In energy-dependent Canada, banks and investors face a dilemma in meeting emissions target By Reuters

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© Reuters. FILE PHOTO: A Royal Bank of Canada logo is seen on Bay Street in the heart of Toronto’s financial district.

By Nichola Saminather TORONTO (Reuters) – Canadian banks’ commitments to “net emissions financed with zero emissions” by 2050 have raised doubts from many investors, given the lack of a defined target, details and their continued support for oil companies. and gas, even if partially aimed at helping them transition to alternatives. But its growing funding for green projects also presents a dilemma for shareholders who want to divest. The situation highlights the overwhelmingly Canadian dilemma facing both banks and their investors. Even in their quest to reduce funding for large emissions producers, lenders cannot withdraw from an industry that accounts for about a tenth of the economy, despite being responsible for more than 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 target, interim reduction targets and plans. moving. away from traditional energy sources. The six largest banks account for nearly 90% of the industry’s revenue and are moving together on strategic changes, including climate initiatives, leaving shareholders with few local alternatives. “The challenge with the current push to divest banks because they are involved in fossil fuels is that these are the same banks critical to helping meet many of our goals in alternative energy and sustainable financing,” said Jamie Bonham, director of corporate engagement at NEI. Investments, which owns shares in all five banks. Outstanding loans from Canadian banks to the oil and gas sector have remained at the levels of two years ago, although they fell 9.7% to Cdn $ 47.5 billion ($ 42.2 billion) year over year. before January 31st. The world’s largest financiers of fossil fuel producers, with TD, the world’s leading oil sands banker and RBC Canada’s largest fossil fuel financier, in 2020, according to Rainforest Action Network https://www.ran.org / wp-content / uploads / 2021/03 / Banking-on-Climate-Chaos-2021.pdf. RBC, TD and Bank of Nova Scotia were among the 12 worst banks for fossil fuel financing globally between 2016 and 2020. Bank reports show that none of the proceeds from the green bonds they issued last year were allocated to renewable projects of traditional energy companies. (GRAPH – Global Bank Financing for Fossil Fuel Companies: https://graphics.reuters.com/CANADA-BANKS/ENVIRONMENT/xegvbxzkkvq/chart.png) LAGGARDS Their reluctance to move away from fossil fuel financing lags them in comparison with their global, particularly European counterparts such as BNP Paribas (OTC 🙂 https://www.reuters.com/article/us-bnp-paribas-shale-idUSKBN1CG0E3 and ING Groep (AS 🙂 which have distanced themselves from shale and / or oil and gas projects related to tar sands. “When we set the net zero target, that was not, for us, about divestment,” Andrea Barrack, TD’s global director of sustainability and corporate citizenship, said in an interview with Reuters. “We are a major corporation in a country where many people’s livelihoods depend on the (oil and gas) industry. We take those obligations very seriously.” TD’s ESG 2021 report, due out next year, will include some interim targets, Barrack said. For more details on how Canadian banks are approaching their net zero emissions targets, see Despite the dilemma, some investors are taking action. Amelia Meister, a lead activist for the SumOfUs retail investor group, which represents some 1,700 Canadian bank retail shareholders, said some members have sold their bank shares and more than 2,500 have said they will move their money from banks to credit unions. . “We don’t necessarily know what their internal definitions of low carbon are,” Meister said. “Some define low carbon content as light, which is still a fossil fuel.” Others demand more transparency. Banks must disclose milestones to achieve net zero emissions, including explicit criteria and timelines for withdrawing from activities that are not aligned with the Paris Agreement, said Emily DeMasi, senior contractor for a management services provider at Federated Hermes. (NYSE :), representing investors who own approximately C $ 3.3 billion in TD stock. They should also show how they are incentivizing customers to cut emissions, he said. If they don’t move fast enough, EOS could team up with other investors, file shareholder resolutions and vote to remove the directors, DeMasi said. None of the major Canadian banks have joined the Net-Zero Banking Alliance, which is committed to finding pathways to net zero emissions by 2050. VanCity, the largest credit union, which has never financed fossil fuel companies, is the only institution Canadian financial institution in The Alliance. Banks globally face climate transition risks, said Jaime Ramos Martin, who manages Aviva (LON 🙂 Investors ESG funds. “To be at the forefront of climate transition risks, banks would need to transition their (portfolios) faster than the economies in which they are present,” said Ramos Martin. “Importantly, in order for us investors to continue these efforts, we need a great deal of disclosure, which is currently lacking.” Meister blamed the banks for Canada’s continued inordinate dependence on traditional energy. “Canadian banks dragging their heels has put our economy in a worse shape for the transition.”