Good afternoon, and thank you for the opportunity to address the committee.
I'm the program manager for financial research at InfluenceMap, which is a global climate-change think tank conducting research into how corporations and financial institutions are affecting climate change.
The past few years have seen a significant growth in companies' recognition of the importance of climate change and the risks it poses. Most notably, companies are making top-line climate pledges supporting the Paris Agreement. They're publishing climate-related disclosures, and they're setting net zero by 2050 targets.
InfluenceMap's research seeks to hold companies accountable to these commitments, in line with the UN's guidance on the net zero commitments of non-state entities. The financial sector is no exception to the net-zero target trend, with a wide range of climate alliances being created with significant membership within the sector. Among these is the Net-Zero Banking Alliance, a group of leading global banks committed to financing ambitious climate action to transition the real economy to net-zero greenhouse gas emissions by 2050.
Canada's five largest banks—RBC, TD Bank, Scotiabank, BMO and CIBC—are all members of this alliance. As such, they have committed explicitly to transition the attributable greenhouse gas emissions from their lending and investment activities to align with a net-zero target by 2050 pathway.
InfluenceMap published research in March of this year that assessed the climate-relevant activities of the big five and to what extent these are aligned with our own climate commitments. We found that Canada's largest banks are substantially off track to meet their own net-zero targets. This is primarily explained by their lack of science-aligned transition policies, their increased financing of fossil fuel companies and low financing of green companies, and their opposition to climate-related policy.
While the “big five” banks have all set policies to reduce the emissions linked to their financing activities, we found these to be severely lacking in ambition to be credibly aligned with net zero by 2050. In practice, the banks' policies continue to allow financing to drive increased emissions in climate-critical sectors such as the energy and power sectors.
Meanwhile, Canadian banks far underperformed the largest European and U.S. banks when it comes to setting policies to phase out the financing of coal, oil and gas in alignment with the U.N. intergovernmental panel on climate change's science-based pathways. As a result of these policies, or rather the lack thereof, in 2022, the proportion of fossil fuel companies in the big five's financing deal value was almost three times that of leading U.S. and European banks. In fact, from 2020 to 2022, the big five banks increased their average lending exposure to fossil fuel companies, while their largest U.S. and European counterparts decreased their financing to the sector.
The big five also provided 3.9 times less deal flow to green companies than to fossil fuel companies over this 2020 to 2022 period. This ratio is again significantly higher than the largest U.S. and European banks, which on average respectively financed 2.8 and 2.0 times less to green companies than fossil fuels.
As part of their Net-Zero Banking Alliance membership, the banks have emphasized the importance of a public policy framework to guide the transition. Each of the big five banks has committed to, “engaging on...public policies, to help support a net-zero transition of economic sectors in line with science”.
Our analysis finds that none of the banks have publicly advocated for ambitious climate-related policy in Canada. In fact, the banks are primarily represented in financial policy matters by the Canadian Bankers Association, which emphasizes that Canada does not require climate-related financial regulation and that the transition should be dictated by the real economy.
Meanwhile, all five banks are members of industry associations blocking climate policy in the real economy, both in Canada and globally. These include the Canadian Chamber of Commerce and the Business Council of Canada, which have also advocated the expansion of Canadian fossil fuel production.
In closing, despite claiming to recognize the importance of banks' roles in the transition, it is clear that Canada's big five banks have taken little voluntary action to achieve their own climate commitments in the absence of climate-related financial regulation.
Thank you.