The regulatory agency for financial institutions, under federal jurisdiction, is questioned. Because the shadow of greenwashing is still very visible in the list of financial risks linked to climate change.
Small parenthesis. We read in The duty from April 13 that the Royal Bank had been the world’s largest funder of fossil fuel projects in 2022, according to study data Banking on Climate Chaos published by a consortium of environmental groups. Royal’s financial assistance to the fossil fuel sector was even up compared to 2021. Five Canadian banks are among the 15 largest donors to the fossil fuel industry in the world for the year 2022. Scotia is in seventh, followed by TD in eighth. The Bank of Montreal occupies the 13e rank, and CIBC on 14e rank.
As for the National Bank, on April 21, during the shareholders’ meeting, the president and chief executive officer, Laurent Ferreira, was questioned about the institution’s environmental policies. The National does not want to completely divest from the oil and gas sector, but it wants to support companies that are making efforts to decarbonize their activities, we read in a text from The Canadian Press.
The proposal by the Movement for the education and defense of shareholders (MEDAC) to hold an advisory vote on the bank’s environmental policy moreover obtained the support of 18% of the shareholders, support considered high for a as an activist shareholder. The institution had recommended voting against the proposal, which surprised the director of MEDAC, Willie Gagnon, for whom the approach of the National in environmental matters would be “better” than that of other Canadian banks.
Let’s close the parenthesis.
The Office of the Superintendent of Financial Institutions (OSFI) was asked last week to take the true measure of the climate emergency for the Canadian financial system. This “key authority” for overseeing financial institutions, which regulates and supervises more than 400 financial institutions — including Canada’s six largest banks — and about 1,200 federally regulated pension plans, has only made financial risks related to changes only a recent, and therefore late, priority, we deplore. In his audit, the report of which has just been tabled, the Commissioner for the Environment and Sustainable Development lists three main findings:
1. “OSFI has begun to implement a sound strategy to manage financial risks related to climate change. However, given that the fight against these financial risks has only recently become one of its priorities, it will be years before its surveillance strategy is fully implemented. However, measures are needed and they must be taken urgently.
2. “OSFI’s climate change financial risk strategy aims to improve the resilience of federally regulated financial institutions, but it will not go so far as to incentivize the transition to a carbon neutral economy. On this point, in publishing the organization’s directives on March 7, the director general of OSFI’s Climate Risk Hub, Stéphane Tardif, explained that the guidelines were not “based on rules”. He spoke of a deliberate decision. “It’s not prescriptive. It is very carefully thought out, because if we give institutions a goal, they will simply manage that goal, ”he explained in a text from The Canadian Press.
3. “How key financial risks related to climate change will be incorporated into OSFI’s updated supervisory framework remains unclear. If these risks are not sufficiently highlighted, they may not be fully addressed in a timely manner. »
And the commissioner concludes that OSFI “had not yet fully taken into account its new roles and responsibilities under the Federal Sustainable Development Act”.
Risk of greenwashing
But another big risk, that of greenwashing, stands out in the commissioner’s concerns. Thus, among the five main recommendations, all accepted by OSFI, he writes in his report, one reads in particular that the regulator should specify the way in which it will take into account the financial risks related to climate change in its supervisory framework. updated.
In particular, climate-related financial risks should be assessed against clearly defined and detailed criteria to empower supervisors to challenge information submitted by regulated institutions. And to ensure that this information and the measures taken to manage financial risks related to climate change are effective and reduce the risk of greenwashing.
The commissioner adds that, to strengthen the accountability of regulated institutions with respect to the transition to a carbon neutral economy and again to avoid greenwashing, the regulator should establish more specific guidelines on the information to be provided in transition plans.
Still a lot of work to do.