If you’ve been reading the news, you’ll know we’re in the “follow the money” stage of the climate debate. For too long, the role of banks and investors in enabling the climate crisis was overlooked. Big Oil was the big villain, even though it can’t operate without Big Finance.

Canada’s banks are particularly carbon entangled, with our big five each featuring in the top 20 largest funders of fossil fuels in the world. While we need to keep lobbying governments to better regulate both the fossil fuel sector and the financial sector, climate-concerned Canadians can also take action by letting their bank know they are unhappy with its performance and either threatening to shift their business elsewhere or actually doing it.

But shift where? We get this question a lot because we carefully parse the climate disclosures of Canada’s banks to compare them with best practices given by science. They are each now talking a good game about getting to “net zero” by 2050, but the reality is unfortunately less than advertised. In this piece, we hope to provide a general ranking of where the banks are in their policy journey so that you can make your own decisions on how or whether to engage with them.

First, the usual caveat: none of this is intended to provide investment advice. Talk to professional investment advisors about that and, ideally, ones who are sincere about the energy transition and not just trying to sell you the usual stuff coated in green paint.

Shifting your banking business all at once can be tricky, so it’s best to ask the advice of the institution you are moving to about how to do it. Maybe it’s partial or in stages — you can open new savings or chequing accounts and shift credit cards relatively quickly.

Moving mortgages or registered savings accounts may take more time. Finally, if you shift, you’ll have a bigger impact if you tell your old bank — as well as friends and relatives — why you are leaving, rather than slipping away quietly.

This ranking deals with shades of grey and the messiness of compromise. There is no perfect answer, since even the greenest banks invest in or do business with other banks who do business with fossil fuels. Also, I genuinely hope this ranking changes over time as the banks begin to take the climate crisis more seriously and up their game. Finally, another ranking is needed to evaluate the banks on their respect — or lack thereof — of free, prior and informed consent (FPIC) in project financing, which is a major issue, for example, with the Coastal GasLink pipeline and the Trans Mountain expansion project. Without further ado, here is the ranking:

1. Credit unions

The first choice for climate-concerned Canadians may not, strictly speaking, be a bank at all but a credit union. Many don’t consider credit unions, possibly because the big banks are so ubiquitous and visible, but they are viable alternatives for most banking needs.

Climate-concerned Canadians can take action against fossil fuel-funding banks by shifting their business elsewhere, says Matt Price of @investors4paris. But where should you take your dollars? #FossilFuels #FossilFunding

The basic difference between banks and credit unions is that with the latter, you are a co-owner of the institution just by virtue of having your account there. You join as a member and then have a vote to choose the board of directors. Partly because of this, credit unions have the reputation of being more responsive to their customers.

A primary reason credit unions are more climate-friendly is that they are generally not large enough to engage in bigger commercial lending like to the oil and gas industry. In addition, many of them, like Vancity, have strong environmental policies, and if they don’t, you have a good pathway as a member to push for them.

Some credit unions also put screens on their investments — where your RRSPs and RESPs end up, but you’ll need to keep a close eye on that aspect. Ask lots of questions and ask for options for investments that don’t lead to more greenhouse gas emissions.

Here is a handy tool to find credit unions near you.

2. Laurentian

Laurentian is the eighth-largest bank in Canada, although operating primarily in Quebec. So far, it is the only Canadian chartered bank to make a commitment to not directly finance the exploration, production or development of coal or oil and gas.

This commitment coincides with the appointment of Rania Llewellyn as president and CEO, the first woman to head a chartered bank in Canada.

3. HSBC and BMO

Now we enter into the zone of banks with deep fossil fuel entanglements. The shades of grey to explore within this zone concern whether the banks are making meaningful decisions to reduce those entanglements.

HSBC is the largest foreign bank in Canada and seventh-largest in size overall in this country. It is the 13th largest funder of fossil fuels in the world but has made some commitments the large Canadian banks haven’t, including restrictions on financing new oilsands and coal activities, and it recently made a commitment to strengthen its action on phasing down fossil fuel financing.

Something to note, though, if you are considering HSBC: the bank also has a spotty ethics record when it comes to money laundering.

The Bank of Montreal is the other big bank that is doing slightly more than others to change course. Specifically, BMO is the only major Canadian bank to set a target to reduce its financed emissions in the oil and gas sector in absolute terms. The other banks set so-called “intensity” targets that only reduce emissions per unit of production, which leaves the door open for absolute emissions to keep going up with more production. BMO is also the only North American bank to make the Corporate Knight’s “100 most sustainable companies” list in 2022, which ranks companies with revenues over US$1 billion.

Whether BMO follows through on its fossil fuel reduction target remains to be seen. It is currently the 15th largest fossil fuel funder in the world and needs to do much more to change.

4. CIBC, Scotiabank, TD and National

We come to the peloton. But unlike in cycling, it’s unclear whether this group is pedalling to catch up to the leaders or prefers to stand still.

CIBC, Scotiabank, TD and National Bank have all committed to reach net zero in financed emissions by 2050, but none has set targets that would actually get them there. Each is a major funder of fossil fuels and has set intensity targets that will let them maintain or even expand that funding. Each one talks about “working with” its fossil fuel clients on the energy transition but lays out no criteria for what that will look like nor commits to holding any of its clients accountable should they fail to transition.

Customers of these banks should be skeptical about their net-zero rhetoric. Much more ambition by these banks is required to take them seriously on climate.

5. RBC

As Spiderman fans know, with great power comes great responsibility. RBC is Canada’s largest bank and, as such, sets the tone. Unfortunately, RBC is Canada’s largest funder of fossil fuels, fifth largest in the world. Moreover, the tone we are hearing from RBC is decidedly pro-fossil fuels.

Incredibly, RBC is doing less than even the banks in the prior category. Unlike the other banks, it is yet to set any targets for its financed emissions and underestimates its current emissions by failing to account for what’s called “Scope 3” or downstream emissions.

Recently, RBC put out a report that called for increasing oil and gas production in Canada. Note that the International Energy Agency found getting to net zero means no investment in new fossil fuels — we already have enough to cook the planet. Only dodgy math could argue the opposite.

For these reasons, RBC is bringing up the rear.

Finally, you'll notice that this ranking doesn't deal with purely online banks, which may be a good option, particularly in the future as they become more established. But watch out who owns them — for example, Scotiabank owns Tangerine and CIBC owns Simplii Financial, so you may not be getting away from the problem.

Matt Price is the director of corporate engagement with Investors for Paris Compliance, a shareholder advocacy organization that holds publicly traded Canadian companies accountable to their net-zero pledges.

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Note the #1 option: Credit Unions. There are so many other reasons to dump banks in favour of credit unions I often wonder why so many people still don't do it. If you're left of centre politically, obviously banks are bad guys who should be steered clear of if there's a better option--and there is!

But even if you're an alt-right conspiracy theorist . . . so, those guys somehow manage to be right wing and back political parties that are utterly servile to the rich, while simultaneously believing that the "swamp" needs to be drained, "elites" need to be taken down, and more specifically stuff like, the World Economic Forum people want to rule the world (which as far as it goes, is true enough) and do it by putting microchips in us or stealing our precious bodily fluids or whatever (which is ridiculous). But if you don't like the WEF types, you shouldn't be using their banks, duh, so alt-right types should also be using credit unions.

And people who just want a more customer-oriented bank should use credit unions. And people who don't want as many user fees should consider credit unions. And people who would like to see some of the money they put away reinvested locally to benefit the local economy should use credit unions. And so on . . .

Absolutely agree. I've belonged to a credit union for OMG 56 years--ever since I started earning a wage. First one was the old CS Co-op, for federal public servants and their families. And I belonged to another one as well, back in the halcyon days when there was an Ottawa Women's Credit Union. Both those have been absorbed into Alterna.

In all those years, outstanding service. Now that I'm in a smaller community, it's like having my own money manager at my desk--they keep track of accounts that need to be renewed or turned over, they advise me regarding investments (my motto is under the mattress), they've helped me so very much after my husband's death, dealing with probate and estate account issues. Friendly, personable, professional. A number of years ago, the independent professional accountant that we had because of my husband's business thoroughly messed up my income tax return for a year. It took innumerable letters and phone calls and over a year to get it straightened out. The customer service rep at Alterna held my hand all the way through this.

I tried to get my husband to move his accounts from a bank to the credit union years ago, but he declined--he was familiar with the bank staff. And they were fine. But when he died, everything hit the fan, in terms of trying to move his funds over to me, at the credit union.

I've suggested to multiple friends and relatives that they switch to a credit union, but they seem to be reluctant--am I going to get the same interest rates, what about my mortgage, etc. The information is there for them, but IMO, they're stuck in the bigger-is-better trap.

Nearly weekly, I read in the media of some horror story associated with a bank, any bank: treatment of First Nations people, funding fossil fuel extraction and transport, unfriendliness to low-income people--especially if they don't have much financial knowledge, outrageous abuse of customers regarding fraudulent account draws ("not OUR fault"), and so on.

I have never understood why, given all the pluses of a credit union, and the negatives of banks, more people don't switch. To me, it's the ultimate in financial foolishness.

Good article. But here is a view from a small potato retiree who has tried to get mortgages over the years (3 times) with credit unions. To put not too fine point on it, in my opinion, they are expensive and useless. The term useless comes from my latest experience. I am retired and was concerned in 2018 about rising rents. I found out my partner and I qualified through the Scotia Bank for a loan to buy a house. Unfortunately the place we could afford had a mobile home built into it which disqualified us getting the mortgage. No problem our broker said we can get it through the credit union that was mortgaging the place before we bid on it. long story short they forced an assessment that we had to pay then raised the interest from 4.6 to 6.6 percent. They kept delaying us until we were six days from closing with no resolution in site. Our broker turned us over to an RBC broker who in 4 days had us approved at 4.2 percent on a 30 year mortgage with a 10 year moratorium. That means I have a guaranteed monthly payment that was less than my rents in 2018 for 10 years. Think about that in regards to two retirees on pension. The Credit union would have let us crash and lose the place. They were terrible to deal with. I like the concept of credit unions but the delivery in the times that I tried to use them fell far short of being practicable.

This is a prescient article. But there are experiences like Fred above that may cause one to pause and think long and hard about switching to a credit union. Not every CU is VanCity, one of the largest in the world. Still, there is a reason why large organizations such as municipalities led by progressive councils do not use CUs for day-to-day banking, not even VanCity.

Retirees may have a quarter century or more of automatic payroll deposits with a big bank and have just carried on with mortgages, RRSPs, mutual funds and savings out of having a good credit rating with the same institution and for convenience.

Perhaps the best way forward for climate concerned citizens is to put NEW money into CUs or private investment firms that manage audited ethical growth funds with a proven record and let the old money in the carbon-heavy bank slowly deplete, or be removed in tranches modest enough to avoid the worst penalties.

A run on the banks will send shafts of fear through corporate board members and shareholders. But that is not a realistic expectation that climate fighters can bank on at present. However, change can come in more insidious forms, like consumers incrementally switching off carbon in their lives. RBC finances oil sands operations, but nothing can stop individual RBC customers from buying EVs (combustion cars are the biggest consumers of refined bitumen), heat pumps, electric cooktops, solar panels and so forth, especially with meaningful government grants. RBC customers can participate in converting RBC investments in fossil fuel projects into stranded assets. Until the flow of money is threatened, ethics will just wash off the backs of the Big Five like rain off a duck's back.

Ethical arguments will mean nothing until renewables can attain a steady flow of profits to rival fossil fuels. We're not there yet.

Profits from renewables will never rival fossil fuel profits. If that is what we are waiting for, we will wait forever.
The fossil fuel industry is profitable only because the economic system is rigged in its favor. Climate change represents the biggest market failure in history. Governments and politicians are controlled by the corporations that profit from this failure. They control the agenda. Those who profit from this voodoo economics also write the rules that govern the market. So don't expect it to end anytime soon.
The industry is viable only because producers and consumers largely externalize health, environmental, and climate costs. Downloading them to the public purse, the environment, and future generations. A massive transfer of wealth from future generations to ours. Inter-generational theft, in short. Stealing from our grandchildren. Beyond which, the industry helps itself to endless subsidies, visible and invisible.
Since solar panels and wind turbines generate energy locally with zero fuel costs, opportunities for lucrative power exports in an electrified world will be relatively limited, with imports and exports more balanced regionally.

OPEC+ controls the oil market and can manipulate the global oil price at will. Restrict supply and prices spike. Flood the market with cheap oil and drive more competitors with high costs out of the market.

Contrast the most democratic, highly distributed energy system in the world: a couple dozen solar panels on your roof. While your costs are low, the scope for profit is also low. No oligopolies to manipulate the market to their own advantage.

Which is one reason why many utility companies oppose distributed energy systems like solar. It is not a system they can monopolize or reap huge profits from.

Thank-you--yes! to both your comments