Banking and finance transactions

Banking and finance and environmental issues

Banks and other commercial lenders must consider environmental, climate change and sustainability issues and risks, both when formulating and applying their lending policy and in the conduct of their business. Lending decisions in relation to large-scale or long-term projects (eg infrastructure or real estate) must take account of factors such as projected climate change impacts and the capital and operational costs arising from new and enhanced regulation.

Lending decisions in relation to corporate and commercial transactions (eg share purchase, mergers or acquisitions) must include adequate assessment of the target's actual or contingent environmental risks and liabilities. These include:

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potential impact on the value of assets (eg remediation or other clean-up costs)
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operational risks (eg suspension or revocation of an environmental permit or other necessary licence)
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reputational risks (eg pollution incidents or perception of poor environmental or sustainability performance adversely affecting share prices)

The interaction of direct and reputational risks, and at least a short-term risk of adverse impact on value, was evident on a large scale following the Deepwater Horizon explosion and oil spill in

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