U.S. investors successfully demand RBC change how it reports on green, fossil fuel investments
RBC is one of several financial institutions to begin disclosing information about climate-related investments
Canada's largest bank has reversed course on a policy to disclose how much it invests in green energy versus fossil fuel energy following demands from New York City's large public pension funds, with environmental groups welcoming the move but pointing out it doesn't actually reduce carbon emissions yet.
The Royal Bank of Canada (RBC) is one of three financial giants in North America that will start to disclose the ratio of how much money they put into clean energy projects compared to how much they invest in fossil fuel extraction. JPMorgan Chase and Citi also made similar agreements.
"Up until now, RBC had resisted calls to disclose that ratio clearly across all their lending and investments every year," explained New York City Comptroller Brad Lander in an interview with CBC News.
Multiple pension funds overseen by Lander had put forward shareholder motions to compel the financial institutions to take these steps. Prior to RBC's annual general meeting, set for April 11, the bank's board of directors had recommended shareholders vote against doing this.
Essentially, up until April 4, when a press release was issued, RBC's public position was that it would not disclose green energy to fossil fuel investment ratios. Now that it has voluntarily agreed to do, RBC will not face a public vote of shareholders that could have forced the issue.
Agreement does not reduce emissions
"All they're doing with this agreement is agreeing to show their work," said Lander, pointing out that the agreement does not require RBC to reduce investing in projects that generate or increase carbon emissions, though the company has said previously that its lending practices will be "net-zero" by 2050.
"We think that's financially prudent and critical [going net-zero]. Making sure they actually are doing it is a responsibility of shareholders and entirely consistent with our fiduciary duty," said Lander, whose pension funds held $28.22 million US in RBC stock as of November 2022.
It's not unusual for large, institutional investors such as pension funds to take a more influential role in corporate environmental policies, according to Sebastian Betermier, an associate professor of finance at McGill University in Montreal and executive director of the International Centre for Pension Management.
"What we're looking at here is not a one off," said Betermier, who added that this type of investor activism is happening around the world — and often in ways that are not as public as the NYC funds influencing Canada's largest bank.
"Over the past several years, many of the pension funds have committed to go net-zero by 2050 ... engagement with firms is one of the ways that you can de-carbonize your portfolio," he said.
RBC says it plans to disclose ratio next year
In a statement sent to CBC News, RBC's vice-president of climate Jennifer Livingstone said that the company will provide a "clean energy supply financing ratio" in their 2024 climate report. As the company's 2023 report was released in March of this year, that report would be expected next year.
"We appreciate the constructive dialogue that we have had with the [New York City comptroller] and plan to engage with them and industry partners in developing the ratio," wrote Livingstone.
The bank declined an interview request from CBC News, but indicated in its statement that its plan is to "increase lending of low-carbon energy and the growth relative to fossil fuels over time."
RBC avoids 'highly embarrassing' situation: environmental group
Climate finance director Richard Brooks with environmental group Stand.earth said he was surprised to see RBC change its mind on disclosing energy investment ratios.
"Institutional shareholders were voting on the shareholder resolution, and then management pulled back and basically capitulated to New York City and gave in," said Brooks, who is based in Toronto.
Brooks speculated that RBC may have been concerned it would lose the shareholder vote, and would be forced to disclose this information. Brooks's opinion is that other institutional shareholders of the bank were "really keen to have this data" and so the RBC board's directive to vote against the request may have been ignored.
"When a bank has an annual shareholder meeting and a vote goes against them, that's highly embarrassing for management. So I think they did the calculus and determined that issuing this type of data would be better than having a failed vote at their annual shareholder meeting," said Brooks.
But advocacy group Environmental Defence points out that these steps may not make enough of a difference for those concerned about climate change.
"They need to cut emissions, not count them," said Julia Segal, senior manager for climate finance with Environmental Defence Canada, who pointed out that RBC has major investments in fossil fuel industries.
"They need to be reducing their investments in polluting industries," said Segal.
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