Written by: Harvin Bhathal, Peak Associate
According to the latest Banking on Climate Chaos report, published in March 2021, Canada’s five largest banks have invested $726 billion CAD into the fossil fuel industry since the Paris Agreement — a legally binding international treaty regarding the climate crisis.
From 2016 to 2020, the breakdown of investments in CAD were:
- RBC — $208 billion
- TD — $157 billion
- Scotiabank — $148 billion
- BMO — $126 billion
- CIBC — $87 billion
While these banks reduced their fossil fuel financing in the past few years, RBC and TD respectively rank 23rd and 25th in the world in terms of their total assets contributed to fossil fuel companies since 2016.
RBC was also the “top funder of tar sands oil in 2020,” with their Line 3 pipeline. The bank has financed existing facilities and pipelines; they have also invested $79 billion into companies actively expanding their fossil fuel production.
In February, RBC committed $500 billion to sustainable financing by 2025. TD, Scotiabank, BMO, and CIBC have also committed varying investments into sustainable financing.
According to earth scientist David Hughes, the continued investment of RBC and other banks in the oil and gas sector will make Canada’s 2030 carbon emissions target difficult to reach. “A stark change in direction is needed,” he said in his Canada’s Energy Sector report.
In an interview with CBC, RBC discussed how its net-zero transition must be gradual and “done in an inclusive manner that brings all sectors and communities along or we won’t achieve the support we need to meet these goals.”
Stephanie Bertels, director of the Centre for Corporate Governance and Sustainability told The Peak, “A huge challenge right now is in articulating what would qualify as a sustainable asset.”
According to the Organization for Economic Co-operation and Development (OECD), sustainable assets range from those “that seek to do no harm” to “seeking positive impacts.” Impact-based investments are “the only form of financing that requires an actual assessment of positive impact.” A majority of investments are not defined as impact-based, meaning there is a “lack of transparency” in the process.
RBC’s most recent fossil fuel investment was issued the same month as their sustainability commitment: a $1 billion sustainability-linked loan for Enbridge’s Environmental, Social, and (Corporate) Governance (ESG) goals. ESG goals are criteria corporations must meet to make environmentally and socially conscious investments.
However, the increase in loans linked to ESG has brought questions about their legitimacy as the criteria and standards are fragmented. They can differ from institution to institution as one may have different criteria or standards for what is sustainable than another.
Along with their commitment, RBC joined the Partnership for Carbon Accounting Financials (PCAF) and RMI’s Center for Climate-Aligned Finance.
The PCAF “provides methodologies for financial institutions to measure the [carbon] emissions financed through loans and investments.” This can be seen in Vancity’s pilot carbon accounting work on residential mortgages and their associated emissions.
Bertels said the next challenge is creating universal frameworks for what constitutes sustainable financing.
Hughes found, “The oil and gas sector alone will cause Canada to exceed its Paris Agreement emissions target.” The agreement aims for an 80% reduction from Canada’s 2005 emission levels by 2050. The sector is an obstruction to Canada’s net-zero targets adopted in Bill C-12. ”
Currently, oil and gas production “account for 26[%] of Canada’s total” carbon emissions and Canada has “only reduced its emissions by 1.2[%] from 2005 levels,” according to the most recent data from 2019.
Bertels said banks have a civic responsibility to address the impacts of the climate crisis.
“More importantly, they have a fiduciary responsibility to do so.”
Bertels noted that this responsibility has been made “abundantly clear” through the work of the Task Force on Climate-related Financial Disclosures (TCFD) and the UN’s Net-Zero Banking Alliance. They are the two biggest actors “that have influenced financial institution behaviour with respect to climate change.”
The Banking on Climate Chaos report is a collaboration between Rainforest Action Network, Banktrack, Indigenous Environmental Network, Oil Change International, Reclaim Finance, and Sierra Club. More information on the fossil fuel financing of Canada’s banks can be in the Banking on Climate Chaos report.
