Climate advocacy groups have complained that Canada's five largest banks use terms such as "sustainable finance," which could mislead investors.
Investors for Paris Compliance, a climate advocacy group, said in a filing with the Ontario Securities Commission and the Quebec Financiers Authority on Tuesday that banks are using the term "sustainable finance" too broadly and that they are not using data to back up those claims.
Big five banks – Royal Bank of Canada (RBC), TD Bank (TD), Bank of Montreal (BMO), Canadian Imperial Bank of Commerce (CIBC) and Scotiabank – have pledged to provide a total of $2 trillion in sustainable financial services by 2030.
Sustainable finance encompasses a range of lending activities aimed at promoting environmental and social causes.
Financing can take any form, from green bonds specifically to finance renewable energy projects, to loans for general business use that are linked to sustainability-related performance targets.
Matt Price, executive director of Investors for Paris Compliance, said the commitments were a key part of its sustainability efforts, but the bank offered little commitment to support its effectiveness.
"They see it as one of the core initiatives to combat climate change and net zero, but they don't provide any evidence or proof of this. ”
The climate advocacy group is concerned not only about the overall lack of disclosure, but also about some of the disclosed deals being made with oil and gas companies with rising emissions.
In 2021, as Enbridge Inc. expanded its oil export capabilities, RBC, CIBC and Scotiabank all participated in sustainable finance deals with the company, while BMO Bank helped Gibson Energy construct sustainability-related credit facilities.
In the same year, TD Bank, together with Occidental Petroleum, represented the sustainability structuring of a $4 billion sustainability-related loan in the United States. The oil company announced in late 2023 that it would spend about $12 billion to acquire shale drilling company CrownRock.
Price of the climate group said the bar for sustainable financing should be higher, and companies working to expand oil and gas production should not be eligible.
"That's a very basic question, right?"
Canada's top five banks did not respond directly to comment, instead referring the request to the Canadian Bankers Association.
Maggie Cheung, spokesperson for the Association of Banks, said the industry's statement is that the Bank of Canada follows the North American market's standards for environmental, social and governance disclosures, adheres to applicable disclosure rules and regulations, and continues to work with industry and regulators to advance sustainability reporting standards.
"The Bank of Canada understands the important role of the financial sector in an orderly transition to a low-carbon future," Zhang said.
"Sustainable finance is a tool to help businesses mobilize capital to achieve this and a range of other environmental and social goals. ”
The climate group Investors for Paris Compliance wants regulators to investigate and assess whether banks' disclosures on sustainable finance are adequate and accurate.
The climate group also wants regulators to require banks to disclose the emissions impact of their sustainable finance operations, or to clarify areas where they can't, and to disclose that these sectors are not specifically advancing their net-zero carbon goals.