Canada’s major investors are all firmly committed to the energy transition, but they are doing very little to finance it, according to an independent assessment. Since the Paris Agreement in 2016 and until 2023, the share of major banks’ investments dedicated to renewable electricity generation has increased by less than 1% per year.
“It’s clearly not enough,” says Renaud Gignac, the spokesperson for Investors for Paris Compliance, a group of activist shareholders whose mission is to track the climate commitments of Canada’s largest investors.
“We would need an increase of 5, 10 or 15% per year to sufficiently decarbonize electricity production and achieve the climate objectives we have set for 2030,” he explains.
The boots are not following the words, notes the group in its bulletin published Wednesday, which reports on the progress made by the six major Canadian banks, the insurance companies Manulife and Sun Life, three pension plans (the Caisse de dépôt, the Canada Pension Plan Investment Board and the Ontario Teachers’ Pension Plan) and the private investors Brookfield and Power Corporation.
Top of the class
Fossil fuel energy production continues to capture the largest share of Canadian banks’ investments. The three pension plans, including the Caisse de dépôt, as well as Brookfield, lead the group for their overall performance. They receive a B grade, which indicates that their commitments translate into real progress towards carbon neutrality.
On the bank side, only four of them have increased their share of financing in renewable electricity since 2016: CIBC, TD, National Bank and Royal Bank.
The dunces
The worst performers are Scotiabank and BMO, which have reduced their investments in renewable electricity production. BMO even gave in to pressure from some US states and abolished its coal exclusion policy, underlines the spokesperson for Investors for Paris Compliance.
Power Corporation also ranks low, for having no corporate environmental targets or commitments. Large institutions are having a harder time making progress toward net zero alignment than smaller institutions, the shareholder activist group notes. Asset management firms are making slower progress than asset owners, it notes.
The Fund and the Gas
All of Canada’s largest investors are at odds with their climate commitments when it comes to natural gas. “Gas policies are the Achilles heel of climate finance institutions. None of the financial institutions assessed have implemented policies consistent with virtually eliminating gas-fired electricity generation without capture by 2040,” the group notes.
This is the case for the Caisse de dépôt, which gets an overall grade of B for its overall performance, but a D for its positioning on natural gas. The Caisse, which is the main shareholder of the gas distributor Énergir, argues that it is an investor anchored in reality and that gas has a role to play in the energy transition, commented Bertrand Millot, head of sustainable investment at the Caisse. The gas distributor wants to reduce the proportion of fossil gas in its network. These arguments are not convincing, according to Investors for Paris Compliance. “When you scratch a little and ask how this is going to be done, the answers are not satisfactory,” said Renaud Gignac.
Read the Investors for Paris Compliance study