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A leasing company provides a physical asset or service for use by a commercial client or individual for an established period of time (sometimes with provisions to purchase asset at the end of the contract) in return for regular payments, known as financial leasing. The lessee is the receiver of the assets or services under the lease contract and the lessor is the owner of the assets or provider of services. Leasing assets include passenger vehicles, light duty trucks, furniture, office equipment, appliances, and heavy equipment, such as earth movers, large machines, industrial equipment, ships, heavy duty trucks, and airplanes. In some cases, a leasing company both owns and services the leased physical asset and is responsible for installing and operating the asset, which is known as operational leasing.

A leasing company’s exposure to environmental and social risks will be more significant for transactions involving specialized or heavy equipment and machinery for use in certain industry sectors, where liability or reputational risk may be of concern. A leasing company that provides operational leases may be directly responsible for environmental and social impacts such as land contamination and worker safety arising from use of the physical asset.

The leasing company can manage these risks by integrating environmental and social risk management procedures into its overall risk management framework.

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