Canadian banks put the 'green' in greenwashing
Canada's six biggest banks invest an average of 50 cents in clean energy for every dollar in fossil fuels. But even that's likely an overestimate.
Global financial institutions have a crucial role to play in the energy transition by transitioning their financing from fossil fuel projects to clean energy.
It’s almost the end of 2023, which has been a great year for The Orchard’s output. If you’re feeling generous this holiday season, please consider a paid Orchard subscription starting at $5 a month so I can continue challenging dominant discourses.
The only Canadian media coverage of this significant story was a Canadian Press article, which was picked up in BNN Bloomberg, of course, the Toronto Star, Financial Post, Globe and Mail, Times Colonist in Victoria, and CityNews Halifax.
The vague consensus declaration reached by COP28 delegates in Dubai to transition away from fossil fuels in a “just, orderly and equitable manner,” rather than phase them out, doesn’t give lenders much of an incentive to clean up their act in the near future without pressure from governments and civil society.
According to the International Energy Agency, banks need to finance $4 in low-emissions energy for every $1 in fossil fuels by 2030 if they want to do their part to limit global warming to 1.5 degrees Celsius.
Internationally, banks financed just 73 cents in low-carbon energy for every $1 spent on fossil fuels in 2022 — or $708 billion for $967 billion — which is actually a two-cent decrease from the previous year’s ratio.
But, as always, there’s a catch. Note the verbiage of low-carbon energy, rather than renewable energy.
Bloomberg’s definition of low carbon includes investments in speculative carbon capture technology, which are in effect subsidies to energy companies that allow them to continue producing fossil fuels, as well as nuclear. If you think nuclear power is clean, I’d urge you to read Joshua Frank’s book Atomic Days, which is about the environmental toll of the Hanford nuclear waste site in Washington state.
Lumping together “real trends towards growing investments” in renewables with carbon capture and nuclear, among other false climate solutions, obscures reality, says Bronwen Trucker, a Toronto-based researcher with Oil Change International and friend of The Orchard.
“It makes it a lot harder to see where we’re at,” Tucker said.
But even by Bloomberg’s artificially low bar, global banks are failing.
Five of Canada’s six biggest banks are performing below this already low international figure, according to the Bloomberg report. All of them have a stated commitment to reaching net zero by 2050.
On average, the big six banks, which together oversee $160.5 billion in energy investments, are spending 50 cents on low-carbon energy for every dollar in fossil fuels.
Tucker says that when it comes to skin-deep climate commitments, Canada’s “finance community is really engaging in a lot of groupthink.”
“There's a revolving door between oil and gas and finance and government, so we are also tending to see Canadian banks be well behind global banks,” she explained.
The worst offender, as per Bloomberg, is Scotiabank, which finances just 32 cents in low-carbon energy for every $1 in fossil fuels.
TD is second-worst, with 35 cents going towards nominally clean energy for every $1 of dirty energy.
According to its 2022 climate report, TD has spent more than $107 billion on renewables since 2017, with a goal of spending $500 billion by 2030, although the report conveniently doesn’t mention how much it’s spent on fossil fuels in the same period.
RBC, which is the largest Canadian financier of energy projects with $42.7 billion in investments, dedicates 37 cents to cleaner energy for every $1 in fossil fuels.
In April, RBC was identified as the world’s top financier of fossil fuels for 2022 in a report from a coalition of environmentalist groups, including Oil Change International, the Rainforest Alliance and Sierra Club, among others.
CIBC’s 2022 climate report acknowledges that financed emissions from its lending activities “comprise a majority of the bank’s total GHG [greenhouse gas] emissions.”
In 2022, these emissions “remained unchanged due to macroeconomic and geopolitical factors,” the report said.
Last year, CIBC spent 41 low-emission cents on the fossil fuel dollar.
BMO, whose 2022 climate update notes that net-zero financing is “not currently economical,” spends 45 cents on low-carbon energy for each dollar invested in fossil fuels.
The one outlier, which is still nowhere near the 4:1 ratio required by 2030, is National Bank, which spends $1.10 on cleaner energy for every $1 in fossil fuels. It also has the smallest energy portfolio of all the banks with $14.9 billion.
According to its most recent climate progress report, National Bank has reduced its fossil fuel financing by two-thirds since 2015.
Stand.Earth climate finance director Richard Brooks called it “absurd” how little banks have done to facilitate the energy transition, given their immense financial resources.
“No bank is doing its fair share of the work required to transition our global energy systems. In fact, they continue to make the problem worse,” Brooks said in a Dec. 14 statement.
Banks are clearly not going to wind down fossil fuel investments on their own accord. Why would they? They exist to make money.
“No one likes big banks,” said Tucker:
It's very clear that they're bad actors and that extends to housing and so many parts of the cost of living crisis that are making everyday people really struggle right now. To just ask them to do the right thing is not the right approach. We really desperately need financial regulation to make sure that they're just not allowed to continue investing in fossil fuels.
As a result, Sen. Rosa Galvez introduced the Climate-Aligned Finance Act in March 2022, which would compel various Canadian institutions, including banks, to align their financing with Canada’s international climate commitments and provide consistent updates on their progress, with oversight from the national bank regulator.
It passed its second reading in June 2023 and is now before the Standing Senate Committee on Banking, Commerce and the Economy for review.
Former Conservative natural resources minister Joe Oliver called the legislation “unhinged” and “dystopian” in a June 2023 Financial Post op-ed, arguing it “would undermine free markets, with potentially debilitating consequences for financial institutions, the energy sector and the Canadian economy in general.”
In a Post column a month later, Oliver gave the game away, referring to the climate crisis as a “supposed existential threat, without proof of either its existence or our ability to alter its impact.”
“The complexity of climate science is not settled,” Oliver wrote, citing a “distinct minority” of climate scientists who agree with him.
Oliver is, of course, free to play in his publicly subsidized Postmedia sandbox. But for the rest of us, who can see increasingly worsening wildfires, droughts and floods for what they are, urgent action is needed.
While the federal Liberals have made some laudable but insufficient steps towards a clean future, firmer action is needed.
Reining in the big banks is a great way for the Canadian government to show it means business while also going a long way towards addressing the other myriad crises Canadians face.