54 Risk Management

We work proactively with our TD business partners and clients to ensure a common understanding of the nature, extent and potential significance of environmental risks in their business. We review policies, management procedures and performance. We engage with our clients directly to discuss potential risks related to their business undertakings, and we work with them to recommend actions to reduce or mitigate risk.

Financing of Canada’s natural resource sector is both an important part of our business and an essential function for the Canadian economy. Our environmental risk procedures extend to consideration of issues that are not directly linked to federal or provincial regulation. Poor management of issues such as high carbon emissions, management of impacts related to climate change and securing the free, prior and informed consent of Aboriginal Peoples have the potential to increase project costs, delay development schedules or result in a failure to secure a social licence to operate. As part of our proactive approach to risk management, TD monitors and assesses current and emerging environmental and related social issues that may affect our financing portfolio. We monitor these risks through:

• A review of technical information; • Project tracking; • Engagement with clients and stakeholders; and • Participation in multi-stakeholder groups.

TD plays an industry-leading role in convening and participating in multi-stakeholder dialogue to discuss these challenging issues and, where possible, to develop practical guidance. In 2012, TD participated in the development of practical guidance for implementation of free, prior and informed consent in Canada.

Equator Principles

TD has been a signatory to the Equator Principles (EP) since 2007 and is a member of a number of EP working groups. TD is currently participating in the update of the EP, scheduled for completion in 2013.

In 2012, 12 project finance transactions were assessed under the Equator Principles. Sector

Country

Oil and gas extraction Real estate

Canada Canada

+ More details on Equator Principles (PDF) TD 2012 Corporate Responsibility Report EP Category

C C

TOTAL

Number of Transactions

2

10 12

+ Free, Prior, Informed Consent in Canada Report (PDF)

Free, Prior and Informed Consent of Aboriginal Peoples

TD’s Environmental Management Framework (2007) outlines our long-standing commitment to support the principles of free, prior and informed consent (FPIC) for indigenous peoples. Since the majority of our resource-based lending portfolio lies within Canada, we focus on this context.

Some recent important develop- ments on FPIC include:

• Amendments to international agreements – such as the IFC Sustainability Framework and the adoption by Canada of the United Nations Declaration on the Rights of Aboriginal peoples (2007);

• Better definition of FPIC in Canadian case law and incorpora- tion of FPIC into domestic laws and treaty agreements; and

• The increasing profile of FPIC with respect to resource development in Canada.

Collaborating to Develop Practical Guidance

TD is a member of the Boreal Leadership Council, a leadership group comprising conservation groups, Aboriginal groups, resource companies and financial institutions. Members of the council are signatories to the Boreal Forest Conservation Framework.

In 2012 the council produced a report: Free, Prior, Informed Consent in Canada. The report is a first step in developing practical guidance for implementa- tion of FPIC by resource developers and Aboriginal communities. It summarizes:

• The unique Canadian context for FPIC;

• Key issues and challenges in implementing FPIC;

• Recent case studies; and

• Lessons learned and best practices.

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