“Despite Canada’s climate change commitments, the country’s “big five” banks continue to finance and support the expansion of fossil fuel industries,” writes Donald Gutstein in a recent report: Fossilized Finance – How Canada’s banks still enable oil and gas production. The report was commissioned by CCPA (BC Office), the Corporate Mapping Project and the Parkland Institute.
Canada’s Fossilized Finance Sector
The key word in the report title is “still”. While the banking sectors in many other countries have committed to helping the world meet the goals of the Paris Agreement on climate change, Canada’s Big Five banks have not joined in. Gutstein’s report explains why: Canada’s big banks continue to rely on profits from financing the fossil fuel industry despite the danger those investments pose for the future of our planet.
Canada’s Big Five banks—RBC, TD, Scotia, BMO, CIBC—are perhaps the most powerful corporate entities in Canada, certainly among the largest and most profitable. Rather than playing a crucial role to help Canada achieve its Paris Agreement commitments to reduce greenhouse gas emissions to 40-45 per cent below 2005 levels by 2030, the Big Five are hindering our progress on reducing emissions.
For more on fossil banks, see the Banking on Climate Chaos 2021 report here.
Report Highlights – Canada’s Fossil Banks
Canada’s big banks continue to be steadfast supporters of the fossil fuel industry, in both financial and non-financial realms.
They increased their lending and lending commitments to the industry by 53 per cent to a record high of $137 billion in 2020.
They continued to pour $54 billion of their clients’ money into shares of the top 15 Canadian fossil fuel and pipeline companies in 2019.
They continue to provide financial advice to the industry, an important function during economically tough times.
The banks and the fossil fuel industry are deeply intertwined in Canada. Donald Gutstein
Two of the banks, TD and RBC, recently pledged to net-zero emissions by 2050, but recent actions call into question the sincerity of these commitments. TD increased its lending to the industry by 160 per cent over seven years to a total of $33 billion in 2020, and RBC invests the most in fossil fuel and pipeline companies to a tune of $21 billion as of November 2019.
These forms of financial support from the banks are allowing fossil fuel development, and therefore emissions, to continue to grow. “It’s past time the banks treated climate change like the threat it is,” writes Gutstein.
Way beyond the realm of normal financial transactions
The report also highlights the various non-financial ways the banks support fossil fuel corporations, including through interlocking directorates, executive transfers, conference sponsorships and public boosterism of the industry:
- There’s an executive transfer between bank and operating companies through which personnel move into the industry at either board or senior operating levels.
- There are also interlocking directorates between fossil fuel and pipeline companies and the banks.
- Banks play a crucial role in running energy conferences that bring industry executives and investors together, overseen by the guiding hand of bank officials.
- As well as providing underwriting and investing services, bank analysts and economists write reports on the industry, on specific companies and on the overarching economic climate.
- Bank predictions of oil prices and demand are closely watched by company executives making capital expenditure decisions.
- Banks are among the most important industry cheerleaders.
- Being perceived as being outside Alberta and outside the industry, they provide third-party validation, which is, in Enbridge CEO Al Monaco’s view, “the best kind” of validation.
- Bank CEOs have honed their message: we will never achieve a low-carbon economy unless we continue to develop the high-carbon one.
Banks missing in action on Climate
In September 2019, during the UN Climate Action Summit in New York, the CEOs of 131 banks signed the Principles for Responsible Banking, committing them to align their businesses with the goals of the Paris Agreement on climate change and the UN’s Sustainable Development Goals. One principle requires banks to review how they are doing in meeting these principles and be held accountable for their contribution or lack thereof to society’s goals. In Canada, only National Bank and Desjardins Group, the Québec-based federation of credit unions, signed the documents. The Big Five were missing in action.
Evidently they felt no urgent need to change direction. Yet urgency is required, as the United Nations Environment Programme’s Emissions Gap Report has starkly pointed out and the Expert Panel on Sustainable Finance has reiterated. For Canada’s big banks, it’s business as usual—they have expressed no willingness to abandon fossil fuel financing.
What about investments in renewables?
Inevitably, banks have begun financing renewable energy projects. Proposals began coming to them to finance hydropower, wind, solar, thermal and other renewable endeavours. If the proposals made financial sense, banks would provide financing.
Pressures from international agencies, governments, investors and environmentalists finally made them take action, starting with TD Bank’s first green bond in 2014. By 2020, all the banks were doing green bonds. In 2017, the idea of a $100-billion commitment to environmental, social and governance (ESG) goals took hold, and by 2020 all the banks were doing $100-billion commitments.
Finance is not going to solve climate change, but it has a critical role to play in supporting the real economy through the transition [to a low-emissions future]. — Final Report of the Expert Panel on Sustainable Finance
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