The Big Six Canadian banks aren’t doing enough to battle climate change, according to a report by Investors for Paris Compliance (I4PC). 
 
The second annual I4PC report, released on Wednesday, found the banks showed few new policies to decarbonize their portfolios. It also raised questions about the banks’ sustainable finance pledges. 
 
“Canada’s banks lack net zero urgency,” the report said. 
 
Canada’s leading banks received ratings between B, meaning good coverage, to D, meaning insufficient coverage. The “interim oil and gas” target category showed the most weakness, as only two out of the six banks -- TD Bank and National Bank of Canada -- set additional targets since last year.
 
No bank has set guardrails against greenwashing, which poses widespread risk, the report added. 
 
The report detailed the ambiguity around tracking sustainable finance reporting in particular. 
 
“Beyond listing eligible activities, no bank provides a measurable standard of what is ‘sustainable’ and what isn’t, particularly with regards to emissions,” it stated. 
 
Since the banks have failed to distinguish between sustainable finance and the banks’ regular financing in terms of impact on the atmosphere, this makes it impossible to accurately track progress, the report added, leaving the door open to potential greenwashing. 
 
In addition, the report flagged there are challenges regarding how the banks calculate their financed emissions and little visibility into what the banks consider a credible client transition plan. 
 
“While other global banks (like HSBC and BNP Paribas) have begun to restrict financing to fossil fuel expansion, no Canadian bank has done so, with all participating in financing projects that expand the use of fossil fuels, making the climate crisis worse,” it said. 
 
Loan amounts for oil and gas declined at four banks, Canadian Imperial Bank of Canada (CIBC), TD, Bank of Montreal (BMO) and National — however, they stayed constant at Scotiabank and slightly increased at Royal Bank of Canada (RBC). 
 
“It is worth noting that when including underwriting activity and the entire fossil fuel value chain, the Banking on Climate Chaos report indicates that from 2021 to 2022 fossil fuel financing increased substantially at TD (34 per cent), followed by RBC (four per cent),” the data showed. 
 
The report called for regulator intervention should the data remain this vague. 
 
“Canada is literally on fire but our banks are showing no urgency shifting their financing from activities that are making things worse,” Kyra Bell-Pasht, director of research and policy at I4PC, said in the release. 
 
“The banks’ voluntary net zero pledges will need to be backed up by regulation if they continue to stall,” she added. 
 
The report flagged several challenges as large hindrances to the banks reaching net zero, such as the lack of a clear set of data for their ESG-related business segment, and no distinction between sustainable finance and the banks’ regular financing.
 
Other obstacles to that goal include no measurable emissions standard to avoid greenwashing and a general conflict of interest between the banks and their clients where the relationship may matter more than the client’s sustainability credentials, the report said.
 
"In order to set new targets and to achieve net zero across the entire corporation, banks must expand the scope of their emissions reporting," it said. 

BNNBloomberg.ca has reached out to the banks for comment.

Scotiabank said in an email that is is committed to transparency in climate governance and climate-related public reporting, and said it is working on a sustainable finance framework “which is expected to be published in 2024.”

“Expectations for reporting and disclosure rapidly evolve and the quality of emissions data presents ongoing challenges for the sector in assessing emissions exposure,” the bank said. “Scotiabank continues to update its targets, methods and action plans as data accuracy and quality improves.”

RBC told BNNBloomberg.ca in an email it remains committed to achieving net zero in its lending by 2050 and has established interim emissions reduction targets to do so.

“These targets are informed by science and reflect a measured and deliberate approach to climate action,” a spokesperson said.

CIBC said open and regular communication about its climate change commitments is important, and the bank said it will continue to “advance our reporting and measurement of our progress.”