In early June, the House of Commons Standing Committee on Environment and Sustainable Development received “the big shots” of the five largest Canadian oil and gas companies. A few days later, it was the turn of the CEOs of the five major Canadian banks. The people who came to testify and answer the elected officials’ questions had prepared their “tape” well, but some of the answers seemed decidedly indecent. Because, unless we live in unspeakable denial, we cannot, in 2024, dissociate the climate and environmental impacts of the extractive activities of the hydrocarbon industry.
Yet these men and women have done it, and with a chilling aplomb. When Rich Kruger, Suncor’s CEO, declares that the idea that “the prosperity of the oil and gas industry comes at the expense of the planet” is a myth, that it is even “false” and adds that “profits and the planet are not mutually exclusive; they are mutually dependent,” one wonders what definition he attributes to the concepts he brandishes.
Without exception, witnesses spoke about the importance of good paying jobs, a prosperous Canada, the innovative and talented nature of the sector, and the concept of ethical oil. When faced with more pointed questions, the panel chose to deflect the subject or offer vague, if not misleading, data.
These CEOs are certainly entitled to their opinions, but certainly not to their own facts: it takes some guts to claim that sector emissions peaked in 2017, as Rich Kruger claimed, when all the data shows that the increase has been continuing since 2004.
Their comments on the contribution of hydrocarbons to the decarbonization of the economy are unanimous: “we need greater regulatory certainty as well as promises of co-investment”. Yet governments have been doing nothing but that for more than half a century for an extraordinarily prosperous industry that prioritizes its shareholders with its record profits.
The Canadian Association of Petroleum Producers confirmed in 2023 that investments in the sector would reach $40.6 billion by 2024, and that these sums would not go towards decarbonization measures, but towards increasing production and exploitation.
In 2022 alone, the profits of these five companies reached $38.3 billion. Despite this, the clear business decision not to support the energy transition prevails. This posture becomes an obstacle to our decarbonization efforts and undermines Canada’s international commitments under the Paris Agreement.
Unable to devote the equivalent of a single year of profits to promote the trajectory towards the decarbonization of its activities, the industry opposes any regulation, starting with a cap on emissions. The same goes for methane, which has a global warming potential 25 times more powerful than CO2.
Lobbying three times a day, seven days a week
In addition to begging for public funds through the New Pathways Alliance lobby, the industry is demanding that no carbon capture and storage project be subject to the federal review provided for in the Impact Assessment Act. The government has announced five tax measures totaling $82 billion by 2035 that will be used in whole or in part to pay oil companies for false solutions.
To formulate such a requirement, the Alliance lobby has worked hard. The industry reports more than 2,110 contacts to the Lobbyists Registry between January 2022 and October 2023.
Brad Corson, CEO of Imperial, was proud to present ” [ses] efforts [en matière] next generation solvent injection technology and [de] development of renewable diesel.” If emissions reductions are achieved through these methods, it will certainly be to the detriment of the environment, and Imperial knows this very well. For its part, Suncor has abandoned its solar and wind energy sectors.
The oil sands industry is the most polluting in the hydrocarbon sector: 12% of our carbon footprint comes from there. Moreover, a joint study by Environment Canada and Yale University, published in Science in January explains that ” [l]The magnitude of the emissions detected is particularly remarkable […] 20 to more than 64 times higher than what was reported in the inventory of air pollutant emissions and that “researchers said this is equivalent to emissions from all other human sources in Canada.”
Increase production. Deregulate. Deny science. This is the position of the witnesses heard. The CEOs of the five major Canadian banks in all this? Let’s talk about it.
A financial system in tune with the industry
It is no surprise that banks hold assets in the oil and gas sector, but when they represent 13% of global financing in a country that accounts for 0.5% of the world’s population, it is cause for concern. Let us add that the five major Canadian banks ranked in the top third of the global hydrocarbon financing rankings.
Their CEOs all recognize the important role their sector must play in promoting the implementation of solutions for the energy transition. They all say they are working alongside their clients to help them in their efforts, but no progress has been made. This stagnation is caused by a federal government that is slow to establish a regulatory framework for disclosure and a taxonomy that would allow the implementation of clear rules of the game, common to all banks.
This laxity of the Liberal government is proving to be of capital importance, with long-term consequences for achieving climate objectives, for the Canadian and global economy and just as much for savers. The Liberals are “pretending”, but a Conservative government will not be any more inclined to move.
Whether it is the report Banking on Climate Chaos or the work of the think tank InfluenceMap, the facts collected are clear: RBC and Scotiabank are respectively ranked 4e and 6e rank among the top 10 financiers of fossil fuel expansion projects for 2023, investing US$14.9 billion and US$14.7 billion, respectively, in companies that plan to build new greenhouse gas-generating infrastructure for decades to come.
These banks will say they are members of the UN Net Zero Banking Alliance, which is made up of 140 financial institutions and is committed to implementing an internal policy, guided by science, to move toward carbon neutrality. What they do not repeat is that their spokespeople, the Canadian Bankers Association and the Canadian Chamber of Commerce, of which they are all members, are at the antipodes of the Alliance… Where are they really located? To which organizations are the banks loyal?
Conflicts of interest in sight
The overlap between the directors of these banks and those of fossil fuel companies must be denounced. At TD Bank alone, three directors hold shares worth more than $6 million in fossil fuel companies. At BMO, one director alone owns more than $2.2 million in shares in Suncor.
The Committee sought to obtain the views of the CEOs of the various banks on these facts. They had nothing to offer in response. Nor on the absence of members with expertise in the area of transition and assessment of climate risks and more.
If a bank faces higher capital requirements, this will result in a lower return on equity. Return on equity is the common financial indicator at the heart of performance-based director compensation. This explains why.
Some observers question the very definition of fiduciary duty, given the risks of assets being stranded as we move away from fossil fuels.
Even the Commissioner of the Environment and Sustainable Development has taken an interest in this issue through a report on the supervision of climate-related financial risks by the Office of the Superintendent of Financial Institutions of Canada, noting that the United Kingdom and the European Union had already aligned the mandates of financial supervisors with sustainability objectives, which Canada has not done.
A bill is currently being studied in the Senate. This proposal would align finance with the objectives of the Paris Agreement, and the Bloc Québécois is fully in favour of it. Self-regulation is not the solution. We need to establish clear and robust legislation on the role that Canada’s major banks must play in the face of the climate crisis.
Yes, we need fuel, but Quebec taxpayers’ money should be used to slow down production from the oil sands, to promote an orderly and planned exit from our dependence on fossil fuels and to build structural policies to promote renewable energies.
Let us never forget that in Quebec our relationship with energy is on the other spectrum from that which prevails in the rest of Canada: our energy is renewable, clean, comes from a resource recognized as part of the common good and finally, it is nationalized.