Virgin Money UK PLC (‘Virgin Money UK’ or ‘the Bank’), together with its subsidiary undertakings (which together comprise ‘the Group’), is an independent banking group operating under the Clydesdale Bank, Yorkshire Bank, and Virgin Money brands. This statement relates to the subsidiaries Virgin Money PLC and Clydesdale Bank PLC.
Our ambition is to embed Environmental, Social and Governance (ESG) into all our business practices and to ensure we can realise the long-term opportunities from being a sustainable business and mitigate risks from climate change and social inequality. The purpose of this Statement is to make clear who we lend to and how we view potential clients operating in sensitive sectors. We still have more work to do to embed ESG in our credit policies and across our business. We recognise we must work with our stakeholders to prepare to transition to a low carbon economy.
Our environmental and social impacts are predominately indirect, arising from the provision of financial services to our business and personal customers. Almost all of our customers and clients do not operate in sensitive sectors (see below for detail on specific sectors).
We will continue to review emerging sensitive sectors and work to update this policy statement as material.
Effective risk management is critical to realising the Group’s strategy of pioneering growth, with delighted customers and colleagues, while operating with super straightforward efficiency, discipline and sustainability. The safety and soundness of the Group is aligned to our purpose and is a fundamental requirement to enable our customers and stakeholders to be ‘happier about money’.
The Group controls its levels of credit risk by placing limits on the amount of risk it is willing to take in order to achieve its strategic objectives. This involves a defined set of qualitative and quantitative limits in relation to its credit risk concentrations to one borrower, or group of borrowers and to geographical, product and industry segments. The management of credit risk within the Group is achieved through ongoing approval and monitoring of individual transactions, regular asset quality reviews and the independent oversight of credit decisions and portfolios.
Credit risks associated with lending are managed through the application of detailed lending policies and standards which outline the approach to lending, underwriting criteria, credit mandates, concentration limits and product terms. The Group maintains a dynamic approach to credit management and will take necessary steps if individual issues are identified or if credit performance deteriorates, or is expected to deteriorate, due to borrower, economic or sector-specific weaknesses. Roles and responsibilities for the management, monitoring and mitigation of credit risk within the Group are clearly defined. Significant credit risk strategies and policies are approved, and reviewed annually, by the Credit Risk Committee.
Credit Policy requires that the impact on and risk from climate change, together with other environmental and social risk considerations, is a feature of the credit risk assessment of our customers. Environmental and social risk considerations have not become a material consideration for the majority of our loan book which is to small to medium sized business lending customers.
Anticipating for tomorrow’s risks is key and as our lending will be repaid from future cash earnings, the sustainability of the business activities and practices should be a key consideration within the credit assessment process. In particular, the assessment and ongoing conversations seeks to:
- Identify relevant legislation and / or regulatory requirements that may affect a customer’s business activities
- Assess procedures and policies used by a customer to identify and manage
- Environmental and Social risks they face
- Identify sites where the customer may be subject to environmental licensing, regulatory requirements and current or historical activity which may lead to contamination and environmental liability or cost to rectify the issues
- Considers wider changes, negative and positive, in social expectations on a customer’s business and where engagement with a customer may lead to reputation risk or enhancement for the Bank
- We expect all of our customers to comply with applicable conventions, sanctions and embargoes, legislation, and licensing requirements. We plan to work with our customers to understand their commitment to Environmental, Social and Governance (ESG) and risk management.
The Group’s operations are UK based and our business customers’ operations are substantiallydomiciled in the UK. Non-resident lending, and lending to non-UK registered companies is permitted but typically business activity is located in the UK. Such lending is subject to additional controls to mitigate the additional credit risks.
ESG risks (including climate change) affect all businesses or are likely to in the future, the Bank has identified a number of sectors where these risks are considered heightened. The Bank’s appetite for new or further lending is restricted or limited. These sectors are outline below:
Defence and Armaments
Due to the potential ethical and social risk associated with the manufacture or supply of weapons the Bank does not lend to businesses in the defence sector involved in the manufacture or sale of weapons which are subject to a treaty/convention to which the UK Government are signatories (antipersonnel mines, cluster munitions, nuclear/biological/chemical weapons).
Manufacture or sale of firearms, where all required licencing is held, for sporting use or for personal firearm ownership is permitted.
With the exception of nuclear medicine, the Bank does not lend to businesses involved in nuclear related activity including weapons, power, processing and transportation.
Resources – Mining & Minerals
The Bank does not lend to businesses involved in exploration, extraction or operational related surface or underground coal mining activity.
Mining, quarrying and extraction of other mineral resources where all required licencing is held is permitted. Lending to the mining and minerals sector is restricted to UK based businesses.
Support services to the sector including, but not limited to, the provision of labour, equipment, transport, technical and professional services are permitted.
The bank does not lend to coal-fired power plants.
Resources – Oil & Gas
The Bank does not lend to businesses which generate revenue directly from oil & gas extraction. The Bank has no exposures to businesses directly involved in extracting oil from oil sands, or gas from hydraulic fracturing.
Support services to the oil and gas sector including, but not limited to, the provision of labour, equipment, transport, technical and professional services are permitted.
Lending to carbon intensive manufacturing industries, chemical manufacturing or Tobacco or associated processes are permitted subject to enhanced diligence checks of all relevant licencing requirements and consideration of relevant environmental impacts.
The Bank expects customers to comply with legal requirements and voluntary standards related to animal welfare.
The Bank has no appetite to support businesses operating in:
- Trading in Wildlife and endangered species or products
- For reputational reasons, commercial, non-healthcare related animal testing (including but not limited to cosmetics testing);
- Fur products and activities (not derived from regulated, commercial farming activities)