Banks, investors face dilemma in meeting emissions target
TORONTO — Canadian banks’ commitments to “netzero financed emissions” by 2050 have drawn doubts from many investors, given the lack of a defined goal, details and their continued support for oil and gas companies, even if partially aimed at helping them transition to alternatives.
But their growing funding for green projects also presents a dilemma for shareholders who might want to divest.
The situation highlights the largely Canadian quandary faced by both the banks and their investors. Even in their quest to shrink financing for big emission-producers, the lenders cannot withdraw from an industry that accounts for about a tenth of the economy, despite its being responsible for over a quarter of emissions.
Over the past five months, Royal Bank of Canada (RBC), Toronto-dominion Bank and Bank of Montreal, have announced plans to achieve net-zero emissions, but lacked details including a definition of that goal, interim reduction targets and plans to move away from traditional energy sources.
The six biggest banks account for nearly 90 per cent of the industry’s revenues and move in tandem on strategic shifts, including climate initiatives, which leaves shareholders with few local alternatives.
“The challenge with the current push to divest banks because they’re involved in fossil fuels is that these are the very same banks critical to help meet many of our goals in alternative energy and sustainable financing,” said Jamie Bonham, director of corporate engagement at NEI Investments, which holds shares of the five banks.
Canadian banks’ outstanding loans to the oil and gas sector has stayed at the levels of two years ago, although it fell by 9.7 per cent to $47.5 billion from a year earlier as of Jan. 31.
They remain some of the biggest financiers of fossil fuel producers globally, with TD the world’s top oil sands banker and RBC Canada’s biggest financier of fossil fuels, in 2020, according to the Rainforest Action Network. RBC, TD and Bank of Nova Scotia were among the 12 worst banks for fossil fuel financing globally between 2016 and 2020.
Reports from the banks show none of the proceeds of green bonds they issued last year went to renewable projects by traditional energy companies.