National reliance on fossil fuels hinders renewable energy transition
Canada's major banks are falling behind in their investment in renewable energy, putting the country’s climate goals at risk, according to a new report by Investors for Paris Compliance.
The report revealed that only three of the country’s largest financial institutions have met the 2030 target set by the International Energy Agency (IEA) for renewable energy investment, a key benchmark for achieving net zero emissions by 2050.
The IEA target, which requires 71% of power-sector financing to be directed toward renewable energy, is part of a global effort to limit temperature rise to 1.5°C, as outlined in the 2015 Paris Agreement. However, the report highlighted that Canada’s biggest banks have made minimal progress toward this goal.
The country’s pension boards, including Caisse de Dépôt et Placement du Québec (CDPQ) and the Canada Pension Plan Investment Board, were noted as leaders in renewable energy investment, meeting the IEA’s power-sector financing targets and actively planning for a transition to net zero.
While some of Canada’s pension funds – including Caisse de Dépôt et Placement du Québec (CDPQ) and the Canada Pension Plan Investment Board – met the IEA’s power-sector financing targets and are actively planning for a transition to net zero, the country’s six big banks are not keeping pace.
The Bank of Nova Scotia ranked the lowest in renewable energy investment, while National Bank of Canada, which had 93% of its electricity credit in renewables in 2020, has since fallen below the IEA’s threshold. On average, renewable credit financing among Canada’s big banks has increased by just one percentage point per year.
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“Despite all the banks assessed having made long-term, net zero commitments in 2021, and [having] adopted power sector-specific interim targets since, most have shown no real progress,” Investors for Paris Compliance, which represents investors advocating for a transition to net zero, said in the report.
Canada’s reliance on oil and gas complicates these efforts. As the world’s fourth-largest oil producer, Canada’s financial institutions face significant pressure to continue supporting the fossil fuel industry. Last year, the country’s five largest banks all underwrote bonds for coal-powered utilities, further entrenching their ties to non-renewable energy sources.
However, the report did highlight a few positive steps. Brookfield Asset Management is raising funds to transition coal assets to clean energy, while Royal Bank of Canada (RBC) plans to triple its renewable energy lending to $35 billion by 2030. Manulife Financial Corp. has also committed $690 million to energy-transition investments.
Investors for Paris Compliance called for stronger measures to boost renewable energy financing.
“Weak power-sector policies by financial institutions, as well as the great variation in how these policies are applied, highlights the need for stronger voluntary guidelines as well as financial-sector regulations,” the organization wrote.
The group filed a complaint with Canadian securities regulators earlier this year, urging an investigation into green financing claims made by the country’s largest banks.
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