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Canada’s five biggest banks are among the 20 largest fossil fuel financiers in the world, according to new research, leading parliamentarians and climate advocates to warn the country is setting itself up for major risks through the energy transition.

Last year, RBC, Scotiabank, TD, BMO and CIBC collectively financed fossil fuel companies to the tune of at least $140 billion, according to a report published Monday. Despite the towering sum, it's a step down from the banks’ financing in 2022, which reached approximately $163 billion.

Since the Paris Agreement was signed in late 2015, the Big 5 banks have pumped approximately $1.2 trillion into fossil fuel companies like Enbridge, TC Energy and Trans Mountain.

Specifically, in 2023:

  • RBC loaned or invested $38.5 billion.
  • Scotiabank loaned or invested $32.8 billion.
  • TD loaned or invested $27.7 billion.
  • BMO loaned or invested $21.4 billion.
  • CIBC loaned or invested $21.2 billion.

Out of the 60 largest banks in the world, researchers found RBC, CIBC and Scotiabank are all on the 2023 list of top 10 financiers of fracked gas projects. Last year, those same banks were also the top funders of oilsands extraction, providing at least $700 million each. Since the Paris Agreement was signed, the Big 5 banks have injected more than $60 billion into oil sands companies.

The report, titled Banking on Climate Chaos, was authored by the Rainforest Action Network, Indigenous Environmental Network, BankTrack, Oil Change International, Reclaim Finance, Sierra Club, Urgewald and the Center for Energy, Ecology and Development.

“We have the solutions, yet Canada’s big banks are still lighting the fuses of carbon bombs, pouring billions into fossil fuel financing during the hottest year on record,” said Stand.earth’s climate finance program director Richard Brooks. “Canadian banks are positioned as lenders of last resort, holding dangerously outsized fossil fuel financing, which should sicken and worry us all.

“It’s time for our government and regulators to step in and mandate Canadian banks help rather than hinder our climate goals.”

"Canada’s big banks are still lighting the fuses of carbon bombs, pouring billions into fossil fuel financing during the hottest year on record... It’s time for our government and regulators to step in."
Richard Brooks of Stand.earth gives remarks and speaks to the media at a press conference following the RBC annual general meeting, in Toronto on April 11, 2024. Photo by Christopher Katsarov Luna/National Observer

The risk for banks is that as the energy transition to renewables unfolds around the world, demand for fossil fuels will collapse, leaving their investments worth less, if not worthless. A 2022 study found Canadians stand to lose more than $100 billion in the energy transition as these fossil fuel assets become stranded.

But it’s not just the lost revenue from fossil fuel investments drying up that’s at risk. Because burning fossil fuels is the primary driver of climate change, financing oil and gas expansion means greater impacts from global warming. Queen’s University’s Institute for Sustainable Finance estimated the Canadian economy could take a $5.5-trillion hit by the end of the century due to climate change if catastrophic warming isn’t avoided.

The Canadian Bankers Association did not return a request for comment by deadline.

MPs from all parties — except the Conservatives who did not respond to an invitation, according to a panel organizer — spoke on a Zoom call Monday afternoon to discuss climate finance issues. During the panel, NDP environment and climate change critic Laurel Collins said it’s clear financial institutions will not align their investments to Canada’s emission reduction targets voluntarily. Regulation will be required.

Collins laid responsibility for Canada’s lack of regulation at the feet of Finance Minister Chrystia Freeland.

“Chrystia Freeland is in the way,” Collins said. “Canada's green investment landscape is actually a Wild West of greenwashing [and] misleading so-called sustainable loans … and so we need a strong [sustainable finance] taxonomy.

“And it looks like the government is heading down the road of labelling fossil fuels [like] LNG as green under the new system and I really hope that's not the case,” she added.

A taxonomy defines what counts as sustainable and what doesn’t in order to allow sustainable projects to receive better financial terms as banks increasingly earmark capital for clean projects. It does not restrict funding for fossil fuel projects. For climate advocates, tipping the business case toward renewables and away from fossil fuels by using a taxonomy is a crucial missing piece in Canada’s climate strategy.

Canada’s forthcoming taxonomy has two labels. One is “green,” which refers to things like wind turbines and solar panels. The other is “transition” and, based on confidential documents obtained by Canada’s National Observer last year, could include financing for carbon capture-equipped oilsands projects, electrification of steel manufacturing, and carbon capture-equipped concrete production.

As previously reported by Canada’s National Observer, Freeland’s office will not clarify whether fossil fuels are being considered for either label.

Liberal MP Ryan Turnbull, who is working alongside Freeland to develop the sustainable finance taxonomy, said he doesn’t think there’s “any risk” that fossil fuels will be labelled “green.” He called the taxonomy one of the key missing pieces of Canadian climate policy and if done right, will help ensure a credible, accountable and transparent marketplace for sustainable finance.

“Where the controversy lies often is around the transition label, and that will require additional evolution and science-based discussions around it,” he said.

Collins said it’s important to set criteria for what counts as green or transition, and said she was curious to know if Ottawa has “settled on not labelling LNG as green, but is now going to label it transitional.”

It remains unclear where the lines will be drawn.

Green Party co-leader Elizabeth May said LNG, which would be made predominantly with fracked gas in Canada, has the same carbon footprint as coal over its life cycle and should be ruled out completely. And while she said it’s important for Canada to fix its financial sector for climate reasons, globally, the financial system needs transformational changes for countries to prepare for the era of climate change.

Despite Canada’s role in fuelling the climate crisis, which disproportionately affects lower-income countries, May said she still believes it's possible for the country to be a climate leader globally. But in order to seize that opportunity, Canada needs to support calls from Global South leaders like Barbados Prime Minister Mia Mottley to redesign the global financial system to respond to the climate crisis.

“We can't do anything about reorganizing atmospheric physics … [but] we can reshape global economic rules,” she said.

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My jaw just dropped.
I suppose I knew, but this article really drives (bad pun) it home.
Whose doubling down?
"The Canadian Bankers Association did not return a request for comment by deadline."
"MPs from all parties — except the Conservatives (our resident fossil fuel advocates) who did not respond to an invitation -
according to a panel organizer — spoke on a Zoom call Monday afternoon to discuss climate finance issues."
I'll be watching this closely and hope for now it is merely politics -
“And it looks like the government is heading down the road of labelling fossil fuels [like] LNG as green under the new system and I really hope that's not the case,” she added.
Come on Liberals, be different than Poilievre, be better than Poilievre, don't try to mimic him.