By Ketki Saxena
Investing.com -- The performance of Canada's 'Big Six' banks in combating climate change is under scrutiny, as per an assessment by Investors for Paris Compliance (I4PC).
In its second annual report, I4PC noted, "While other global banks like HSBC and BNP Paribas (EPA:BNPP) have begun restricting financing fossil fuel expansion projects; none from Canada has shown similar initiative"
The report brought into focus the lack of new policies aimed at decarbonizing their portfolios and questioned the authenticity behind their sustainable finance pledges.
"Beyond listing eligible activities, no bank provides a measurable standard of what is ‘sustainable’ and what isn’t, particularly with regards to emissions"
The inability to distinguish between sustainable finance and regular financing concerning atmospheric impact also makes tracking progress virtually impossible, the report noted.
This ambiguity paves the way for potential greenwashing practices, and the report notes that no bank has established measures against such misleading representation of environmental friendliness.
Apart from ambiguous data sets related to ESG business segments & indistinguishable lines between sustainable & regular finance, there exists no measurable emission standard preventing greenwashing.
Furthermore, conflicts between client relationships over sustainability credentials pose additional challenges.
Overall, Canadian Banks were rated from B (good coverage) to D (insufficient coverage), based on their efforts towards sustainability. The weakest area was found to be interim oil and gas targets where only TD Bank (TSX:TD) and National Bank of Canada (TSX:NA) showed improvements since last year.
Loan amounts allocated for oil & gas industry declined at four out of six banks - CIBC (TSX:CM), TD Bank, BMO (TSX:BMO) & National but remained stable at Scotiabank (TSX:BNS) while slightly increasing at RBC (TSX:RY). However, data indicated significant increases in fossil fuel financing by TD (34%) followed by RBC(4%).
"Canada is literally on fire but our banks are showing no urgency shifting their financing from activities that exacerbate this crisis," commented Kyra Bell-Pasht from I4PC. "The voluntary net zero pledges made by these banks will need regulatory backing if they continue with current trends."
"In order set new targets & achieve corporation-wide net zero status; scope expansion regarding emission reporting is essential".