Environmental, Social & Ethical (ESE) and Reputational Risk Management

We recognise that the activities of our customers can have environmental, social and ethical (ESE) impacts – including polluting activities and the potential for human rights infringements.

ESE risk forms part of NatWest Group’s overall Reputational Risk policy and requires enhanced due diligence to be performed for certain customer relationships, transactions, activities, and projects.

ESE sector risk acceptance criteria (RAC)

To manage these risks, we have developed Risk Acceptance Criteria (RAC) for nine sectors which present heightened ESE risk and define the level of ESE risk the bank is prepared to accept.

The ESE RAC are applicable to corporate customer on-boarding, lending and underwriting, and apply to all legal entities. Some of the activities which we prohibit include; sexual entertainment venues, the manufacture, sale, trade, servicing or stockpiling of Highly Controversial Weapons, new coal relationships and customers using harmful child labour, forced labour, modern slavery or human trafficking.

We also have an ESE risk concerns process which seeks to ensure that ESE risk is identified and managed for customers and transactions in sectors which are not covered by Risk Acceptance Criteria. Examples might include major or sustained environmental, human rights, modern slavery or social issue-related campaigns against a company in sectors such as agriculture/food, chemicals, tobacco, pharmaceuticals and waste management, or companies associated with controversial projects.

All customers who fall into the ‘restricted’ ESE risk category are subject to enhanced due diligence. This includes ensuring that companies have relevant policies and procedures to manage ESE risks and the capacity to manage these risks through good governance and control. It also assesses the companies external ESE track record to ensure that it remains within our ESE Risk Acceptance Criteria.

All restricted customer relationships are approved by an accountable executive and/or a franchise/legal entity Reputational Risk Committee. ESE Risk Framework oversight and effectiveness is provided by the Risk Function and reported annually to the Group Reputational Risk Committee.

Our sector RAC can be found below:

Helping to end the most harmful activity

In early 2023, we announced we will not provide reserve based lending specifically for the purpose of financing oil and gas exploration, extraction and production for new customers, and, after the 31 December 2025 we will not renew, refinance or extend existing reserve based lending used specifically for the purpose of financing oil and gas exploration, extraction and production. 

2022 Customer ESE risk assessments undertaken

In 2022, we undertook 535 customer ESE assessments (2021: 305), and 126 trade-related transactions involving defence equipment (2021: 108). The increase is representative of more cautious approach to assessing customers against risk acceptance criteria in 2022.

Related content

Read more about how we seek to promote and respect human rights through the continued implementation of policies and practices covering our colleagues, customers and suppliers.

Read more about the voluntary set of standards adopted by financial institutions for determining, assessing and managing environmental and social risks in project-related transactions.

Read more about how we are building a bank that is safe, simple and smart.