Canadian banks run reputational risk by not prioritizing net-zero issuance

The news: According to a report by a coalition of environmental groups, Canada’s largest banks more than doubled funding for highly polluting tar sands oil projects to $16.8 billion last year.

More on this: the report questions the commitment of Canadian banks to achieve net zero emissions by 2050, despite their sign the commitment of the banking alliance convened by the UN.

  • Tar sands, or tar sands, emit far more climate-polluting greenhouse gases than conventional oil and are one of the most carbon-intensive sources of petroleum.
  • Canadian banks represent five of the world’s six largest oil sands investors since the Paris climate agreement of 2016.
  • TD Bank, Royal Bank of Canada (RBC), CIBC, Scotiabankand BMO collectively channeled $88.8 billion to the top 30 oil sands producers and six oil sands pipeline companies between 2016 and 2021, increasing their funding by nearly $9 billion Last year.
  • Nearly two-thirds of directors at the five banks have past or present ties to high-carbon industries, meaning Canadian banks have more climate-related links than their US or UK counterparts, according to DeSmog data.

Words versus actions: Banks are facing increasing public pressure to prioritize tackling climate change, but the actions of some banks do not reflect their stated good intentions:

  • Last month, a report found that the banks invested $742 billion in coal, oil and gas companies last year, despite extensive public climate pledges.
  • RBC, CIBC and Scotiabank ignored shareholder calls for tougher climate policies last week, according to the Financial Times, while TD Bank and BMO will likely face similar challenges at their annual meetings this week.

The big takeaway: Banks that fail to put sustainability on the agenda risk of alienating customers.

Last year, more than half of respondents in all Canadian provinces showed some support for phasing out fossil fuel useby Environics. This concern for the environment will only grow stronger as Gen Z embraces additional banking products.

Canada’s largest banks have yet to make the sweeping changes needed to achieve their net zero portfolio goals. At one point, public pressure and growing concerns about environmental damage will force them to act or face accusations of hypocrisy. Long-term changes that promote sustainability across the organization will benefit banks more than short-term funding that could hurt their brands and bottom lines.