Social & Environmental Risk Management & Governance
Responsible & Sustainable Business Policy
As part of our efforts to build a more socially responsible company, we’re proud to share our Responsible & Sustainable Business Policy. This policy applies to the entire company and all its' activities, providing guidance on our social and environmental business practices, principles and commitments. The policy empowers our employees to act in accordance with our Be FIRST values to help ensure we operate responsibly, inclusively, and sustainably, fulfilling our purpose of financially empowering our communities, reducing the wealth gap and helping all individuals realize life’s exciting moments.
The policy includes the following major sections:
- Roles & Responsibilities
- Responsible & Sustainable Business Culture
- Responsible & Sustainable Business Commitments
- Environmental Sustainability Principles
- Third Party Responsible Business Principles
- Fraud Reporting & Suspicious Activity
- Conflict of Interest
- Exceptions
All employees receive training on the policy and new third party partners are screened against the policy. Please
click here to view the full policy. Additional company policies, including our Business Code of Conduct and Anonymous Reporting Line can be found by visiting our
Investor Relations website.
Social & Environmental Responsibility Risk Management:
Our social and environmental responsibility risk management approach is based on our Enterprise Risk Management program and integrates social and environmental considerations into our due diligence and business processes. The company understands that social, environmental and cultural risks can lead to both reputational and strategic risk affecting both short and long-term stakeholder value as well as our communities. Our approach ensures we implement effective controls and programs to mitigate, monitor and manage those risks.
This includes:
- FDIC Diversity & Inclusion Self-Assessment- Completed annually to assess the strengths and risks of the company's Diversity and Inclusion program, including workplace employment practices, procurement and business practices as well as practices that promote transparency of organizational commitments to Diversity and Inclusion.
- Social Responsibility & Culture Risk Assessments- Completed annually, based on the company's Enterprise Risk Management framework, to ensure there are proper controls in place to monitor, mitigate and control social, environmental and cultural risks. When ineffective controls or new risks are identified, the company implements action plans to improve performance and protect the company and its stakeholders. The final results are reviewed with executive management and the company's Corporate Responsibility & Culture Committee.
- Emerging Risk Briefing(s)- Regular briefs are provided to the credit and lending teams, as well as other impacted business lines, on potential emerging social, environmental and culture risks that could impact business activities. The briefings provide guidance to front line teams to ensure risks are addressed appropriately.
- Social & Environmental Credit Risk Due Diligence
- Standard ESG due diligence is conducted for all transactions when the social, environmental and reputational risks are well understood and expected to be relatively low, site specific or completely reversible for the borrower, business activity, industry or community. Due diligence begins with front line staff and involves credit, risk and lending teams. The process generally includes, but is not limited to, research, ensuring compliance with all federal, state and local laws and permits, assessment of creditworthiness and screening against all applicable company policies and procedures including the prohibited businesses list which includes industries ranging from marijuana businesses to firearms and ammunition manufactures. If, during this process, staff determine the borrower, business activity, industry or community poses heightened social, environmental or reputational risk because the transaction is subject to the Environmental Loan Policy or the Responsible & Sustainable Business Area of the Commercial Loan Policy-Exception Based then an enhanced level of due diligence is conducted.
- Enhanced due diligence includes a deeper analysis of topics, documentation, assessments and risks related to the transaction to ensure the company understands the full environmental, social and reputational impact. These policies and procedures apply to all company operations. Credit, Lending, Risk and Corporate Responsibility teams all play a role in the due diligence process.
- Environmental Loan Policy: A borrower, business activity, or industry requires enhanced due diligence related to environmental topics if it is subject to the company’s Environmental Loan Policy and falls within the company’s list of environmentally sensitive industries. Evaluation of environmental matters take place in accordance with the Environmental Loan Policy. The evaluation is conducted by front line staff in collaboration with the risk management function, subject matter experts and external consultants. The review includes a deeper analysis of environmental assessments and risks related to the transaction to ensure the company understands the full environmental impact and manages risk accordingly. For the most highly sensitive industries, additional documentation, assessments and ongoing monitoring are required.
- Responsible & Sustainable Business- Commercial Loans, Exception Based: Transactions in industries that pose the highest potential for social, environmental and reputational impacts are treated as exception-based loans. This includes any transaction with the oil & gas, mining and chemical sectors as well as private prisons and detention centers. To ensure the Bank proactively manages, mitigates and monitors potential risks to its stakeholders and communities, ensures respect for biodiversity as well as protects critical habitats, the Bank requires a social and environmental impact review for a transaction to proceed through the Bank’s existing exception- based loan approval process. Every transaction is unique and as such requires a customized review. Front line staff, including credit and lending teams work with corporate responsibility to review the transaction and potential social, environmental and reputational impacts. Documentation may be requested as part of this process to determine the borrowers track record, commitment, policies and procedures in place to minimize, manage, mitigate and monitor social and environmental impacts. Generally, transactions that pose significant reputational risks or that will irrevocably harm the environment, stakeholders or a community will not be recommended for approval.
- Prohibited Businesses: Sectors that pose the highest risk for negative social, environmental, reputational and financial impacts are listed as prohibited businesses. This includes, but is not limited to, transactions with the manufacture of ammunition, firearms, small arms and ordnance accessories.
- Business unit leaders are responsible for the ESG and social responsibility performance within their areas as outlined in the company's Responsible & Sustainable Business Policy. All employees receive training and those working in the lending, credit and underwriting process receive additional education on ESG risks as well as the company's Responsible & Sustainable Business Area of its Exception Based loan policy.
- Climate Change- Climate change poses potential risks that could directly or indirectly affect the company. We implemented Environmental Sustainability Principles as part of our Responsible & Sustainable Business Policy and continue to enhance and integrate social and environmental considerations into our due diligence and business processes to proactively address the climate change related risks below:
- Transition Risk- Loans to companies in industries with substantial negative environmental impacts such as those in the fossil fuel industry who do not have plans to address those impacts and transition to a low carbon economy could see a negative impact to their financial health, resulting in an inability to repay debt.
- Reputation Risk- Shifts in consumer preferences to companies that are more (perceived/real) environmentally responsible could impact reputation.
- Physical Risk- Direct short- and long-term effects of more frequent weather or climate related events on a physical asset or property such as homes or businesses in areas along the coast that are prone to flooding, potentially impacting consumers’ ability to repay financial obligations.
Berkshire Hills Bancorp Corporate Responsibility & Culture Committee
The joint Corporate Responsibility and Culture Committee of the Board of Directors of Berkshire Bank and Berkshire Hills Bancorp, Inc., is responsible for overseeing the management of the Company’s enterprise-wide Corporate Social Responsibility, Environmental Sustainability (including climate change), Diversity & Inclusion, and Culture programs. The Committee is appointed by the Board to:
- Review, approve, and recommend programs and policies to the Board that are designed to identify, measure, monitor, control, and enhance Corporate Social Responsibility, including environmental sustainability, Diversity & Inclusion, and Culture performance;
- Oversee management’s implementation of Corporate Social Responsibility, Diversity & Inclusion, and Culture programs to foster belonging, enhance reputation, mitigate risk, promote competitive advantage, engage employees, and meet stakeholder expectations; and,
- Monitor the performance of the Corporate Social Responsibility, Diversity & Inclusion, and Culture programs and policies by setting goals, examining social and culture risks, as well as reviewing opportunities and threats that could affect the Company.
Read the committee's full charter
here.
To learn more about stakeholder engagement, materiality, social & environmental risk management or governance policies, please contact:
csr@berkshirebank.com