Canada’s big five banks could be misleading investors by using terms like “sustainable finance,” according to an environmental group that has filed a complaint with securities regulators in Quebec and Ontario.
Banks use the term “sustainable finance” too broadly and do not support their assertions, says Investors for Paris Compliance in a brief presented Tuesday to the Autorité des marchés financiers du Québec (AMF) and the Ontario Securities Commission.
Canadian banks, including RBC, TD, BMO, CIBC and Scotia, have all made commitments to sustainable finance that together represent $2 trillion by 2030.
Sustainable finance aims to support environmental and social causes. Financing can take the form of green bonds linked to a renewable energy project, for example, or a loan aimed at performance targets linked to sustainable development.
As part of their sustainability efforts, financial institutions present these commitments as a key element, but Canadian banks provide few means to guarantee the effectiveness of these loans, laments Matt Price, managing director of Investors for Paris Compliance.
“They are highlighting this as one of their main responses to climate change, while providing no evidence or explanation for it. »
The environmental group is concerned not only about disclosure gaps, but also that some of the deals revealed were with oil and gas companies, whose emissions are growing.
In 2021, RBC, CIBC and Scotiabank all participated in sustainable financing agreements with Enbridge as the company increased its oil export capacity, while BMO helped structure a sustainability-linked credit facility for Gibson Energy, which nevertheless increased its exposure to oil.
The same year, TD Bank participated in a US$4 billion sustainability-linked loan with Occidental Petroleum. The oil company announced in late 2023 that it was spending around US$12 billion to buy shale driller CrownRock.
Mr. Price believes that the bar should be higher for a loan to be considered sustainable financing. He also believes that companies banking on an increase in oil or gas production should not be eligible. “That’s a pretty basic question, isn’t it?” »
The banks did not comment, referring questions to the Canadian Bankers Association.
Its spokesperson, Maggie Cheung, says Canadian banks follow North American market standards for environmental, social and governance disclosures. She adds that they comply with applicable disclosure rules and regulations and continue to work with industry and regulators to advance sustainability disclosure standards.
“Canadian banks understand the important role the financial sector plays in an orderly transition to a low-carbon future,” says Ms.me Cheung.
“Sustainable finance is a means used to help businesses mobilize capital towards this effort and a range of other environmental and social goals. »
Investors for Paris Compliance wants regulators to investigate and assess the extent to which banks’ information on sustainable finance is adequate. The group also wants regulators to require banks to disclose the effect of their sustainable finance activities on greenhouse gas emissions.