Big Canadian banks may be making misleading claims on sustainability, says securities complaint

Canada’s big five banks are potentially misleading investors with their use of terms like sustainable finance, according to a complaint to securities regulators by a climate advocacy group.

Banks are using the term “sustainable finance” too broadly and not backing up the claims with data, Investors for Paris Compliance said in its submission Tuesday to the Ontario Securities Commission and the Autorité des marchés financiers of Quebec.

Canadian banks, including RBC, TD, BMO, CIBC and Scotiabank, have all made pledges on sustainable finance that together total $2 trillion by 2030.

Sustainable finance covers a range of lending activities aimed at advancing mostly environmental and social causes. The financing can be anything from green bonds funding a specific renewable energy project to loans that go to general corporate use but are tied to sustainability-linked performance targets.

The commitments form a key part of their sustainability efforts, but banks are providing little to back up their effectiveness, said Matt Price, executive director of advocacy group Investors for Paris Compliance.

“They’re putting this in the window as one of their core responses to climate change and net zero, when they’re not rationalizing or justifying or providing any evidence or proof about that.”

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In an interview with CBC News, Investors for Paris Compliance said it would like to see more investment in sustainable businesses, and it’s not trying to challenge that. The group says it’s looking for accurate promises.

“We just want to make sure that investors can hold the banks accountable to their claims,” said Kyra Bell-Pasht, director of research and policy for Investors for Paris Compliance.

A woman in a scarf and glasses looks to camera in the CBC Toronto atrium.
Kyra Bell-Pasht is Director of Research and Policy with Investors for Paris Compliance. Her group claims multiple Canadian banks are being misleading around sustainable investments. (Philippe de Montigny/Radio-Canada)

“In 2021, all five of the Canadian big banks committed to achieve net zero across their entire businesses, including the businesses that they lend to, that they underwrite with … reducing the amount of emissions that they’re financing with their bank,” she said.

Advocates point out oil and gas deals with banks

The advocacy group is concerned that some of the deals labelled as sustainable by banks were with oil and gas companies whose emissions are on the rise.

In 2021, RBC, CIBC and Scotiabank were all involved in sustainable finance deals with Enbridge Inc. as the company was expanding its oil export capacity, while BMO helped structure a sustainability-linked credit facility for Gibson Energy that has been increasing its oil exposure.

The logo of Royal Bank is shown outside the bank's headquarters in Toronto
RBC is one of the banks an environmental advocacy group says was involved in a ‘sustainable finance’ deal with energy company Enbridge. (Nathan Denette/The Canadian Press)

That same year, TD Bank served as a co-sustainability structuring agent for a $4-billion US sustainability-linked loan with Occidental Petroleum. The oil company announced in late 2023 that it was spending about $12 billion US to buy shale driller CrownRock.

Price said there should be a higher bar for what’s considered sustainable financing, and that companies working to expand oil and gas production shouldn’t qualify.

“It’s a pretty basic question, right?”

Banking association says they follow market standards

Banks didn’t provide direct responses for comment to either The Canadian Press or CBC News, directing requests instead to the Canadian Bankers Association.

A pumpjack draws out oil from a well head near Calgary in September. Alberta's rural municipalities are still waiting on their significant unpaid outstanding property taxes to be paid.
A pumpjack draws out oil from a wellhead near Calgary in September 2022. (Jeff McIntosh/The Canadian Press)

Spokeswoman Maggie Cheung said the industry’s statement is that Canadian banks follow North American market standards on environmental, social and governance disclosure, comply with applicable disclosure rules and regulations and continue to work with industry and regulators to advance sustainability reporting standards.

“Banks in Canada understand the important role that the financial sector has in an orderly transition to a low-carbon future,” said Cheung.

“Sustainable finance is one tool for helping companies mobilize capital toward this effort and a range of other environmental and social goals.”

Advocates say banks need to do more

At least one financial planner who focuses on helping clients with environmentally-friendly investments says it’s important for Canadians to know and trust a label of “sustainable.”

“I think a lot of Canadians are worried that the banks are talking a big game when it comes to sustainable finance,” said Tim Nash, president of Good Investing.

A man in a purple shirt and glasses looks to the side.
Tim Nash is a financial planner who advises clients on how to align personal values with their financial investments. (Submitted by Tim Nash)

Speaking to CBC News, Nash said it’s not enough for Canadian institutions to say they are following the letter of current regulations.

“We don’t want the banks to simply follow the best practices or do the bare minimum by following the guidelines.”

Investors for Paris Compliance wants regulators to investigate and assess how adequate and accurate banks are in their disclosures around sustainable finance.

The group also wants regulators to require banks to disclose the emissions impacts of their sustainable finance business or clarify areas where they can’t and instead disclose that the segments don’t specifically advance their net-zero goals.