Climate activists have filed a complaint with Canadian regulators demanding an investigation into five major banks, accusing them of publishing misleading disclosures about their “sustainable” financing.
“Each of the five banks has made a sustainable finance – or some similarly worded – commitment in the hundreds of billions of dollars and lists this as a central way it will reach its net zero target,” campaign group Investors for Paris Compliance (IPC) said.
“Yet none discloses the emissions impact of deals in this business segment and the complaint documents several instances where sustainable finance deals have increased instead of reduced emissions.”
The IPC filed complaints on Tuesday with the Ontario Securities Commission and Quebec’s Autorité des marchés financiers against the Bank of Montreal, the Canadian Imperial Bank of Commerce (CIBC), the Royal Bank of Canada (RBC), Scotiabank and Toronto-Dominion.
The campaigners said each of the banks had recognised that climate change poses a significant risk to their business and had claimed in their annual, climate or ESG reports to be making progress towards achieving net-zero operations.
However, the IPC said none of the banks had disclosed the emissions resulting from deals it had labelled as sustainable, “meaning there is no practical distinction with the banks ‘regular’ financing”.
“Canada’s securities regulators, via the Canadian Securities Administrators, have clarified that ESG disclosure is subject to the same rules of accuracy and completeness as financial disclosure,” it noted.
The advocacy group highlighted several examples of deals that had been described by the banks involved as “sustainable” but which, it claimed, had actually contributed to emissions.
These included a C$1bn sustainability-linked loan to pipeline company Enbridge, on which RBC and CIBC served as sustainability structuring agents.
Enbridge was at the time “expanding fossil fuel infrastructure, including finishing the Line 3 oil sands expansion pipeline, estimated to have the same impact on the climate as adding 50 new coal-fired power plants”, the complaint reads.
It asks that if the two regulators find the complaint to be valid, the banks should be obliged to either disclose the emissions impact of deals labelled as sustainable, “or else disclose the limitations of sustainable finance to their net zero goals”.
It also requests that the regulators join with others to issue guidance for ESG-labelled bonds. Canadian banks are not currently obliged to report the overall emissions of activities financed with these bonds.
“At best, sustainable finance as currently practiced by Canada’s big banks is a $2 trillion placebo at a time when we need strong medicine to reduce emissions,” IPC’s executive director Matt Price said in the statement.
“At worst, it is greenwashing of carbon-intensive businesses, misleading investors and the public.”
Financial regulators are facing growing calls to reduce greenwashing by banks by tightening the disclosure requirements around their “sustainable” activities and lending more generally.
In November, the Basel Committee on Banking Supervision proposed changes to its Pillar 3 rules, which lay out the public disclosures banks are required to make.
The proposal would require detailed information on the impact of climate change on large banks. While Basel rules are not legally enforceable, they are considered best practices in the industry.
This page was last updated January 16, 2024
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