RBC Abandons Green Finance Goal, Could Trigger 'Domino Effect'
RBC blamed the decision on amendments to the federal Competition Act last year that require companies to prove their environmental claims, The Canadian Press reports. At the time, advocates said the amendments amounted to a "very modest provision" that "simply requires companies to tell the truth and to have an evidence base to back up their claims."
In 2021, RBC pledged to add $500 billion to its sustainable funds by 2025, after hitting an initial target of $100 billion the previous year. At the time, the Globe and Mail said the commitment put Canada's biggest bank "in league with a growing number of global corporations aligning with commitments their countries have made under the Paris Agreement."
But now, RBC says it can't square those commitments with the anti-greenwashing provisions in the new federal legislation. "Sounds like a possible admission they misled investors with previous statements," Stand.earth Climate Finance Director Richard Brooks wrote on LinkedIn.
RBC media relations officer Jeff Lanthier did not respond to a request for comment by the time The Energy Mix went to virtual press last night. We'll update this story when we hear back.
In its 2024 sustainability report released Tuesday, the bank stated [pdf] that "we have reviewed our methodology and have concluded that it may not have appropriately measured certain of our sustainable finance activities as presented on a cumulative basis." In a statement, it added that the Competition Act amendments "limit the information we can share on certain sustainability disclosures and the progress we are making and have restricted our ability to publicly report on several metrics."
As a result, the sustainability report "provided a methodology to calculate its energy supply ratio, the ratio of financing for low-carbon energy projects compared with their financing for fossil fuel projects, but was unable to disclose the number," CP writes. "The bank said it would continue to monitor and report the ratio internally," after previously agreeing to disclose it in an agreement with the New York City Comptroller, a longtime advocate on climate finance.
Until now, the $500-billion sustainable finance pledge "has been this kind of marquee first message that was delivered over and over and over again," Brooks told The Mix. "Every time there was criticism levelled at RBC for their financing of fossil fuel companies, their first retort would be, 'we are a leader, we have committed to $500 billion of sustainable finance by 2025, and we're helping our customers [make the] transition and decarbonize.'"
Independent analysts "knew the framework and criteria they were using were pretty loose," he added, taking in loans to oil and gas pipeline companies on the hope or pretext that they would decarbonize their operations. Now, the language in the sustainability report is "banker talk for 'we misreported on what was deemed to be sustainable finance.'"
Brooks said it's "very troubling" to see RBC using the Competition Act amendments as an "excuse" to scale back its reporting and its green investments. But it isn't such a bad thing that "there's a little bit of pulling back the green curtain, and we're seeing the real wizard behind it. That's good from a transparency standpoint, but it means there's even more need for our government to step in," since "it's clear that voluntary commitments, whether they were real or not, are not working."
RBC also said it will no longer report on its progress toward other climate goals, including $30 billion in low-carbon energy financing and tripling its renewable energy investments by 2030. "All the more reason to look to the new government of Prime Minister Mark Carney to step [in] and regulate and incentivize real climate investments by our biggest banks and pension funds," Brooks wrote on LinkedIn.
The sustainability report followed decisions earlier this year by RBC and other big banks in Canada to step away from the Net-Zero Banking Alliance (NZBA), part of a network of climate finance coalitions brought together by Prime Minister Mark Carney in his former role as UN Special Envoy on Climate Action and Finance. The banks' positioning at the 2021 UN climate summit in Glasgow didn't stop them from pouring hundreds of billions of dollars into new fossil fuel investments in the years that followed, with Canadian banks supplying almost US$104 billion out of the $6.9 trillion that went to the industry in the eight years after the 2015 Paris climate conference.
Now, Brooks said RBC's action may be the beginning of a wider shift. "The banks move as a pack," he told The Mix. "When they first started quitting NZAB they were tripping over each other to get out the door. So I'm sure the other banks are very much looking at what RBC has done and are considering doing the same." He called that trend an "infection" could extend beyond Canada given RBC's global profile among the world's top ten financiers of fossil energy projects.
"When one of the top energy financing banks takes an action related to energy financing, which this very much is, all the others pay attention. So I think it could have a big domino effect quite quickly," he said. "The backsliding on climate by banks and other corporations that is happening right now has largely been in response to the Trump administration, and this would be another step."
Source: The Energy Mix
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