Royal Bank of Canada has nudged out US giant JP Morgan Chase for top spot on an annual list of the top global financiers to fossil fuel companies, a ranking compiled by a group of international environmental organizations.
The Canadian bank was responsible for US$42.5 billion in financing for fossil fuel projects in 2022, the group’s calculations show. Of that amount, US$4.8 billion went to oil and gas projects and US$7.4 billion to fracking, according to the report, which profiled the top 60 banks by assets, provided they also funded fossil fuel projects. Their annual assessment aims to track how the banks have handled such financing since 2016, when countries including Canada signed the Paris Agreement to tackle climate change.
The report, published April 13 and titled Banking on Climate Chaos, was produced by organizations including Rainforest Action Network, Indigenous Environmental Network and the Sierra Club, which are pushing for the winding down of all fossil fuel projects, which they say contribute to climate change , biodiversity loss and violations of Indigenous Peoples’ rights.
Their 2022 report identified 15 banks that increased their fossil fuel financing in dollar terms last year. That list includes RBC, even though the Canadian bank placed near the bottom with a four per cent increase over 2021.
The authors identified top clients over the past year, which in RBC’s case included Enbridge Inc. and Canada Development Investment Corp., a Crown corporation responsible for managing investments and corporate interests held by the Government of Canada.
On April 14, in response to a request for comment , RBC said the authors of the report “do not validate their figures or findings” with the bank, which “can’t confirm their conclusions.”
In an emailed statement, RBC criticized the report for failing to measure progress in meeting climate goals.
“We are confident in our ongoing engagement with our clients and our climate strategy,” RBC said. “This includes setting initial interim emissions reduction targets for lending in three key sectors which inform our lending decisions, adding climate considerations to executive compensation and establishing the RBC Climate Action Institute, (which is) focused on advancing climate policy research and action.”
RBC’s chief executive, Dave McKay, has previously rejected calls for outright divestiture from oil and gas projects, and urged governments to step up with tax policies and incentives to spur private investment in the energy transition, which includes developing renewable energy sources such as wind and diesel alongside decarbonization efforts like carbon capture.
The fossil fuel financing report noted that RBC continues to fund expansion projects, such as British Columbia’s Coastal GasLink pipeline which will carry fracked gas, a project that has drawn protests from environmental activists and the Wet’suwet’en hereditary chiefs.
The BC project has attracted peaceful protests but has also been beset by violent incidents. An RCMP official told CBC News in April that police believe some of the protests in 2022 were infiltrated by unaffiliated “anarchists” seeking opportunities to target government facilities and infrastructure.
While Canada has become a magnet for such protests, US banks as a group continue to dominate fossil fuel financing, accounting for 28 per cent of it in 2022, according to the report. In addition to JPMorgan, the report said Citi, Wells Fargo and Bank of America are among the top five fossil financiers of non-renewables since 2016.
Other Canadian banks are in the report as a result of their financing of oils and projects, while some European banks have backed off. The report, which refers to the oilsands as tar sands, said companies in that energy segment received $20.9 billion in financing in 2022, with Canada’s largest banks lining up 89 per cent of it. TD, RBC and Bank of Montreal topped that list.
Increased funding for liquefied natural gas (LNG) projects in 2022 is also criticized in the report. Financing for LNG projects, which came amid calls to transition to renewables to reduce Europe’s reliance on energy from Russia, increased by nearly 50 per cent in 2022 over the prior year, clocking in at US$23 billion.
The report’s authors were also critical of weak and slow-to-develop disclosure rules, which they contend allow banks and institutional investors to continue funding oil and gas projects despite climate commitments.
In addition, it says a significant portion of fossil fuel financing by banks over the past six years has come in the form of bond and equity underwriting, not lending, while most financial institutions include only lending in their environmental policies. This, it is suggested, “leaves a massive US$2.7 trillion loophole for banks that do not include underwriting in their climate policies.”
Tracking by Canadian Imperial Bank of Commerce in mid-2022 showed that Canada’s largest six banks had reduced their exposure to oil and gas as a percentage of their loan books since 2015 — from two per cent to 0.8 per cent. And that decline wasn’t solely pegged to a shifting mix in loans at the banks, because the total loans had also shrunk to an average of just over $5 billion from a shade below $8 billion.
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A spokesperson for The Canadian Bankers Association responded to the fossil fuel financing report on April 14, saying the organization had not yet analyzed the numbers.
In an emailed statement, Mathieu Labrèche said banks in Canada recognize climate change is a “critical issue of our time” and are committed to doing their part in addressing it, “understanding that the financial sector is central to securing an orderly transition to a low -carbon economy while also ensuring the continued resilience of our country’s financial system.”
The statement said the financial institutions acknowledged that firm commitments are required to accelerate clean economic growth and to meet the goal of a net-zero economy.
“That’s why banks in Canada have begun implementing climate action plans that set specific targets to meet the demands of this global challenge,” the statement said. “This includes working with clients across industries to help them decarbonize and pursue energy transition opportunities. By financing the climate transition, banks are helping Canada meet its net-zero ambitions while also helping meet temporary energy demands in a volatile global context.”