Many banks are promoting the Net-Zero goal within the Paris agreement and claiming they have 'sustainable' funds and 'ESG' funds, however as investors are beginning to take a closer look Investment Executive discloses what the reality of Canada's big banks is. The article states that; "In March, a report from the Rainforest Action Network found that Royal Bank of Canada, Bank of Nova Scotia, CIBC, Toronto-Dominion and Bank of Montreal increased their financing of fossil fuels by a combined $61 billion in 2021. From 2016 to 2021, those banks lent $911 billion to the fossil-fuel industry. In August 2021, a Greenpeace report performed a similar analysis."
A lot of pressure has been placed on the actual producers of fossil fuels however now it seems the focus is also beginning to shift towards those funding these producers as well. Investors are beginning to realize the banks may not be backing what they are promising, so now they are looking for answers.
Until 2050, the banks are having to publicly publish emissions data annually and every 5 years they must show what other targets they are implementing.
As Investment Executive states, having mandatory reporting and publicly available data could be both a good thing and also hinder the banks that are unable to reach the goald they stated they would to get to their net-zero commitments, said Conor Chell, an environmental and regulatory compliance lawyer with MLT Atkins in Calgary.
“Once that happens, we’re gong to see activists, shareholders and potentially regulators looking at companies that are not performing as well as their industry peers. From there, we could see litigation against some of the big players in each of those sectors,” Chell said.
It seems the more attention ESG funds are receiving and the more investors are becoming interested in these funds, the more transparent companies and banks need to be with just how they are planning to attain their goals and what they are doing to get there. I believe this will also put more pressure on regulators to come out with standards in order for funds to be eligible to be declared 'ESG' or 'Responsible'. The more transparency we are able to get with this I believe the better.
As Toulch says to end this article, “Banks have a profound and catalytic role to play to ensure that society’s transition is both smooth and swift, and while it seems that banks are aware of the problem and recognize a need to act, the pace of change remains far, far too slow across the sector given the urgency of the situation,”.
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