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Three large Canadian banks and a powerful lobby organization representing 60 banks from Canada have asked Canadian regulators not to delay potential reforms that would require corporations be more transparent about how the crisis could affect their operations.
The banks’ pushback against the implementation of these reforms puts them in line with major oil and gas companies, many of whom also Oppose any new climate financial transparency measures.
Moreover, Bay Street’s opposition to key climate financial transparency initiatives seems to clash with a major public advertising campaign launched by the large Canadian banks last year.
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Banks have been scrambling in order to publish climate reports, outlining their plans for reducing emissions and putting pressure on high-polluting customers to decarbonize. This is part of a commitment that they made in 2021 to a United Nations conference. net-zero banking campaign.
But their submissions to the regulators of Canada’s capital markets tell a different story.
The banks’ stance on climate transparency rules are among 130 submissions from a variety of industry and civil society stakeholders sent to regulators between October 2021 and February 2022.
Responding to a solicitation, submissions were made by companies and organizations. ProposalSecurities regulators are requiring publicly-listed companies on stock exchange to publish information on how they assess climate-related risk and the metrics and goals they use when gauging the effect of climate change on business plans.
Investors would be able to make informed decisions when buying and selling stocks. This information would help them to identify which companies are most vulnerable to economic disruptions triggered due to climate change, and which companies are well-positioned to thrive on a warming planet.
But in the absence of this information, regulators of Canada’s capital markets Warn that Canada’s economy will continue ballooning into a “climate bubble” that may suddenly explode in a disorderly manner.
Despite these warnings, The Narwhal conducts an investigationTwo-thirds (63%) of organizations and companies that wrote to regulators over the past month were opposed key climate financial transparency initiatives.
One prominent Bay Street is part of the opposition Lobby group, the Canadian Bankers Association, that represents the “big five” Canadian banks — TD Bank Group, Bank of Nova Scotia (Scotiabank), Royal Bank of Canada (RBC), CIBC and BMO Financial Group.
The bankers group has publicly praised how important it is to transform the financial sector to combat the climate crisis. declaring on its website that “Canada’s banks recognize the urgency of addressing climate change and understand that the financial sector is central to securing the transition to a low-carbon economy.”
However, the group recommends that regulators not create new rules that require companies reporting information about how climate change could disrupt their operations in different planet-warming scenarios.
“We believe there is a risk of inadvertent and inaccurate disclosure during the early stages of development with results that may be too uncertain to be of value to investors,” it warned regulators in a Letter.
The Canadian Bankers Association responded to questions from The Narwhal by sending a short email that included a 22-word statement, along with a message from spokesperson Mathieu Labrèche stating the lobby group would let the submission speak for itself.
“Climate change is a critical issue of our time and banks in Canada are committed to doing their part to address it,” Labrèche wrote.
Scotiabank admits its ‘oil producer clients’ will need more help to decarbonize
This situation shows how, after years of financing fossil fuel development in Canada, and elsewhere, banks are now trying balance that legacy with the realities of climate change and changing financial markets.
Scotiabank wrote March 15, 2005 Net-Zero Pathways Report that “additional efforts will need to be undertaken” to help lower the carbon pollution from its “oil producer clients.” Scotiabank acknowledged in its report that it stands to lose billions of dollars if the oil producers it supports can’t pay back the loans or other financial products the bank has offered them.
The bank’s report sets a target of cutting the emissions intensity from the burning of the oil and gas products it finances Minimum 15%By 2030, and to reduce the intensity of oil-and-gas operations’ emissions by 30 percent by 2030.
“Scotiabank recognizes the oil and gas sector as an important part of the bank’s net-zero strategy given the sector’s size and emissions profile,” the report stated. The bank suggested a range possible actions, including investing in. Carbon-capture technologyTo help reduce emissions.
Scotiabank was founded just one month ago. SubmittedCanadian regulators recommended that they not go ahead with rules that would have required companies to publish reports showing how oil producers it finances would fare under different carbon-constrained scenarios.
Scotia Global Asset Management is a subsidiary of the bank. I wrote a letter to regulators recommending they hold off on requiring these reports be published because there are “significant practical challenges” faced by companies in compiling the information and a lack of standard methods to use.
The firm wrote that requiring reports on emissions from the use of a company’s products “seems excessive for the foreseeable future.” The bankers group also argued against rules that would force companies to publish the emissions generated when its products are burned or used, writing that much of the data needed to measure those emissions “is either of poor quality, or simply not available.”
Scotiabank declined questions from The Narwhal regarding how its submissions to The Regulator matched its net zero commitment. The bank stated that it had no further comment beyond the ones it had submitted.
BMO and CIBC demand disclosure over time, but they say that firms should be free from the responsibility for now
BMO Global Asset Management as well as CIBC Asset Management urged regulators to allow companies to choose to not publish their climate scenarios. They could also write a note explaining why it is not possible.
BMO Financial Group’s 2021 Climate ReportThe February 28th publication of the bank’s oil and gas portfolio commits to reducing its emissions intensity by 33% by 2030 and 24% by 2030. The bank wrote oil and gas decarbonization is a “critical element of the green transition.”
BMO Global Asset Management sent in a letter less than two week earlier. Letter to Canadian regulators that, while it believed Canada should be “moving to mandatory disclosure” for scenario planning reports “over time,” companies should initially be given the option of avoiding this requirement because “there are still challenges” related to the procedures used to produce climate scenarios.
CIBC’s 2021 Sustainability Report, released earlier this month, says it is still developing its interim targets for its financed emissions and expects to publish a “climate transition roadmap” in a forthcoming net-zero report.
CIBC Asset Management’s January Letter to regulators states the bank “would love” for regulators to require companies to report the emissions from the use of their products — but also raised concerns such data was “not easily available and is difficult to put together.”
The bank also asked regulators to be “cognizant of the financial impact or cost” to companies “from all this incremental disclosure.”
CIBC declined to answer questions from The Narwhal, while BMO did not respond to The Narwhal’s request for comment.
TD, however, did not send a letter of intent to the regulators. However, it stated that it would refer to the bankers association for comments. RBC, too, did not send a formal letter to regulators and declined to comment.
Scotiabank, BMO won’t divest from high-polluting clients
Scotiabank’s and BMO’s climate reports rejected the idea that they should kick high-polluting customers off their loan books.
Scotiabank’s net-zero report argues “divestment is among the least effective approaches to achieving a net-zero economy.”
The bank said divestment’s “impact on real-world emissions is questionable,” suggesting there was a “wide range of capital providers that can step in to replace any single bank’s financing.”
“Conversely, by continuing to support clients in emission intensive sectors, we can work with company leadership to enable and influence emission reducing initiatives — things that we could not do if we exit the banking relationship,” Scotiabank wrote.
BMO wrote in its climate report that it intended on “supporting the decarbonization efforts of our clients, rather than divestment strategies that we believe do not support emissions reduction in isolation.”
A strategy of divesting from oil and gas, BMO argued, would not support “real world emissions reductions” and could result in a “disorderly net-zero transition that does not address the economic and social needs of the communities affected.”
Other major financial players and pension plans support strict regulations
Canadian financial reporting rules have not required as strict climate transparency rules as the regulators are proposing. Regulators are responding a growing chorus from pensions, asset managers and accountants, as well as credit unions and credit unions, who demand clear and reliable information about the climate-related risks Canadian companies face.
According to The Narwhal’s analysis, 20 firms or organizations told regulators they endorsed three key climate transparency measures that would force Canadian companies to demonstrate how the climate crisis could disrupt their business plans, report on the emissions from their products and submit to independent emissions audits.
One of them is the Desjardins Group in Quebec, which has assets of approximately $400 billion and is the largest North American financial co-operative. You can find out more at www.a LetterDesjardins Group informed regulators that investors can only identify polluting assets within their portfolios if they have the right information. This is why it requires more strict transparency.
Norges Bank Investment Management, the investment arm of Norway’s central bank that handles the Norwegian government’s global pension fund, also wroteCanadian regulators recommended rules that would require companies to create a scenario in the world where the average global temperature rises below 2 C from pre-industrial levels.
“It is good practice for companies to assess the sensitivity and resilience of their long- term profitability to different transition and physical climate scenarios, including a well-below two degrees Celsius scenario,” the central bank wrote, adding that companies should also disclose which climate scenarios they used, including detailed information about their analyses.
The Canada Post Corporation Pension Plan, one of Canada’s largest corporate-sponsored pensions with about $30 billion in assets, also Submitted to regulators that all companies should be required to produce climate scenario planning — and that should include a scenario that limits global warming to 1.5 C.
Without stronger financial disclosure rules, it is impossible to know whether a company is truly aligned with the world’s climate goals, according to Barbara Zvan, the president and CEO of University Pension Plan, an Ontario-based fund with assets over $10 billion and serving about 35,000 members at University of Toronto, University of Guelph, Trent University and Queen’s University.
In a Feb. 11 interview with The Narwhal, Zvan said she feared delaying mandatory climate disclosures will leave the public in the dark and hinder investment managers’ ability to achieve climate-related targets.
In a letter, Zvan Submitted financial regulators the pension plan wants to see many public companies, including all those in “high-emitting sectors,” required to undertake and reveal climate scenario planning within the next two years.
Zvan also wants to see a requirement for companies to reveal the emissions from their operations as well as from the products they make, if the information is considered “material,” or in other words, if a reasonable investor’s decision whether to buy, sell or hold things like stocks would likely be influenced if that information was left out, or if it was misstated. She also suggested that mandatory audits of emissions reporting should be implemented.
“When you think about the industry, unless you tell them, ‘This is coming, and you’re going to need to do it,’ who’s going to invest the time and energy to do it?” Zvan told The Narwhal.
She said she understood how smaller institutions couldn’t tackle disclosures as easily as larger ones — and that’s why regulators need to start with simpler requirements and make them more complex over time.
“When most companies do something new, they often go to advisors. But no one’s going to build an advisory service unless they know they’re going to have clients,” Zvan said.
“They have to build certain capabilities, or for the larger institutions, build those capabilities internally, and you’ll never get it right the first time. So we need a few cycles to learn.”
