Climate advocacy group files securities complaint against big five banks

Group urges regulators to investigate accuracy of banks' sustainable finance disclosures

Climate advocacy group files securities complaint against big five banks

A climate advocacy group has filed a complaint to securities regulators, alleging that Canada's big five banks may be misleading investors through their use of terms like sustainable finance, according to a report by The Canadian Press.

Investors for Paris Compliance submitted the complaint to the Ontario Securities Commission and the Autorité des marchés financiers of Québec, asserting that the banks are employing the term “sustainable finance” too broadly without substantiating the claims with data.

The big five Canadian banks, namely RBC, TD, BMO, CIBC, and Scotiabank, collectively pledged $2 trillion by 2030 for sustainable finance initiatives. The term covers various lending activities aimed at promoting environmental and social causes.

Matt Price, executive director of Investors for Paris Compliance, voiced concern over the lack of disclosure and questioned the effectiveness of the banks' sustainability efforts. “They're putting this in the window as one of their core responses to climate change and net zero, when they're not rationalizing or justifying or providing any evidence or proof about that,” he said.

The group also raised concerns about the banks’ disclosed deals with oil and gas companies.

RBC, CIBC, and Scotiabank have been previously involved in sustainable finance deals with Enbridge Inc. as it expanded its oil export capacity, while BMO previously structured a sustainability-linked credit facility for Gibson Energy, increasing its oil exposure. To add, TD Bank previously served as a co-sustainability structuring agent for a $4 billion sustainability-linked loan with Occidental Petroleum, which later announced an investment in shale drilling.

Investors for Paris Compliance is urging regulators to investigate the adequacy and accuracy of banks' disclosures regarding sustainable finance. The group also calls for regulators to mandate banks to disclose the emissions impacts of their sustainable finance business or specify areas where they cannot do so, clarifying that such segments do not necessarily advance their net zero goals.

The banks, when approached for comment, directed inquiries to the Canadian Bankers Association. Spokeswoman Maggie Cheung emphasized that Canadian banks adhere to North American market standards for environmental, social, and governance (ESG) disclosure, complying with applicable rules and regulations while actively collaborating with industry and regulators to enhance sustainability reporting standards.

“Banks in Canada understand the important role that the financial sector has in an orderly transition to a low-carbon future. Sustainable finance is one tool for helping companies mobilize capital toward this effort and a range of other environmental and social goals,” the spokeswoman said.