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Environmental and Social Risk Management

Helping clients, and our company, manage complex non-financial matters

Download the full ESRM framework (PDF)

As a provider of financial services for customers in nearly every sector of the economy and around the world, it is imperative that we consider the environmental and social impacts of our lending and investments in addition to the traditional financial risk. We seek to adhere to global best practices for managing environmental and social risk. Our Environmental and Social Risk Management (ESRM) Framework and policies include due diligence requirements that help us identify, evaluate, and manage these complex issues.

Sensitive industries

We look at the full spectrum of risks and various other factors when we consider financing any sector, company, or project-specific transaction. We have identified a handful of sectors with inherent, elevated environmental and/or social risk. We engage with industry experts and community organizations to maintain a deep understanding of specific environmental and social risks associated with sensitive industries. Transactions with customers in these sectors are subject to environmental and social due diligence pursuant to ESRM policy and our ESRM Framework.  

Arms and armaments

The arms and armaments industry is heavily regulated by U.S. and international regulations due to the inherently dangerous nature of its products. Additional due diligence and social risk ratings are assigned to all customers in this sector. We analyze licensing and regulatory compliance; involvement in the manufacture, distribution, or sale of high-risk armaments, firearms, and accessories; reputation risk incidents; human rights; and implementation of risk mitigation practices.

Coal and metal mining

We analyze a company’s ability to mitigate risk associated with impacts on community, human rights and Indigenous Peoples, greenhouse gas (GHG) and other emissions such as dust particles, water and waste management, health and safety, natural resources and biodiversity, and sensitive geographies.

Consumer finance

To address the risks associated with providing commercial credit and certain support services to in-scope consumer finance businesses within Commercial Banking and Corporate & Investment Banking, the Consumer Compliance Risk Assessment (CCRA) evaluates the risks associated with a client’s activities and assesses the state of the client’s compliance management system. CCRA is separate from ESRM, and is housed within Wells Fargo Securities Asset Backed Finance.

Equator Principles transactions

We adopted the Equator Principles in 2005 to support minimum best practices in the financial services industry for project finance. The Equator Principles are an industry framework to determine, assess, and manage social and environmental risks and impacts associated with large scale projects globally. The framework is based on the major policies and principles set by International Finance Corporation (part of the World Bank Group). As a signatory, we will provide loans and advisory services only to those projects whose borrowers can demonstrate their ability and willingness to comply with the Equator Principles requirements for categorizing, assessing, and managing environmental and social risks.

Oil and gas

Due to the heightened environmental and social risk inherent in certain types of extraction, processing, and transportation methods, we have developed activity-specific due diligence processes, including tar sands oil, Arctic oil and gas, offshore/deep-water operators, fracked gas, long-haul pipelines that cross state boundaries or potentially sensitive geographies, and large refineries and terminal stations, particularly those near potentially sensitive geographies and vulnerable populations. Our due diligence evaluates risk associated with impacts to natural resources and biodiversity, GHG and other air emissions, water and waste management, health and safety events, impacts on communities, and human rights impacts on vulnerable populations, such as Indigenous Peoples.

Companywide policy restrictions and prohibitions

Wells Fargo has internal policies that prohibit lines-of-business from knowingly accepting or opening new accounts or relationships (or renewing existing accounts or relationships) with certain types of clients or industries. Additional prohibitions related to clients, products, or business activities exist at the line-of-business level. Under these policies, any business or business activity that is illegal under applicable law for the jurisdiction, including state or federal law, is prohibited, and we will not knowingly finance or take deposits from individuals or businesses engaged in, or deriving income from, illegal activities. Wells Fargo currently does not directly or indirectly provide new financing, or is in the process of exiting existing relationships or reducing our exposure as contracts expire, for the following activities or customers involved in them:

  • Coal industry, including companies deriving profits from mountaintop removal coal operations, or any project associated with the expansion of an existing or development of a new coal mine or new coal-fired power plant
  • Equator Principles in-scope transactions in the Alaskan Arctic region
  • Modern slavery, servitude, forced or compulsory labor (including child labor), and human trafficking
  • Private prison companies and immigrant detention centers

Companywide focus areas

Climate change

We believe that climate change is one of the most urgent environmental and social issues of our time. When serving customers, we utilize a risk-based approach to identify, assess, and manage environmental and social considerations, including climate change. We apply internal policies and monitoring capabilities to assess where climate-driven risks may adversely impact a customer’s near- and long-term environmental, social, and financial performance.

Human rights

We recognize the role corporations play in society, and we understand our responsibility to respect human rights in our operations and through our business relationships. At the enterprise level, our Human Rights Statement (PDF) guides our efforts with key stakeholders, including employees, consumers, business customers, and suppliers. The ESRM process includes performing human rights due diligence and analyzing third-party environmental, social, and governance research for sectors subject to our review. We take allegations of human rights abuses seriously. When our research uncovers such allegations or they are brought to our attention, we often engage with our customers to understand their risk management approach and actively monitor developments over time. Our Environmental, Social, and Governance (ESG) Report (PDF) includes detail about our human rights governance, due diligence, grievance mechanisms, training, and collaboration with others. We recognize our role in preventing modern slavery as noted in our UK modern slavery statement (PDF), including human trafficking, both in our operations and in our supply chain.

Indigenous Peoples

We respect Indigenous Peoples’ rights to determine their own way of life on their own lands, according to their time-honored cultures, traditions, and beliefs. We recognize the rights of these communities to meaningful and appropriate consultation regarding issues affecting their sacred lands and natural resources —traditionally owned or otherwise occupied and used.  Our Indigenous Peoples Statement (PDF), developed in consultation with tribal leaders, Indigenous stakeholders, and their representatives, helps guide our decision-making for transactions where indigenous communities may be impacted.