Achi news desk-
Canada’s biggest bank has reversed course on a policy to disclose how much it invests in green energy versus fossil fuel energy following demands from New York City’s major public pension funds, with environmental groups welcoming the move but noting that actually reduces carbon emissions. again.
The Royal Bank of Canada (RBC) is one of three financial giants in North America that will begin to disclose the ratio of how much money they put into clean energy projects compared to how much they invest in fossil fuel extraction. JPMorgan Chase and Citi also made similar deals.
“Until now, RBC had resisted calls to clearly disclose that ratio across all of their loans and investments every year,” New York City Manager Brad Lander explained in an interview with CBC News.
Multiple pension funds overseen by Lander had submitted shareholder proposals to force the financial institutions to take these steps. Ahead of RBC’s annual general meeting, set for April 11, the bank’s board of directors had recommended that shareholders vote against doing this.
Basically, up until April 4, when the press release was issued, RBC’s public position was that it would not disclose green energy to fossil fuel investment ratios. Now that it has agreed to do so voluntarily, RBC will not face a public vote of shareholders that might have forced the issue.
Agreement does not reduce emissions
“All they are doing with this agreement is agreeing to show their work,” said Lander, pointing out that the agreement does not require RBC to reduce investment in projects that produce or increase carbon emissions, although the company has previously said that its borrowing practices will be “net-zero” by 2050.
“We think that’s prudent and financially critical [going net-zero]. Ensuring that they actually do it is a responsibility to shareholders and fully consistent with our fiduciary duty,” said Lander, whose pension funds held US$28.22 million in RBC stock as of November 2022.
Climate change concerns are important to many Canadians but some are calling for pension funds to continue investing in the fossil fuel sector.
It is not unusual for large, institutional investors such as pension funds to take a more influential role in corporate environmental policies, according to Sebastian Betermier, associate professor of finance at McGill University in Montreal and executive director of the International Center for Pension Management.
“What we’re looking at here is not unique,” said Betermier, who added that this kind of investor activism happens all over the world – and often in ways that aren’t as public as the NYC funds that n influencing Canada’s largest bank.
“Over the past few years, many of the pension funds have committed to becoming net zero by 2050 … engaging with companies is one of the ways you can decarbonize your portfolio,” he said.
RBC says it plans to disclose next year’s ratio
In a statement sent to CBC News, RBC climate vice president Jennifer Livingstone said the company will provide a “clean energy supply financing ratio” in their 2024 climate report. As the company’s 2023 report is released in March this year, that report would be expected next year.
“We appreciate the constructive dialogue we have had with the [New York City comptroller] and intend to engage with them and industry partners to develop the ratio,” wrote Livingstone.
The bank declined an interview request from CBC News, but noted in its statement that its plan is to “increase low-carbon energy lending and growth relative to fossil fuels over time.”
RBC avoids ‘extremely embarrassing’ situation: environmental group
Director of climate finance Richard Brooks with environmental group Stand.earth said he was surprised to see RBC change its mind on disclosing energy investment ratios.
“Institutional shareholders were voting on the shareholder resolution, and then the management withdrew and basically capitalized them to New York City and surrendered,” said Brooks, who is based in Toronto.
Brooks speculated that RBC may have been concerned that it would lose the shareholder vote, and that it would be forced to disclose this information. Brooks’ view is that the bank’s other institutional shareholders are “really keen to get this data” and so it is possible that the RBC board’s directive to vote against the application has been ignored.
“When a bank has an annual shareholders’ meeting and a vote goes against them, that’s a big embarrassment for the management. So I think they did the calculus and decided that publishing this kind of data would be better than having a failed vote at their annual shareholder meeting,” Brooks said.
But the advocacy group Environmental Defense points out that these steps may not make enough of a difference to those concerned about climate change.
“They need to cut emissions, not count them,” said Julia Segal, senior manager of climate finance with Environmental Defense Canada, who noted that RBC has large investments in fossil fuel industries.
“They need to be reducing their investments in polluting industries,” Segal said.
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