Mike Lyons

An interview with our Head of Corporate & Institutional Banking

Q: Over the last few years, PNC has enhanced its environmental and social risk management (ESRM) program. Could you talk about this process and what you have learned?

A: When Bill Demchak stepped into his current role as CEO, one of his priorities was to address stakeholder concerns, particularly as they pertained to PNC’s environmental lending practices. As we increased our engagement with our various constituencies, we learned that what our stakeholders often want most is to be heard and to have their specific concerns considered. While we learned where there were gaps in our lending policies and procedures, we also discovered that we were doing a lot of things right and simply had not communicated them well. By proactively communicating with our stakeholders and being transparent about our policies and practices, we’ve received considerable support internally and externally. This in turn has created very collaborative and productive relationships with groups like Boston Common Asset Management and The Rainforest Action Network.

Q: How have our stakeholders responded to our enhanced ESRM efforts?

A: Our efforts around ESRM have really resonated with our stakeholders. First, we have received incredible support and valuable feedback from our Board, which recognizes the importance of CSR in terms of doing the right thing, but also from a recruiting and business perspective. Second, we have received positive feedback from our investors, who increasingly understand the importance of considering long-term environmental risks on our credit portfolio. Our employees have been very supportive of our enhanced environmental due diligence and focus.  And, finally, we can cite specific instances where we have won new customer business directly tied to our refined policies around things like lending to companies engaged in mountaintop removal coal mining.  Furthermore, as PNC has enhanced its environmental lending due diligence, we’ve noticed more companies in environmentally sensitive businesses improving their own CSR efforts and leveraging these efforts to secure financing.

Q: What has been the greatest challenge in implementing PNC’s ESRM policies and procedures?

A: Our greatest challenge is balancing the competing and changing needs of our various stakeholders – for example, a business practice core to one customer may be viewed as environmentally harmful by another customer.  Technology is constantly changing and influencing how are clients do business and impact the environment, which means that our learning is never finished. Instead, we must keep our finger on the pulse of what is happening in the industry, specifically as it pertains to sustainability trends, stakeholder needs and potential new risks. It is critical that we stay on top of these changes so that we can quickly and appropriately respond, when needed.

Q: PNC recently became a signatory to the Green Bond Principles. What drove PNC to sign these principles, and are there others that PNC has considered adopting? Why or why not?

A: We are constantly evaluating various principles to determine which best apply to and could help support our business. We recognized that the Green Bond Principles aren’t only an industry best practice, but they’re consistent with our commitment to sustainable finance and relevant to our client base.

Of course, some principles don’t naturally align with our business model. For example, we’ve chosen not to adopt the Equator Principles for the very simple reason that we are not in the project finance business – it’s just not relevant to our clients or our business model.

We recognize the value of many principles, which often result in greater transparency and structure in a rapidly developing market. That said, we evaluate and assess principles for their potential impact on the company’s risk management, environmental sustainability, stakeholder engagement and business development.

Q: How do you envision our approach to ESRM evolving over the next five years?

A: We know that corporate responsibility will continue to grow in importance, especially as technology and environmental issues evolve. Therefore, we will continue to learn and make thoughtful decisions as we go, and we will continue to engage with our constituents to better understand what’s most important to them. Among other insights, our stakeholders have taught us that in addition to managing risk, we can and should capitalize on business opportunities, such as those related to the transition to a low-carbon economy. We will pursue financing opportunities that support the environment and are consistent with our risk framework.

Mike Lyons
Head of PNC Corporate & Institutional Banking

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