In energy-dependent Canada, banks and investors are faced with the dilemma of meeting Reuters’ emissions target

© Reuters. FILE PHOTO: A Royal Bank of Canada logo can be seen on Bay Street in the heart of Toronto’s financial district

By Nichola Saminather

TORONTO (Reuters) – Canadian banks’ pledges of “net-zero funded issuance” by 2050 have cast doubt on many investors in the absence of a defined goal, details and continued support for oil and gas companies, albeit in part aim to help transition to alternatives.

However, their growing funding for green projects also presents a dilemma for shareholders who may wish to dispose of them.

The situation illustrates the largely Canadian dilemma that both banks and their investors face. Even in their quest to cut funding for large emissions producers, lenders cannot withdraw from an industry that accounts for about a tenth of the economy, despite the fact that it is responsible for more than a quarter of emissions.

Over the past five months, the Royal Bank of Canada (RBC), Toronto-Dominion Bank and the Bank of Montreal have announced plans to achieve net zero emissions, but details such as a definition of that target, tentative reduction targets and plans have been lacking for a move away from traditional energy sources.

The six largest banks account for nearly 90% of the industry’s revenue while making strategic changes, including climate change initiatives, leaving shareholders with few local alternatives.

“The challenge with the current drive to dispose of banks for their stake in fossil fuels is that they are the same banks that are vital to the achievement of many of our alternative energy and sustainable finance goals “said Jamie Bonham, director of corporate engagement at NEI Investments, which holds shares in the five banks.

Canadian banks’ outstanding loans to the oil and gas sector remained at the level of two years ago, although they rose 9.7% year over year to $ 47.5 billion ($ 42.2 billion) as of January 31. went back.

According to the Rainforest Action Network https://www.ran.org/wp, they are still among the world’s largest financiers of fossil fuel manufacturers. TD is the world’s leading oil sands banker and RBC Canada’s largest fossil fuel financier in 2020 -content / uploads / 2021/03 / Banking-on-Climate-Chaos-2021.pdf. RBC, TD and Bank of Nova Scotia were among the top 12 worst banks for fossil fuel finance worldwide between 2016 and 2020.

Reports from the banks show that none of the green bond income they issued last year was used for renewable projects by traditional energy companies.

(GRAPHIC – Financing global banks for fossil fuel companies: https://graphics.reuters.com/CANADA-BANKS/ENVIRONMENT/xegvbxzkkvq/chart.png)

LAGGARDS

Their reluctance to withdraw from funding fossil fuels makes them stand out compared to their global counterparts, particularly European ones like BNP Paribas (OTC 🙂 https://www.reuters.com/article/us-bnp-paribas- shale-idUSKBN1CG0E3 and ING Group (AS 🙂 who have distanced themselves from oil and gas projects related to shale and / or tar sands.

“When we set the net zero target, it wasn’t about the divestment for us,” said Andrea Barrack, TD’s global director for sustainability and corporate citizenship, in an interview with Reuters. “We’re a big company in a country where many … people’s livelihoods depend on the (oil and gas) industry. We take these commitments seriously.”

TD’s 2021 ESG report, which is expected to be released next year, will include some interim targets, Barrack said.

For more information on how Canadian banks are meeting their net zero emissions targets, please visit

Despite the dilemma, some investors are taking action.

Amelia Meister, senior activist at the retail investor group SumOfUs, which represents around 1,700 retail shareholders in Canadian banks, said some members had sold their bank shares and over 2,500 announced they would transfer their money from the banks to credit unions.

“We don’t necessarily know what their internal definitions of low-carbon are,” said Meister. “Some define low carbon as light that is still a fossil fuel.”

Others demand more transparency.

Banks should disclose milestones for achieving net zero emissions, including explicit criteria and deadlines for withdrawing from activities inconsistent with the Paris Agreement, said Emily DeMasi, senior engager at Federated Hermes (NYSE: ), which represents investors holding TD shares valued at approximately $ 3.3 billion.

They should also show how they encourage customers to cut emissions, she said.

If they don’t act fast enough, EOS could partner with other investors, file shareholder resolutions and vote to remove directors, DeMasi said.

None of the major Canadian banks have joined the Net-Zero Banking Alliance, which is committed to finding ways to net zero emissions by 2050. VanCity, the largest credit union that has never financed fossil fuel companies, is the only Canadian financial institution in the alliance.

Banks around the world are exposed to climate change risks, said Jaime Ramos Martin, who is in charge of management Aviva (LON 🙂 ESG funds for investors.

“In order to be one step ahead of the risks of climate change, banks would have to change their (portfolios) faster than the economies in which they are present,” said Ramos Martin. “In order for us investors to follow up on these efforts, an important disclosure is required that is currently missing.”

Meister blamed the banks for some of Canada’s continued excessive reliance on traditional energy.

“Canadian banks have put our economy in a worse position to transition.”

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