Environment Committee on June 13th, 2024

[Bharat Masrani]

It's hard to model specifically what each tax would do. I think the important point, which I think Dave McKay made, is predictability, stability and understanding how taxes drive decisions. This is early in terms of the new tax and what it will do. Time will tell, but it is important to have a stable, predictable tax regime in order to drive long-term investment decisions.

[Dan Mazier, Conservative, Dauphin—Swan River—Neepawa, MB]

Okay.

Mr. McKay, you stated that a failure to lower housing costs in Canada could “put our entire economy at risk”. What did you mean by this?

[David McKay]

Solving our housing challenge in Canada is absolutely critical in attracting and retaining the talent we need for the success of our economy and the prosperity of our country. We are obviously short of housing currently. There are a lot of initiatives under way to try to close that. We have a lot of work to do.

The nature of my answer is that it is absolutely critical to talent and prosperity and growth.

[Dan Mazier, Conservative, Dauphin—Swan River—Neepawa, MB]

This is for all of you, eventually.

The Deputy Governor of the Bank of Canada stated that Canada is facing a productivity emergency.

Do you agree? How do we address this?

Mr. McKay, I'll start with you, and then we'll go around the table.

[David McKay]

Productivity is linked to competitiveness. For us to continue to enjoy the quality of life we have and the prosperity we have in this wonderful country, we need to be competitive and we need to be competitive on a productivity basis. We need to attract investment to do that.

All the things we've talked about—ensuring a successful climate transition, having a stable tax regime, solving for housing and encouraging investment in more productivity—are an important part of the overall competitive landscape in Canada.

[Dan Mazier, Conservative, Dauphin—Swan River—Neepawa, MB]

How about any others?

[Leah Taylor Roy, Liberal, Aurora—Oak Ridges—Richmond Hill, ON]

Mr. Chair, I have a point of order.

I was looking back to the motion for this study, and I do not understand the relevance of some of these questions to what our study is specifically about, which is the “environment and climate impacts related to the Canadian financial system, including...current practices in this sector”—having to do with environment and climate impacts and—“analysis of regulatory and legislative mechanisms” that we could put in place “to ensure its financial regime aligns with the Paris Agreement and thus, promote the reduction of inherent risks, namely physical and transition risks”.

I don't see Mr. Mazier's line of questioning being at all consistent with what our study is about.

[The Chair, Liberal, Francis Scarpaleggia]

His time is almost up anyway, but it is a bit of a stretch. He is talking about capital flows and so on. That's why—

[Dan Mazier, Conservative, Dauphin—Swan River—Neepawa, MB]

Chair, here we're talking major—

[The Chair, Liberal, Francis Scarpaleggia]

Excuse me, Mr. Mazier.

That's why I would not rule it out of order, but it is a bit of a stretch.

You have about 10 seconds.

[Dan Mazier, Conservative, Dauphin—Swan River—Neepawa, MB]

These banking executives just asked for over $100 billion. We're talking about investments. Every penny that anybody makes in Canada is going to be needed under productivity. Of course the Liberals would not want to talk about this.

Thank you.

[The Chair, Liberal, Francis Scarpaleggia]

Thank you.

Mr. van Koeverden.

[Adam van Koeverden, Liberal, Milton, ON]

Thank you, Mr. Chair, and thank you to our witnesses for joining us today.

My questions will be for the CEO and executive director of RBC, David McKay.

Mr. McKay, in your opening remarks today, you espoused your commitments to net zero and reducing emissions. You reiterated your recently published goal to triple renewable energy lending to $15 billion per year by 2030.

For reference, RBC currently finances fossil fuel industries in Canada with more than $30 billion per year.

If you achieve your objective without reducing funding for fossil fuels in the oil sands in Canada, RBC's clean-to-fossil-fuel financing ratio will be less than 1:1. That's in 2030. The International Energy Agency states that a 6:1 ratio of clean-to-fossil-fuel energy funding is necessary to achieve net zero, which, as I said, is your stated goal.

Is your goal that was published earlier this year—which is to, within six years, still fall within about 12 times short of what the International Energy Agency states is necessary—sufficiently ambitious?

[David McKay]

As we talk about renewables, it's just one part of the overall commitment to the energy grid. As we talk about the reduction in overall emissions from our economy, it's going to require further investment. Working with our customers to transition their businesses across every sector of the economy is not only going to require information, advice and support; it's going to require financial support as well.

If we look at the overall envelope of what we will do with our clients, it's quite significant. I can't put the overall ratio against that as yet, but we've actually committed to disclosing our financing ratio of renewables to fossil fuels starting in 2024, as I talked about in my opening remarks. That's an important part of the transition.

The ratio you're quoting is just one part of the overall transition of our economy. There's a much greater component outside of that commitment that we highlighted.

[Adam van Koeverden, Liberal, Milton, ON]

Okay, that's excellent.

Just for reference, if it's currently $5 billion and your fossil fuel funding is about $30 billion, then it's at 1:6 right now, and what's necessary is 6:1. Your ratio literally needs to flip upside down in order to achieve that goal.

In six years, do you think that's possible?

[David McKay]

I'm not sure how you're getting the 6:1. We're disclosing a very different ratio from that, currently.

[Adam van Koeverden, Liberal, Milton, ON]

I can re-emphasize—

[David McKay]

No, I know you're saying $30 billion to $5 billion, but I don't reconcile that.

I encourage you.... We are disclosing that financing ratio. We will show you how we calculate that. I could submit that to you after this committee meeting.

That ratio was based off a global standard that we are using to disclose. We're being very transparent about our journey, because it's important, to your question.

[Adam van Koeverden, Liberal, Milton, ON]

Thank you.

RBC is the world's largest financier of the oil sands. RBC has provided about $13.4 billion in financing for the oil sands. The oil sands in Canada is the largest-emitting sector in the energy industry or at all, accounting for over 12% of our country's total emissions, more than the entire province and all the activities in British Columbia. It's also important to note that for a lot of the products that come from the oil sands, it would be a stretch to describe them as energy. Bitumen is often used as tar for shingles and roads. Calling it an energy product is perhaps a bit of a stretch.

Despite that, research recently revealed that emissions from the oil sands were possibly 6,300% even more polluting than they reported.

Last week we had the oil executives here, and I asked the CEO of Suncor about that. I asked him how it's possible, with all the funding that's coming from Canadian banks delivered to the oil sands sector, that the carbon required to produce a barrel of oil sands bitumen has actually increased over the last 20 years. You'd think all that investment could inspire a bit of innovation.

Do you feel like it's a good investment, regardless of whether they're profiting—we know that they continue to make record profits—if the carbon intensity of a barrel of oil is increasing? Is that a good outcome and a good use of $13.4 billion of Canadians' hard-earned and invested dollars?

[David McKay]

I can't reconcile where you get the information that we're the world's largest financier of fossil fuels. I don't believe that to be true.

[Adam van Koeverden, Liberal, Milton, ON]

Oil sands, sir. Mr. McKay, it's just oil sands, not the oil industry.

[David McKay]

I'm not even sure if that's accurate, but we will fact-check that for you. Certainly it's not in the world, and I don't believe that's correct either.

As far as your comments are concerned, are we committed to this transition? I take that as the theme of your question, and we're absolutely committed to this transition. It's critical for our society that we make this transition. That's why we started a climate institute headed by John Stackhouse, where we're doing significant research—

[Adam van Koeverden, Liberal, Milton, ON]

I'm sorry for cutting you off, but given the record that a barrel of oil from the oil sands has actually become more carbon-intensive over the last 20 years, and your stated goal of becoming net zero, can you commit to ending your financing of tar sands oil expansion?

[The Chair, Liberal, Francis Scarpaleggia]

Give a very brief answer, please, because we have to go on.

[David McKay]

We are in a transition. Therefore.... We are not making the transition overnight. We are going to need this source of energy until we find new sources of energy, so we must transition this economy away from carbon-intensive.... We're not there yet.