Canada’s major banks caution that commitment to sustainable finance may not effectively reduce emission growth, as reported by Reuters.

Canada’s major banks caution that commitment to sustainable finance may not effectively reduce emission growth, as reported by Reuters.

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© Reuters. FILE PHOTO: A Royal Bank of Canada (RBC) logo is seen on Bay Street in the heart of Toronto’s financial district January 22, 2015. REUTERS/Mark Blinch/File Photo

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By Nivedita Balu

TORONTO (Reuters) – Some of Canada’s biggest banks said for the first time that their green financing efforts would not necessarily curb emissions growth, after years of pressure from activists to improve the transparency of their targets climatic.

Canadian banks, considered one of the world’s largest fossil fuel financiers, have drawn criticism from climate activists and investors for using sustainability-linked financing (SLF) simply under the guise of a smaller carbon footprint. weak, rather than taking significant steps in this direction.

In their latest annual climate reports released last week, many Canadian banks pledged billions of dollars in sustainable financing to decarbonize high-emission sectors, while highlighting major challenges to meeting their targets.

“The question for regulators will be whether it is enough for banks to insert these brief warnings deep into their ESG reports or whether they need to do a better job of telling their investors and the public that these huge financial numbers they presented as being green are not necessarily adding to emissions reductions,” said Matt Price, executive director of Investors for Paris Compliance.

In January, the group urged securities regulators to investigate major Canadian banks over their climate-related claims and alleged misleading disclosures.

The complaint gave climate activists more fuel in their fight, which is part of a broader international campaign for accountability for corporate climate commitments.

Price said the latest revelations were not enough to avoid an investigation.

Canada is the world’s fourth largest oil producer and its energy sector contributes approximately 5% of the country’s GDP. Despite the influence of the oil sector, the federal government has set ambitious emissions targets, including pushing companies to reduce their emissions by up to 38% from 2019 levels by 2030.

The Bank of Nova Scotia has given C$132 billion ($97 billion) since 2018 to reach its target of C$350 billion in climate-related financing by 2030, but said climate-related projects “could – or not – lead to reductions in overall emissions. “.

Meigan Terry, the bank’s head of sustainability and communications, said its aim was to “demonstrate transparency and foster a clear understanding” of its climate-related financing objective.

Scotiabank’s climate-related financial framework, released last year, includes broader categories such as biodiversity, sustainable agriculture and the circular economy, which are not necessarily measured in terms of emissions reductions .

CIBC said “sustainable finance may involve qualifying green activities… but does not necessarily curb the growth of their absolute emissions.”

TD said the impact of greenhouse gas emissions from its business operations cannot be “reliably measured at this time.”

Royal Bank of Canada, Canada’s largest bank, said the goal of limiting global temperatures to 1.5 degrees Celsius above pre-industrial levels would pose a major challenge and that only 2% of its clients have plans aligned with this objective.

The bank’s plans this year include tripling loans for renewable energy projects to $15 billion and increasing loans for low-carbon energy to $35 billion. dollars by 2030.

In a recent report, think tank InfluenceMap said that between 2020 and 2022, Canada’s big five banks steadily increased their exposure to fossil fuel financing, reaching an average of 18.4% in 2022, up from 15. 5% in 2020. This compares to an average of 6.1% for major US banks. banks and 8.7% for European banks over the same period.

Several global banks have committed to “funded net zero emissions” by 2050, but have sparked doubts from many investors due to concerns over the lack of a defined target.

Regulators in the Americas and Europe are increasingly concerned about greenwashing, in which companies exaggerate their environmental credentials.

($1 = 1.3578 Canadian dollars)

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