Environment Committee on June 13th, 2024

[The Chair, Liberal, Francis Scarpaleggia]

I call this meeting to order.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

On a point of order, Mr. Chair.

[The Chair, Liberal, Francis Scarpaleggia]

I'm listening, Mr. Deltell.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Mr. Chair, the Minister of Environment and Climate Change had committed to coming to see us by June 18, but we've learned that he won't be appearing on that date. As this is likely to be our last meeting, it will be impossible for him to testify. It is completely unacceptable that the minister refuses to appear before our committee and answer parliamentarians' questions.

We're seeing a lot of the minister in the House of Commons these days, which is great. We've even seen him answer the first questions during oral question period, which is fine. However, he also has a duty to answer questions from members of the Standing Committee on Environment and Sustainable Development, where we can get to the bottom of things, ask many more detailed questions and tackle many more themes. It's the minister's responsibility to be accountable.

It is totally unacceptable, Mr. Chair, that Mr. Guilbeault is not here and cannot answer questions for the parliamentarians in this committee. We have seen him many times in the House of Commons, which is great, by the way. He was the one who answered the leaders' questions in the first round. He was there. He's in the House. He's in the building, but he cannot attend the House of Commons committee. This is totally unacceptable and irresponsible, especially because he doesn't want to go into the deep questions we have when we are here, sitting in this room. We have had plenty of opportunities to talk to him. He has had plenty of opportunities to come here. He has decided not to answer questions from the parliamentarians in this committee.

This is shameful.

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

I have a point of order along the same lines.

I think it's the same—

[The Chair, Liberal, Francis Scarpaleggia]

I want to say something.

It's true that he was invited to appear on June 18, not today. Perhaps we should wait and see what happens on June 18. If the minister isn't there, whether for a good reason or for some other reason, then we can make that comment. The fact remains that the minister wasn't expected today, so we're not yet faced with a fait accompli. From what I've been told, he has a scheduling conflict on Monday, but, who knows, maybe he'll show up.

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

I have a point of order.

[The Chair, Liberal, Francis Scarpaleggia]

Yes.

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

On a point of order, Chair, still, that was the indication. He is not coming here. That was two days ago.

I think it's imperative that you get us on his schedule. He has questions to answer, without a doubt. They're telling Canadians today that they're reducing emissions, but they're not even measuring the amount of emissions being reduced from the carbon tax.

[The Chair, Liberal, Francis Scarpaleggia]

Mr. Mazier, I will take it up with the minister—

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

I certainly hope you do.

[The Chair, Liberal, Francis Scarpaleggia]

—but I think that, before we condemn the minister for not showing up on the 18th, we should wait for the 18th.

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

I'm looking forward to the 18th to see him here.

[The Chair, Liberal, Francis Scarpaleggia]

Okay. Good.

On the other hand, we have with us today the CEOs of five major Canadian banks.

First of all, thank you for being with us to participate in this important and interesting study for the committee and for the future of our economy, as we are in a period of transition to a greener economy.

I'd like to reassure Ms. Pauzé that the sound tests were carried out successfully.

Next, I'd like to invite witnesses participating by video conference to mute their microphones when they're not speaking to avoid ambient noise.

Each witness will have five minutes to deliver his or her message to us.

We'll start with Mr. Darryl White, who is the CEO of BMO Financial Group.

[Darryl White, Chief Executive Officer, BMO Financial Group]

Thank you, Mr. Chair.

Chair and honourable members of the committee, my name is Darryl White. I am the chief executive officer of BMO Financial Group. I am pleased to join my competitors today to discuss the work of the financial sector relevant to this committee's study.

I'd like to begin by acknowledging the traditional lands of the indigenous people from which I am joining you today, and on which we have the privilege of doing business. We acknowledge that BMO's work spans many indigenous territories.

With that, I will continue my remarks.

BMO is a financial institution committed to facilitating Canada's growth while having a positive social impact. This role is reflected in our motto, “To boldly grow the good in business and life”. This purpose guides our strategy, fuels our ambitions and reinforces our commitment to progress towards a thriving economy, a sustainable future and an inclusive society.

While my remarks focus on BMO, it's important to note that the entire banking sector makes a considerable contribution to carbon neutrality. This includes working with international groups, such as the Net-Zero Banking Alliance, and with our domestic regulators, such as the Office of the Superintendent of Financial Institutions.

Within BMO, and relevant to today's discussion, we are leveraging our experts to support all of the communities we serve across Canada and their diverse economies.

Some specific examples of how we work collaboratively with clients, both within and outside the natural resources sector, include BMO's energy transition group, formed in 2021. Our team delivers innovative investment banking solutions for our clients as they look to decarbonize their businesses and pursue energy transition opportunities. This work is complemented by the BMO climate institute, which helps our clients bridge the complexities of climate science and policy with economics and business strategy. In 2022, BMO acquired Radicle Group, a sustainability advisory services firm with an established reputation as a leading developer of carbon offsets, helping organizations measure and reduce emissions. Regarding sustainable financing activities, we have mobilized $330 billion in capital for clients pursuing sustainable outcomes, surpassing our goal of $300 billion by 2025. These have been integrated across our businesses since 2019.

When it comes to managing our own value-chain emissions, BMO has been carbon-neutral in its operational emissions since 2010 and continues to aim for carbon neutrality and 100% renewable energy purchases. We're also setting net-zero-aligned operational emissions targets, including for commercial real estate. We've developed a robust sustainable procurement program to address our upstream value chain. In terms of downstream value-chain emissions, BMO has set targets for financed emissions for certain carbon-intensive aspects of our lending portfolio. In this work, BMO is focused on serving a constructive role to help our clients decarbonize and make real-world emissions reductions. We describe BMO's client ambition as being “our clients' lead partner in the transition to a net-zero world”.

This does not mean divesting from the energy sector. Instead, we are working with clients on the leading edge of new technologies and supporting the net-zero transition of traditional energy clients working hard to change their emissions profile. The transition to a net-zero world is not an either-or situation. It requires an “all of the above” response. Banks play a critical role in supporting the clients providing non-carbon energy sources, such as nuclear, hydro, wind, solar and others.

Over the past several years, we've transitioned the way we communicate about our policies, from making a collection of sector-specific statements to emphasizing what we've always done—conducting comprehensive, risk-based approaches to credit judgment and underscoring our commitment to sound and prudent business practices, while complying with the laws and regulations in the markets we serve.

The challenges to achieving a net-zero future are significant, and the investment needed will be substantial. Attracting the substantial capital needed for the net-zero transition requires strong public-private sector collaboration, as well as regulatory predictability. I hope the committee will consider these as it reflects on its recommendations.

Thank you for your attention, and I look forward to your questions.

[The Chair, Liberal, Francis Scarpaleggia]

Thank you, Mr. White.

I now turn the floor over to Mr. Victor Dodig, who is the president and chief executive officer of the Canadian Imperial Bank of Commerce, or CIBC.

[Victor Dodig, President and Chief Executive Officer, Canadian Imperial Bank of Commerce]

Mr. Chair, thank you.

Before I begin my remarks, I'd like to thank my counterpart for the land acknowledgement to begin the meeting today, which we also acknowledge.

Thank you and good afternoon to everyone.

Mr. Chair, our bank, CIBC, traces its roots back to 1867. Since Confederation, we've been an integral part of helping Canadians achieve their ambitions. In our early days, as the Canadian Bank of Commerce, we helped capital flow to Canadian business owners who had aspirations to build our nation. Over the years, we've played a key role in enabling growth and prosperity for families and businesses across our country.

Today we have more than 1,000 banking centres in Canada. Our team, over 48,000 strong, operates with a single purpose, which is to help make your ambitions a reality. That's true for our clients. It's also true for the millions of Canadians who hold an investment in our bank, either directly by holding shares or indirectly through mutual funds and pension plans.

In addition, we're making significant investments to support communities across our country. In 2022, we announced a goal to contribute $800 million over the next decade to community investment initiatives.

Over our long history, we have consistently addressed key issues facing our stakeholders and climate change is no exception. Climate change is a critical global issue of our time. It's one that requires significant coordinated effort to drive change and achieve a more sustainable future for all.

Our bank recognizes that we have a role to play in enabling solutions. We also recognize that natural resources, including oil and gas, play a critical role in Canada's economic foundation and that Canada has a key role to play as a responsible provider of energy to the world—today and through the transition to a lower-carbon future.

We work alongside our clients in these industries to help them achieve their sustainability goals. We provide capital and financial advice to help make innovative energy solutions possible, and we're a leading provider of financing for the renewable energy sector. Our commitment to a more sustainable future includes our stated ambition to achieve net-zero GHG emissions associated with our operational and financing activities by 2050. This ambition is integrated into our business activities.

We also actively engage with our stakeholders to understand their perspectives, just as we're doing today, and to ensure that we're listening, learning and taking into account a wide range of views. We disclose our progress publicly, as in our recent climate report.

We are making progress toward many of the goals we have put in place, including interim targets related to emissions intensity in specific carbon-intensive sectors and mobilizing sustainable finance towards our $300-billion goal by 2030 in support of environmental and social outcomes. This disclosure also enables productive dialogue with our stakeholders on climate-related issues.

We've built accountability into the process. Our ESG index, which includes climate-related goals, forms 10% of our business performance factor at our bank, which impacts compensation across our CIBC team.

It's important to acknowledge that indigenous communities are also central in resource development. The road to net zero involves indigenous lands. CIBC is dedicated to providing tailored and accessible financial services to first nations, Inuit and Métis clients in Canada. We take an active role in partnering with our indigenous clients at the national and local levels. We're proud that, just recently, we received the indigenous reconciliation award as part of the 2024 employment equity achievement awards organized by the Minister of Labour and Seniors.

Within our capital markets business, renewables and energy transition growth are one of our top strategic initiatives, and our team invests significant time and resources in helping companies in this space to grow and achieve scale.

Across our bank, we recognize that climate change is a defining issue of our time. As we've done at our bank since 1867, we're actively supporting the outcomes we all want for the future.

We have a clear ambition and comprehensive disclosures, and we are making progress in helping clients transition their businesses to a low-carbon future.

We acknowledge that there's more work to be done. I believe banks play a vital role as enablers in creating a more sustainable and inclusive future. We're committed to playing our part at CIBC.

Thank you.

[The Chair, Liberal, Francis Scarpaleggia]

Thank you very much, Mr. Dodig.

We'll go now to Mr. David McKay, president and CEO of the Royal Bank of Canada

The floor is yours. Thank you.

[David McKay, President and Chief Executive Officer, Royal Bank of Canada]

Thank you, Mr. Chair.

Before I begin, I want to respectfully acknowledge and give thanks to the original peoples of the lands upon which all of us now live and work.

Thank you for the opportunity to speak about how RBC is helping to accelerate the transition to a greener economy. As this committee knows, we're in a decisive decade for Canada's economy and the collective work required by us all on the climate transition. The coming years must see banks, businesses and investors working alongside governments to drive a fundamental reimagining of nearly every sector of the global economy. This means a climate-smart, 21st-century approach to how we generate energy, grow food and construct buildings and infrastructure.

However, rising temperatures and the resulting storms and wildfires remind us how essential it is for countries, businesses and communities to share our strong sense of urgency and work together to make the carbon-neutral economy a reality.

At RBC, we are aware of the imperative of collective action in favour of the climate. We embrace our role as a bank that supports its customers and communities in their efforts to decarbonize. This is how we believe we can have the greatest impact.

Over the past few years, we've been laying the foundations to help our customers progress along the path to carbon neutrality. We have achieved this by working more actively than ever on ways in which we can help our customers in emission-intensive sectors of the economy who are keen to adopt measures to reduce the level of emissions associated with their activities.

I'm proud that we were the first major Canadian bank to disclose a formal approach for engaging with our Capital Markets clients in the energy sector, including a framework that will guide how we assess their transition plans. This will help us deepen the support and advice we bring to those who are producing the energy our world relies on while we continue to work on bringing more renewable sources of energy online. Importantly, this new client engagement framework will also inform the decisions we make to disengage from clients who don't have credible plans to reduce their emissions.

I'm pleased to share that almost 80% of RBC Capital Markets' lending exposure in the energy sector is to clients who have transition plans. While many of these plans are still in the early stages, we're encouraged by the progress we're seeing as clients move forward on this complex, multi-decade journey to net zero. As a recent RBC Climate Action Institute report projects, Canada needs about $60 billion of annual private and public investment to reach its net-zero goals by 2050. This is double what we currently spend. It means we all need to do more—all banks, every level of government, businesses both large and small, and all Canadians across the country.

To help play a role in generating and attracting more capital to finance the shift to a new economy, we're accelerating our strategy to finance the energy sources needed to build a net-zero economy. We're doing this by stepping up our focus on low-carbon energy development opportunities, including new goals to triple our renewables lending by 2030 across RBC capital markets and commercial banking, allocating $1 billion of RBC capital by 2030 to support the development and scaling of innovative climate solutions, and a new decarbonization finance category that will help us accelerate the deployment of capital to emissions reduction efforts in high-emitting, hard-to-abate sectors.

We're matching these actions with an even sharper focus on accountability and transparency, disclosing how we're tracking against our goals and more clearly and actively outlining the steps we are taking to support our clients. For example, we're now reporting our absolute financed emissions on an authorized basis for the oil and gas sector, and we will continue to do so every year to show our progress. We also plan to disclose a clean energy supply ratio in RBC's 2024 climate report.

Over the past year, I've spent a lot of time with our leaders and teams across the bank to find ways to better support our clients as they take action to reduce emissions. We also engaged with many external experts and organizations, including government and indigenous leaders, because getting to net zero will require unprecedented collaboration across all areas of the economy and all segments of society. While we know there's still much work to be done, RBC is up for the challenge and ready to continue helping our clients and communities build a greener economy.

[The Chair, Liberal, Francis Scarpaleggia]

Thank you, Mr. McKay.

I now turn the floor over to Mr. Thomson, who is the president and chief executive officer of Scotiabank.

[Scott Thomson, President and Chief Executive Officer, Scotiabank]

Good afternoon, Mr. Chairman. I am pleased to have this opportunity to provide comments during today's meeting.

I am joining this meeting today from our Scotiabank office in Toronto, which is home to many first nation, Inuit and Métis communities. I acknowledge the treaty holders, the Mississaugas of the Credit First Nation, and recognize that Toronto is “one dish with one spoon” territory. What this acknowledgement means to me is that I'm grateful to the indigenous stewards of these lands, who have made it possible for me to participate in these important discussions today. It also serves as a reminder of my commitment to continue to remove barriers that have, in the past, made it difficult for indigenous peoples to access financial services and have meaningful careers in the financial industry. I make these commitments as an individual and as the president and CEO of Scotiabank.

I have the honour of leading this bank, which has an almost 200-year history supporting Canadians with their financial needs. Employing 40,000 people and serving more than 11 million clients from coast to coast to coast, we take our role as an important pillar of the Canadian economy seriously. We're also a leading bank across North America, including being a top-10 foreign bank in the United States and the fifth-largest bank in Mexico, with a market-leading presence in jurisdictions across the Caribbean and Latin America. In all the markets in which we operate, climate change represents both an economic and a business opportunity and a complex risk for our clients and to our economy and physical environment.

For Scotiabank's part, we're focused on working with our clients—including large corporate clients in high-emitting, hard-to-abate sectors, as well as smaller companies in the clean energy and technology sectors—to support them in the energy transition. Earlier this year we released a stand-alone climate report to provide information about the ways in which Scotiabank is addressing climate action.

Our climate goals are organized around three pillars in which we as a bank can make the most significant impact. First, we are financing climate solutions, with $350 billion in climate-related finance by 2030, and are supporting our clients through advisory services and products as they invest in less carbon-intensive business models, finance emission-reducing technologies and develop sustainable supply chains.

Second, we are advancing sectoral targets by enhancing our understanding of our clients' transition-planning activities, especially in industries where we have set 2030 interim targets, including oil and gas. We also enhanced our financed emissions reporting and support for innovative research aimed at moving the needle on climate change.

Finally, we are reducing our own emissions. In 2023 we committed to reduce the bank's own greenhouse gas emissions by 40% by 2030. This year we reached our goal to have 100% of our electricity come from emission-free sources in Canada.

At the end of this year we'll be publishing a more fulsome climate transition plan that will outline our strategy and implementation plans to embed climate into relevant discussions across the enterprise. However, even with these actions, no bank can deliver this transition on its own. The transition to a low-carbon economy is a complex process that will take time and will need to occur in an orderly and responsible way, with close partnership between the private sector, government and institutions, to tackle the multipronged challenge of decarbonization and energy security, access and affordability.

As I have this opportunity before you, as representatives from all our major political parties, my message is this: Canada is blessed with an abundance of natural resources, a highly educated population, strong governance and a reliable financial system, all of which are required to accelerate economic growth and overcome many environmental challenges before us. Our production and environmental standards are among the highest in the world, regulated by institutions that ensure that industry practices are monitored, measured, verified and authenticated. Our extensive geography and geology allow for a growing mix of energy products at a time when the need for new and sustainable infrastructure across the continent, especially electricity generation, is undeniable. By clearing the obstacles that inhibit investment in technology and infrastructure, we have an opportunity to link Canada's climate strategy with our industrial strategy to reduce emissions and become recognized as a low-carbon, high value-add and high-IP leader in global sustainable infrastructure.

I recognize that the path forward will not be easy, but Canada's potential to reduce emissions while having a thriving economy is there. Scotiabank is here to support those efforts.

Thank you very much for your time today.

[The Chair, Liberal, Francis Scarpaleggia]

Thank you, Mr. Thomson.

We'll go to Bharat Masrani, president and chief executive officer of TD Bank Group.

Go ahead, Mr. Masrani. The floor is yours.

[Bharat Masrani, Group President and Chief Executive Officer, TD Bank Group]

Thank you, Mr. Chairman, and good afternoon.

Thank you for the opportunity to speak about the important study this committee is undertaking. Thank you to my colleagues for providing the land acknowledgement, which we as well acknowledge.

Today, we find ourselves in the midst of a global economic transition to net zero that is unfolding against a backdrop of socio-economic and geopolitical challenges. This transition requires focus, investment, innovation and new technologies in all sectors of the economy. Progress will take engagement and partnership between the private and public sectors, and all of this is happening as people and societies, including financial institutions, face increasing climate risk.

This afternoon, I'd like to make three key points related to this global context: the economic imperative, the critical importance of a balanced approach and the need for engagement among all stakeholders.

First is the economic imperative. We believe TD has an important role to play in supporting our clients in the transition to a low-carbon economy, and that focus on sustainability drives long-term value for our shareholders, the Canadian economy and the many communities we serve. For a sense of the type of economic opportunity before us, TD Economics' analysis shows that connecting new renewable power generation assets to the grid could require upwards of $25 billion to $50 billion in transmission investments alone by 2035 in the context of Canadian emissions reduction pathways.

TD has a long history of environmental engagement that we are building on. More than 30 years ago, we launched the TD Friends of the Environment Foundation, helping to support grassroots projects in communities across Canada. We have been focused on decarbonizing our own operations. We were the first major bank in Canada to set a 2050 net-zero goal, and in 2020 we launched our climate action plan.

TD has also announced financing targets. In 2017, we introduced an initial low-carbon economy target for lending, financing, asset management and internal corporate programs, and we met it ahead of schedule. We then set our $500-billion sustainable and decarbonization finance target in 2023 and, in the first year under the new target, delivered nearly $70 billion in business activities toward our goal. As we navigate this transition landscape, our focus is on resilience for the bank and our clients strategically, financially and operationally.

That brings me to my second point. We believe it is critically important to take a balanced approach through this transition to net zero. TD supports and engages with clients across all sectors as they meet the world's needs today while investing in opportunities to meet the demands of tomorrow, all within the larger context of meeting our long-term climate objectives. As part of our efforts to support our clients, we've released specific targets related to the energy, power generation, automotive and aviation sectors. Led by our TD Securities ESG solutions group, we focus on understanding our clients' decarbonization initiatives and future plans and support them through advisory and financing solutions.

That brings me to my third point: engagement with a range of stakeholders and partners. Our transition plan continues to evolve through work with clients and experts, engagement in industry forums and consideration of new guidance. We think engagement with a broad set of stakeholders is critically important for us, Canada and the world in enabling us to meet our collective objectives and obligations. On the role of policy-makers specifically, government policy shapes how our clients navigate the net-zero transition.

I look forward to our discussion today, because we are on this journey together. In the complex economic and geopolitical environment in which we find ourselves, we understand that TD has an important role to play and can make a positive contribution through our own efforts and by supporting engagement among stakeholders and partners.

Thank you.

[The Chair, Liberal, Francis Scarpaleggia]

Thank you, Mr. Masrani.

We'll go now to our first round of questions, which is a six-minute round, and we'll start with Mr. Deltell.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Thank you very much, Mr. Chair.

It is with enormous pleasure that we welcome this very impressive group of quality people and decision‑makers in the Canadian financial and banking world.

Gentlemen, welcome to your House of Commons and to your Parliament.

We all know that we're facing climate change and that we need to act appropriately, effectively and practically if we're to succeed in reducing greenhouse gas emissions.

In the financial world, of course, you are at the heart of the decisions and at the heart of the opportunities. I'm talking about the opportunities to grow, but to grow by reducing pollution, and also the opportunities to reduce pollution through the approaches that every company can adopt.

My first question is for Mr. White.

Mr. White, let's take the case of an entrepreneur who knocks on your bank's door to borrow, say, $10 million to increase production. The company is doing well, but it doesn't necessarily have the best environmental record. Are you going to refuse a loan to this company that wants to expand? What will your response be to this entrepreneur?