Good afternoon.
I'd like to thank the committee for inviting me to be here today to discuss a key issue, one that affects our collective future and the energy and climate challenges we face.
First of all, I want to make very clear a crucial point. It is heresy to think that we will be able to change our practices simply by providing better access to information. What's more, there is this idea that all economic players need to make well-thought-out choices is clear, perfect information, that this would be beneficial across the board and that the information would give them alone the ability to course correct climate engagement. A binding framework is necessary. As the taxonomy would, the framework should make it possible to compare information provided by big banks and businesses. However, a penalty system is also necessary to make the corrections that are needed.
Specifically, I'd like to talk about a report the RRSE produced, with the help of the firm Æquo. The report examines the approach of banks with their own clients, in other words, the businesses in their portfolios. We wanted to see the transition plans and find out how robust they were. We wanted to examine their credibility, if you will.
Last year, we looked at a group of 23 banks, comprising not just the big banks in Canada, but also banks in Europe and the U.S. We looked closely at the banks' statements and their expectations of their clients, to ascertain whether it was possible to credibly achieve the Paris agreement target to limit the increase in global temperature to 1.5°C.
It was, in fact, a comprehensive analysis, and the conclusions are clear. On one hand, in order for an oil and gas company's plan, say, to be credible, it has to incorporate reductions in greenhouse gas emissions across all three scopes used to classify emissions. That means the plan has to include reductions in scope 3 emissions. On the other hand, it is paramount that the financial institution commit to not investing in new oil and gas projects. That is key.
Our analysis of the financial institutions' plans revealed very disparate practices that were highly inconsistent with the evaluation criteria and the way the banks intended to implement their transition plans. Overall, we found not only a lack of engagement, but also highly unclear methodologies. We saw multiple occurrences of such terms as climate engagement, ethical products, responsible products and green products, as well as a lack of support for clients so that they, themselves, could transition successfully.
However, there was no clear explanation of the expectations, the time frames or the penalties. By penalties, I mean a strategy for escalation or for excluding the business from the portfolio. That would mean a commitment on the part of financial institutions to not do business with big companies that don't play ball when it comes to reducing their greenhouse gas emissions. Currently, the information we have is not sufficiently reassuring vis-à-vis the banks' public statements. We used all the available frameworks and best practices, and what we are seeing is that we are headed for disaster.
To wrap up, I would say that our findings are consistent with those in the notice released last week by the Canadian Securities Administrators. The notice is based on an analysis of 425 reviews of reporting issuers' compliance with disclosure requirements. It highlights a plethora of activities involving greenwashing, and unclear or hardly achievable commitments on environmental, social and governance, or ESG, matters.
As things stand, by allowing financial institutions or economic actors to regulate themselves and adopt practices, we will not be able, collectively, to reach the targets set under the Paris agreement or effectively reduce greenhouse gas emissions.
I will leave it there. I'm not sure whether I stayed within my allotted time.