • HVAC upgrades • Green purchasing standards • Are we buying from responsible companies? • Green Energy • Forest Stewardship Council (FSC) certified • Energy Star • Paper and water use • Default duplexing • Electronic statements • Tap water preferres • Waste management (electronic waste? VTB preference?)

25. Sustainable Business at RBCii. Risk Mgmt and Responsible Lending Environmental risk is the risk of loss to financial, operational or reputational value resulting from the impact of environmental issues. • Environmental Review at the Sector level • Environmental Review at the Borrower level • Borrower’s ability to manage environmental matters is discussed and considered in Borrower assessment and risk rating, where appropriate • Environmental review at the transaction Level • Procedures depend on size and type of transaction • If real property involved, Phase I ESA is typical starting point • Client questionnaire to determine management of on-going issues • Equator principles for project finance

26. Sustainable Business at RBC iii. Offering “Green” Products and Services • Energy Saver mortgages and loans • Subsidised energy audit, eco-efficient renovation advice, line of credit • Retail SRI Mutual Funds • Financing energy efficacy retrofits • Solar rooftops • GHG emissions trading, brokerage • Renewable energy • Project finance • Small renewables • Renewable power investment banking • LEED certified affordable Housing There must be a Business Case

27. VI. What Next for Business and Environmental Sustainability? • Streamlining • Focus on what makes sense for your company • Eco-efficiency first • Is there a business case? • Can it save money? • Implications of a price on carbon • Green Procurement • Supply chain matters • Consumers weary of greenwash • Walk the talk • Making use of committed volunteers • Employees who care will be urged to contribute • There is no finish line • Constantly evolving area

28. Thank You! Questions? sandra.odendahl@rbc.com www.rbc.com/environment