The Royal Bank of Canada has become a lightning rod for criticism from climate activists over the years.Andrew Vaughan/The Canadian Press
Royal Bank of Canada RY-T says it is stepping up efforts to reduce the climate impact of its lending and investment businesses with a strategy to plow billions of dollars into decarbonization measures and triple its lending for renewable energy.
The country’s largest bank, which has become a lightning rod for criticism from climate activists, also said on Tuesday it is taking a more stringent approach to evaluating the emissions of its oil and gas and power generation clients, with a view to helping them advance the transition to lower-carbon operations.
The new measures are detailed in the bank’s 2023 climate report. In it, RBC says global economies must take a dual-track approach to achieving net-zero emissions by 2050 while meeting rising energy demand: scaling up low-carbon energy and decarbonizing traditional sources.
Plans include increasing lending for renewable energy projects to $15-billion by 2030 from $5-billion last year, and boosting overall low-carbon energy lending to $35-billion in six years. Its venture capital & private equity unit will invest $1-billion by 2030 into climate-focused technologies through growth-equity and venture capital funds, as well as directly into companies developing products, it said.
Jennifer Livingstone, RBC’s vice-president of enterprise climate strategy, said the focus on an accelerated decarbonization push among energy clients, with more detailed data-gathering, is aimed partly at answering its environmental critics.
Activists frequently cite the bank as one of the world’s largest funders of fossil fuel producers, and say it should move faster to wean itself away from high-carbon industries. The bank is the target of complaints to Canada’s Competition Bureau and provincial securities commissions over its sustainability and marketing practices. The allegations have not been proven in tribunals.
Ms. Livingstone pointed out RBC is the biggest bank in a country that is one of the largest oil and gas producers, so it stands to reason it has many clients in the sector. Its increasing focus on climate disclosure shows it is addressing the problems, she said.
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“I feel like what we’re doing in this report, especially coupled with the client engagement approach that we published in November, is really showing how we are working with our clients, and the expectations we are setting around how we will support this decarbonization that is so important for RBC and for Canada as a whole,” Ms. Livingstone said in an interview. “So I think that bringing this transparency out is what’s really important.”
In November, RBC published a “transition readiness framework” to assess the plans of its energy-sector clients and offered them support to speed up their transition efforts. The bank, which set its own net-zero target in 2021, said it is committed to disclosing emissions-reduction progress at the portfolio level, and pledged to break ties with clients that, after repeated efforts, don’t sufficiently prepare for the shift to a lower-carbon economy.
Lindsay Patrick, head of strategy, marketing and sustainability for the bank’s capital markets division, said much of the criticism levelled at RBC is from “a narrow stakeholder audience” whose aim is accelerating the transformation to a low-carbon economy without enough regard to the structure of Canadian banking industry and the economy at large.
The majority of shareholders, clients, employees and others appreciate the measured approach that RBC is taking to the issues, Ms. Patrick said. “That’s why it was so important to publish the energy outlook report, which was to ground the reality of how the energy system was transitioning.”
In its report, RBC said it is committed to bolstering its disclosure of financed emissions on an absolute basis, and those from oil and gas must decline if there is any hope of achieving net-zero by 2050. The bank said it will prioritize allocating capital to clients that are taking active steps to decarbonize.
It said 79 per cent of its energy-sector clients have set transition plans, and 48 per cent have met more than just the minimum criteria. However, none has a strategy that is considered advanced.
Just two per cent have plans that are aligned with the target of limiting global temperatures to 1.5 degrees Celsius above preindustrial levels. In the power-generation sector, 34 per cent of its clients are aligned with 1.5 degrees. It described improving these metrics as a “key challenge.”
“Clients do not typically have a clear path to achieving the magnitude and speed of reductions implied by this criteria,” the report said.
The bank’s billion-dollar fund for investment into decarbonization, meanwhile, will have different investment return criteria than other pools of capital to account for the longer periods it can take for technology to prove itself and take hold, and for the institutional knowledge such investments can offer, Ms. Patrick said.
It plans to report on the client decarbonization data and its engagement progress annually, it said.