New Application

Are your 'Know Your Client' procedures sufficiently identifying and evaluating key sustainability risks posed by prospective forestry clients?

Understanding the sustainability challenges of new clients and the risks they pose to the bank presents a challenge to financial institutions carrying out sustainable lending activities.  Banks' know your client (KYC) procedures involve a number of considerations, including credit risk, compliance and increasingly, sustainability risks. Failure to adequately manage client risks can lead to substantial financial, legal and reputational liabilities for the bank. As these risks to financiers grow in frequency and materiality, it is becoming increasingly important for banks to have adequate KYC procedures in place for evaluating new clients' sustainability performance.

The toolkit

The Sustainable Forest Finance Toolkit provides an illustrative client evaluation procedure to assess the sustainability credentials of prospective new clients. This procedure is most effective when integrated into the bank's existing overall KYC process.

The New Application section of the Sustainable Forest Finance Toolkit has four key components:

1. A client evaluation decision tree to help identify higher risk prospective customers and transactions
2. A sample interview template to assess and document prospective clients' environmental and social risks
3. An illustrative approach to higher risk clients where additional client due diligence is recommended
4. Concise briefings on key risks and opportunities in the forestry, paper and packaging sectors

How PwC can help

PwC has experience providing a range of sustainability services to leading financial institutions:

• Design and support implementation of integrated sustainability risk management frameworks
• Case study based workshops and programmes on sustainability risk management
• Transaction reviews and due diligence on prospective clients
• Advice on business opportunities related to sustainable forest financing, including carbon markets
• Bespoke integration of screening procedures into the industry recognised online risk management tool - the Sustainable Finance Toolkit

Forest, paper and packaging companies interested in improving their sustainability performance, please contact Chris Knight