Environment Committee on June 13th, 2024

[Darryl White]

Thank you for the question. To make sure my answer is as accurate as possible, I'll reply in English.

The first thing I would say, Mr. Deltell, is that we do not take the view that we wouldn't support any particular sector. In the example you gave, if a client came in, we would assess all of the risks of their proposal—whether they be environmental, credit, market or legal—and we would assess their proposal as we would any other, regardless of whether it was a carbon-related proposal or not.

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

If it was carbon-related and you realized it wasn't attaining any goal to reduce emissions, what could happen if we shut down this project? Could the entrepreneur go offshore and go to another country's bank to get this money, or would it be impossible for them to develop their company?

[Darryl White]

The entrepreneur in that particular instance would have an opportunity to go to multiple channels to source the capital.

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

He could go offshore. Even if we refused him in Canada, he could have access to money offshore. At the end of the day, the pollution would go on.

[Darryl White]

It's difficult to opine on a hypothetical, but I agree with you, practically speaking, that it could be the case.

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

That's fine.

My other question will go to Mr. McKay from the Royal Bank of Canada. There is an annual report each and every year about the banking system and investment in hydrocarbons.

This is the world's top oil and gas financing list, and I assume you can see where I'm going with this. The Royal Bank, your institution, is seventh in the world among those with the most investments in hydrocarbons.

For you, is this a source of pride or rather an embarrassment?

[David McKay]

If you look at the Canadian economy, RBC is one of the largest banks in the world. It's a top-10 bank in the world. If you look at the energy-intensive nature of the Canadian economy, it's going to take us a while to transition. It's a very complex journey. Therefore, our focus is obviously on transition financing and on emissions. That's why you've seen us make commitments on absolute reduction and commitments on financing.

The most important part of this is the $15 billion. We tripled our investment in renewable energy. There's $1 billion of equity commitment. It's all part of a very important transition.

If you look at the context of RBC in the world, look at the context of RBC as the largest bank in the country and look at the context of where we've come from as a country, that energy has been very important to the economy. It will continue to be very important to the economy as we make this complex transition. I think we're focused on the right things.

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

I'll give you the example of my province, Quebec, where a lot of oil is consumed. According to HEC Montréal's recently tabled annual report, annual oil consumption in Quebec stands at over 18 billion litres. This represents an increase of 7%. As long as there is a need for so‑called fossil fuels, we on the opposition side will fight for them to come from Canada rather than abroad.

In that perspective, Mr. White, my question is this: If you refuse support for an oil and gas company because maybe its record is not so good on the green aspect, what can this business do? It can go offshore. Then, at the end of the day, it will have access to funding. Do you think we should have here in Canada a more straight line to help businesses with hydrocarbons, or can we put the emphasis on reducing the emissions when we have a deal with these kinds of companies?

[David McKay]

I really believe it's important that every company has a plan. As I said in my opening comments, 80% of our energy companies have a plan going forward. It's very important that we're transparent in tracking those plans and the progress of those plans. It's a complex journey. We have to get moving. I would say that financing has to be available to help make the transition. Financing has to be available to maintain economic strength as well. One of the greatest risks to our transition is economic weakness.

[The Chair, Liberal, Francis Scarpaleggia]

We're over time. I'm sorry.

Madam Chatel.

[Sophie Chatel, Liberal, Pontiac, QC]

Thank you, Mr. Chair.

I want to welcome all of the witnesses.

I receive a lot of emails from my constituents, and many of them are angry. They're worried. They find it hard to reconcile your net-zero commitment with the constant increase in investments in the fossil fuel sector. The transition pathway initiative assessed that Canadian banks score very poorly for their transition to net zero compared to their peers.

Mr. Dodig, how are you measuring real progress for your organization that includes interim targets, not just the objective of 2050 but real progress in the interim?

[Victor Dodig]

Madame Chatel, thank you for your question and for your service to our country.

I recognize that many Canadians are anxious about what lies ahead in the transition. How will this all play out? How will it benefit the environment? How will it benefit their own economic security? I want to assure you that at CIBC, our team works with our clients to ensure that our path to net zero is aligned with their path to net zero.

We've signed on to the Net-Zero Banking Alliance, pledging to be net zero by 2050. For us to achieve that, we need to achieve that as a bank on our own, but we also need to achieve it with our clients, so we work with them, regardless of their size. We start with the oil and gas sector, the energy sector and the automotive sector, and we continue to move on to understand what their targets are to 2050. What are their interim targets? Are they highly aligned with our own? If they don't have a plan, we work with them to achieve that plan.

I'm very encouraged by the interim targets that we've achieved so far. There's more work to do. We've set those targets for 2030, and I would say that in most instances, we're ahead in plans with our clients. We remain committed to that 2050 net-zero goal.

[Sophie Chatel, Liberal, Pontiac, QC]

Thank you very much.

Mr. White, can you please articulate the key benefit for your organization in having a science-aligned green transition taxonomy and disclosure as proposed by the sustainable finance action council, which I believe you were part of?

[Darryl White]

Thank you for the question.

I think it's important to consider the role of the banks in the overall ecosystem. In my opening remarks, I talked about partnering with our clients to be their partner in the net-zero transition. That means that our clients drive the decisions that work for their businesses, and we work to structure financial solutions around them. That's relevant to the taxonomy, because having a common language, i.e., a taxonomy, is generally useful as we look to couple the work we do with our clients with sourcing international capital.

It's been referenced in this meeting how much capital is going to be needed for the transition itself, and attracting international capital is made easier with a common taxonomy. It's not to say that without it we don't invest in the transition. We are, as we've demonstrated in our comments today, but to me, the value of the taxonomy is in the common language that we would all have internationally.

[Sophie Chatel, Liberal, Pontiac, QC]

Thank you.

For investors, we want to invest in a clean and net-zero portfolio. We want to have that. We want our pension to have that. We want to be helping the transition of Canada, but it's hard when you don't have disclosure of scopes 1, 2 and 3. Well, scope 1 is something, but scope 2 and 3 emissions....

Do you support the work of the government to provide a good system of taxonomy? As you said, it's a common language. We will have to speak the same language, not only in Canada but with our trading partners and other capital investors, and we need the disclosure, because we need to know that we are investing in net zero.

[Darryl White]

I do think that it is useful, because it would create a common language, as I said earlier, in terms of how we effectively label sustainable finance. Conversely, finance does take place without the taxonomy. In the end, simply put, the more common disclosure we can all have, the better.

[Sophie Chatel, Liberal, Pontiac, QC]

Thank you.

I would now like to address Mr. McKay.

The taxonomy and disclosure rules have not yet been implemented in Canada, but they will be. How important is it to your organization that the rules of the game be very clear and common to all banks?

[David McKay]

I think it is very important that we have a strong taxonomy for the country, not only for domestic investment in our transition, to your point, but also for international investment. When you're trying to attract $2 trillion of investment by 2030 to make this journey, when you have to double from $30 billion to $60 billion, when you have to transition your energy grid and those sources, it's very important that we, as a country, agree on this journey, because one of the risks to not being successful is not agreeing on how we want to make this journey as a country, as individuals, as companies, as governments and as municipalities. We have to agree on the journey. I think the taxonomy, to your point, brings us together on that point, and then we have to be clear on where the rules are. Investors do not like uncertainty. They prefer certainty and action.

[The Chair, Liberal, Francis Scarpaleggia]

Thank you.

Ms. Pauzé, you have the floor.

[Monique Pauzé, Bloc, Repentigny, QC]

Thank you, Mr. Chair.

I would have preferred the witnesses to be with us in person rather than by video conference, but I thank them nonetheless for being here.

From the outset, I'd like to make it clear that your institutions are important and that, if you're at the head of these institutions, it's certainly because of your skills and talents. That said, we are at a crossroads. You have a moral and fiduciary responsibility to take concrete action. In your opening statements, you all said that we need to structure an economic future that values the path to carbon neutrality.

My question could be addressed to all the witnesses, but I choose to put it to Mr. Masrani.

In May 2024, Canada's National Observer published an investigation into the overlap between bank directors and directors of fossil fuel companies. For the Toronto-Dominion Bank alone, the three members involved hold shares with a total value of over $6 million in fossil fuel companies. For BMO, one board director alone owns more than $2.2 million worth of shares in Suncor.

How can you ensure that these members aren't exerting influence for personal gain, i.e., to line their own pockets as shareholders? I'm talking here about decisions that would show bias, choices of investment or lending policies, or the very development of climate policies.

[Bharat Masrani]

We released a climate action plan in 2020 that lays out a road map as to how TD gets to the net-zero world. In the meantime, we have also provided interim targets. We also annually provide a reporting suite with clear criteria as to how we measure our progress.

In my opening remarks, I talked about the sustainability and decarbonization target of $500 billion in the first year alone.

We deliver—

[Monique Pauzé, Bloc, Repentigny, QC]

Forgive me for interrupting, Mr. Masrani. I understand what you're saying and I listened carefully to your statement. I'd rather talk to you about your board of directors and possible conflicts of interest.

Do you have a way of ensuring that your board members don't exert influence for personal gain? That's what I'd like to know. Do you have firewalls, so to speak?

[Bharat Masrani]

Board members have to declare all of their conflicts when they attend board meetings. If there is any conflict of any kind, they recuse themselves from any decision. That's how it operates in every major corporation in Canada, and we follow those rules very diligently.

[Monique Pauzé, Bloc, Repentigny, QC]

All right. Thank you for your reply.

I will now ask Mr. McKay a question.

You have a glaring lack of directors with the skills to properly assess the risks that climate change is already posing to RBC.

How can the board of directors make business decisions on climate if it has no real expertise in the subject and instead has a vested financial interest in the expansion of the oil and gas sector?

[David McKay]

We have a very strong and diverse board of directors with many skills. The board of directors has access to our full management team, which is highly skilled in climate change, from engineers to experts we rely on in our climate institute and in our management and finance teams. We quite consistently make the board open to meeting with external experts advising the board and explaining to the board the complexity of the journey, how to take the journey and how to think about climate change.

I do believe the board is strong, has access to internal [Technical difficulty—Editor]