Climate change is an existential threat to the future of humanity and all life on earth. But there is a clear solution to averting the climate disaster – stop consuming fossil fuels and achieve net-zero emissions by 2050.
However, the financial industry continues to pour money into the development, extraction, and consumption of fossil fuels – and Canadian banks and pension funds are among the worst culprits.
In the past year, Canadians experienced killer heatwaves, scorching droughts and dangerous flooding. The response by Canadian banks to these climate disasters was to increase their fossil fuel financing by 70 per cent last year – an increase of approximately $61 billion.¹
Governments, institutions and public bodies have started to take action, with the federal government in Canada passing climate accountability legislation to try and achieve net-zero emissions by 2050.
However, Canada’s big banks and pension funds refuse to take the necessary step of divesting from new investments in fossil fuels.
As the world literally burns around us, Canada’s big banks, pension funds, and other financial institutions continue to pump money into fossil fuel companies so they can pump greenhouse gas pollution into our atmosphere.
The Coastal Gaslink project, currently under construction, would transport fracked gas through unceded Wet’suwet’en territory in British Columbia.
At full operational capacity, the project is estimated to release up to 3.517 megatonnes of CO2 per year²– equivalent to 5.5 per cent of B.C.’s total greenhouse gas emissions for 2017.
The project is also controversial for trampling on Indigenous rights. Indigenous groups, environmental activists, and concerned members of the public have protested the continued development of this pipeline.
In November 2021, these protests resulted in a violent crackdown by members of the RCMP against Wet’suwet’en land defenders and the arrest of two members of the press.³
Royal Bank of Canada (RBC) is financing the construction of the Coastal Gaslink pipeline through Wet’suwet’en territory. So far, the bank has provided $275 million in project financing, co-financed a $6.5 billion loan, a $40-million corporate loan, and provided $200 million in co-financed working capital.⁴ The bank has also served as a financial advisor for the project.
At its recent AGM, RBC’s Chief Executive defended its continued funding of a project that tramples on Indigenous sovereignty and puts the environment at risk despite continued protest from the Wet’suwet’en.
Coastal Gaslink is not the only fossil fuel development that Canadian financial institutions are bankrolling.
A new report from our friends at Stand.Earth⁵ has uncovered that Canada’s biggest banks have stepped in to finance the next stage of construction of the Trans Mountain tar sands pipeline.
Earlier this year, Canada’s financial watchdog⁶ outlined that the Trans Mountain pipeline was effectively broke, and that the federal government was very unlikely to recoup the $4.5 billion in public funds it used to buy the pipeline. According to the report, the projected cost of the pipeline has risen from $12.6 billion to $21.4 billion.
Undeterred by the spiralling cost of the project – and by the estimated 400,000 tonnes⁷of greenhouse gas pollution the Trans Mountain pipeline will produce each year – Canadian banks stepped into the breach to provide the funding needed to keep the project alive.
Stand.Earth found that TD Securities, RBC Capital Markets, Canadian Imperial Bank of Commerce, BMO Capital Markets, Scotiabank, and National Bank of Canada are providing $10 billion in funding so that the Trans Mountain pipeline project can continue.
To rub salt into the wound, the federal government has guaranteed this loan – meaning you and I will have to foot the bill if anything goes wrong.
Canadian pension funds hold more than $1.7 trillion in assets and wield a considerable level of influence on the industries that they invest in.
However, Canadian pension funds continue to pump money into the fossil fuel industry, investing in projects that extract, develop and export oil, gas, and coal.
The money we are putting aside for our future selves is being used to fund projects that release massive amounts of greenhouse gas pollution, leading to extreme heatwaves, disastrous floods and choking wildfires. In short, our pension funds are investing in our own demise.
Canada’s pension industry is increasingly out of step with some of the world’s leading pension funds who have concluded⁸ that financing fossil fuels is a bad investment.
Ecojustice is working with beneficiaries of Canada’s ten largest pension funds to find out how these bodies are planning to mitigate climate risk in the face of the worsening crisis.
While pension funds such as Caisse de dépôt et placement du Québec (CDPQ)⁹ are taking steps to reduce their investment in oil companies, too many of the responses show a pension industry that is unwilling to divest from fossil fuels – a move that puts the financial security and future safety of beneficiaries at risk.
In spite of their continued funding of fossil fuel developments, financial institutions are still eager to present themselves to the public as “sustainable” and “concerned about the environment.” But we are calling them out.
An example of this is RBC, who has claimed to “support the principles of the Paris Agreement” and is providing $500 billion in “sustainable finance” to help address climate change.
In truth, it continues to power the fossil fuel industry through providing billions of dollars of investment capital, ensuring that Canada doubles down on dangerous fossil fuels at the exact moment when it needs to transition away to secure a liveable future.
RBC ranks fifth¹⁰ among the 60 largest banks worldwide in terms of fossil fuel financing between 2016 and 2021. All of Canada’s big five banks rank among the top twenty globally for fossil fuel financing. Scotiabank and TD are also in the top 12 worst offenders.
With the help of Ecojustice, members of the public have been striking back at this blatant greenwashing.
In April 2022, six members of the public requested that the federal Competition Bureau open an investigation into RBC’s misleading advertising on its commitments to climate action.
Until RBC stops funding fossil fuel expansion and develops credible plans that phase out fossil fuel financing, it should not be able to advertise itself as supporting the principles of the Paris Agreement or aiming to achieve net-zero emissions by 2050. Other Canadian banks should take note.
As long as Canada’s banks and pension funds continue to invest in coal, oil and gas extraction, we severely hinder our chances of avoiding a climate catastrophe. To achieve net-zero emissions by 2050, we must rapidly transition financial support away from fossil fuels and towards clean energy. Canada’s banks can and must play an essential role in this transition – but instead, they are doubling down on fossil fuels and funding our collective destruction.
According to the International Energy Agency, financing the expansion of fossil fuel development completely undermines the goal of the Paris Agreement – keeping global temperature rise below 1.5 degrees Celsius. Bluntly, the head of the United Nations has called continuing investment in fossil fuels “moral and economic madness.”
But the world is beginning to wake up to the role that the financial industry must play in securing a safe, sustainable future for all.
At every level, from individual customers to local community groups to investors, more and more people have started to push financial institutions to change course and divest from fossil fuel developments before it is too late.
The irony of all this dangerous foot-dragging by financial institutions in Canada is that they are missing a massive economic opportunity (in addition to behaving irresponsibly). The New Climate Economy Report found that bold climate action could yield a direct economic gain of US$26 trillion¹¹ through to 2030 compared with business as usual.
Canadian financial institutions must develop credible plans to contribute to Canada’s climate goals. While many have signed on to global pledges to align with the Paris Agreement and reach net zero by 2050, we are yet to see credible plans or changes in lending behaviour, that would signal their sincerity.
Ultimately, the federal government needs to cut through the greenwash by introducing new laws that force banks and pension funds to make credible climate plans. Over the next few months, Ecojustice will be working hard to develop strategies that will hold these financial institutions accountable for playing their part in stopping a climate catastrophe.
¹Canadian Banks Keep Financing Fossil Fuels – The Tyee
²Environmental Impact of Coastal GasLink Pipeline – Shake Up The Estab
³In photos: inside the Gidimt’en eviction of Coastal GasLink – The Narwhal
⁴Wet’suwet’en, Hollywood Team Up to Demand RBC Divest from Coastal GasLink Pipeline – The Energy Mix
⁵Royal Bank of Canada, TD, Scotia, CIBC, BMO, National Bank front $10 billion to finance financially risky Trans Mountain pipeline, analysis reveals – Stand.Earth
⁶Trudeau’s Trans Mountain pipeline investment ‘clearly’ not profitable: watchdog – The Narwhal
⁷Greenhouse gas emissions from the Trans Mountain project – Government of Canada
⁸The database of fossil fuel divestment commitments made by institutions worldwide – Divestment Database
⁹Statement on the CDPQ’s oil producer divestment and new emissions intensity targets – Shift: Action for Pension Wealth and Planet Health
¹⁰ Fossil Fuel Finance Report 2022 – Banking on Climate Chaos
¹¹ Financing Climate Action – United Nations