Canada’s big banks say sustainable finance pledges may not curtail emission growth
Canada is the world’s fourthbiggest oil producer, and its energy sector contributes about 5 per cent to the country’s GDP.
TORONTO — Some of Canada’s biggest banks have for the first time said their green financing efforts may not necessarily curtail emissions growth, after years of pressure from activists to improve transparency in their climate goals.
Canadian banks, said to be one of the biggest fossil fuel financiers globally, have drawn criticism from climate activists and investors over using sustainability-linked financing (SLF) merely for the pretence of a lower carbon footprint rather than take meaningful steps in that direction.
In their latest annual climate reports released during the past week, many Canadian banks have pledged billions of dollars in sustainable financing to decarbonize high-emitting sectors, while highlighting major challenges to meeting their goals.
“The question for regulators will be whether it’s enough for the banks to insert these brief disclaimers deep in their ESG reporting or whether they need to do a better job telling their investors and the public that these huge financial numbers they promote as green aren’t necessarily adding up to emissions reductions at all,” said Matt Price, executive director of Investors for Paris Compliance.
In January, the group urged securities regulators to investigate major Canadian banks on their climate-related claims and alleged misleading disclosures.
The complaint gave climate activists more fuel in their fight, which is part of a broader international push for accountability on corporate climate pledges.
Price said the latest revelations were not enough to obviate an investigation.
Canada is the world’s fourth-biggest oil producer, and its energy sector contributes about 5 per cent to the country’s GDP. Despite the influence of the oil sector, the federal government has set out aggressive emissions goals that include pushing companies to cut emissions up to 38 per cent from 2019 levels by 2030.
Bank of Nova Scotia has given C$132 billion ($97 billion) since 2018 toward its target of C$350 billion in climate-related finance by 2030, but said that climate-related projects “may — or may not — lead to reductions in overall emissions.”
The bank’s chief sustainability and communications officer, Meigan Terry, said it aims “to be transparent and support a clear understanding” about its climate-related financing target.
Scotiabank’s climate-related finance framework, released last year, includes broader categories such as biodiversity, sustainable agriculture and circular economy, which are not necessarily measured in emissions reductions.
CIBC said “sustainable financing may involve eligible green activities... but do not necessarily curtail the growth of their absolute emissions.”
TD said the greenhouse gas emissions impact of its business activities cannot be “reliably measured at this time.”
Royal Bank of Canada, Canada’s No. 1 bank, said that the target of limiting global temperatures to 1.5 degrees Celsius above preindustrial levels would be a key challenge and that just 2 per cent of its clients have plans aligned with that goal.
The bank’s plans this year include tripling lending for renewable energy projects to $15 billion and boosting lowcarbon energy lending to $35 billion by 2030.
In a recent report, think tank Influencemap said between 2020 and 2022 the big five Canadian banks steadily increased their fossil fuel financing exposure to an average of 18.4 per cent in 2022 from 15.5 per cent in 2020. That compares with an average of 6.1 per cent for leading U.S. banks and 8.7 per cent for European banks across the same period.
Several global banks have committed to “net-zero financed emissions” by 2050 but have drawn doubts from many investors, due to concerns over the lack of a defined goal.
Regulators in the Americas and Europe have increasingly been worried about greenwashing, in which companies exaggerate their environmental credentials.