This article was written by Jeffrey Jones and was published in the Globe & Mail on June 14, 2024.
The CEOs of Canada’s five largest banks insist they are serious about funding the transition to low-carbon energy, but told a parliamentary committee on Thursday they have no intention of cutting off financing for the oil and gas industry.
Royal Bank of Canada, Canadian Imperial Bank of Commerce, Bank of Nova Scotia, Bank of Montreal and Toronto-Dominion Bank have all set targets to get to net-zero emissions from their own operations and those of their clients by 2050. But they come under frequent criticism by environmentalists, who say their efforts come up short as long as they keep on providing financial support to fossil-fuel producers.
As head of Canada’s biggest bank, RBC chief executive officer Dave McKay took much of the heat at the Standing Committee on Environment and Sustainable Development hearing on Thursday.
Mr. McKay said his bank recently boosted its transition-related targets, with plans to lend $15-billion for renewable power and $35-billion for overall low carbon energy by 2030. The venture capital and private equity unit at Canada’s largest bank also earmarked $1-billion for climate-focused investments.
But he faced tough questions from some MPs, including the New Democratic Party’s Matthew Green, who took him to task for continued financing of oil and gas, including Canada’s oil sands. Mr. Green argued that Canada must wean itself off fossil fuels if it wants to deal with the need to slow climate change.
“When will you stop greenwashing and double-speak with climate plans, when really you’re the companies pouring fuel on the fire?” Mr. Green said.
Mr. McKay took issue with the characterization, saying that the country can’t practically make the transition to low-carbon energy without banks supporting the massive natural-resources sector because it would disrupt the economy. He said 80 per cent of RBC’s oil and gas clients are formulating strategies to make the shift, and RBC is providing financing and resources to help them.
“This is a complex transition. We are not getting off fossil-based fuels immediately. ‘Just stop’ is not an option for us. We have to commit to finding greener sources of energy. We have to accelerate that transition,” he said. “There’s an anxiety in the country about making this transition, and therefore Canada has to move and keep moving forward.”
His counterpart at TD, Bharat Masrani, touted his bank’s transparency with its financing targets and strategies to reduce risks tied to climate change, but he echoed Mr. McKay on the issue of continued oil-sector lending.
Mr. Masrani said the bank must support the oil and gas industry and its efforts to decarbonize, while providing the necessary capital to help the country achieve its net-zero goals. “We are a great believer in an orderly transition, and we have to do both,” he said. Canada’s big banks have dedicated billions of dollars to decarbonization projects in numerous industries, set up research institutes to provide clients with technological assistance and signed up with the Net-Zero Banking Alliance, a voluntary organization of international banks that aims to provide the necessary financing for climate action.
But as some of the world’s largest oil and gas lenders, they remain targets of disparagement. Early this year, Investors for Paris Compliance, which seeks to hold companies to account on their carbon-reduction targets, filed complaints with the Ontario Securities Commission and Autorité des marchés financiers of Quebec, urging investigations into the accuracy of the Big Five banks’ disclosures.
Calling their stated efforts a “$2-trillion-dollar placebo,” the activist group cited equity and debt financing deals billed under the banner of sustainability that, it said, resulted in increased fossil-fuel production and greenhouse gas emissions.
In 2022, the federal Competition Bureau launched an investigation of RBC after environmental groups alleged its climate-focused marketing practices were deceptive. Mr. McKay said, however, that the bank has not heard anything on this since.
The bank CEOs’ appearance at the committee follows a heated session there last week when leaders of the country’s largest oil companies contended they too are serious about implementing multibillion-dollar decarbonization programs. But they argued against a federally mandated cap on emissions for their industry.
Thursday’s session coincided with the release of a report by the International Institute of Sustainable Development, ranking the performance of countries in developing plans to transition from fossil-fuel use, as agreed at the COP28 climate summit in Dubai last year. In its latest plan – known as a nationally determined contribution – Canada mentions measures to mitigate the oil and gas sector’s emissions and be the cleanest producer, but is on track to increase the sector’s output, the think-tank reported.
Julie Segal, senior manager of climate finance for Environmental Defence, said after the hearing that the banks showed that they are still trying to position themselves as aligned with net-zero goals while over-investing in oil and gas. “That ignores the need for Canada to shift out of polluting investment and into greener alternatives for us to succeed in meeting our climate commitments and build a more stable economy.”
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