Global lenders are confronting their climate responsibility. Canada’s banks are way behind.

But a group of lenders are noticeably trailing their peers. Canada’s major banks consistently rank among the world’s top fossil fuel financiers. In 2021, fossil fuel lending from Canada’s top five banks—RBC, CIBC, TD Bank, the Bank of Nova Scotia, and the Bank of Montreal (BMO)—surged 70% to $165 billion, compared to a 5.7% increase for U.S. banks. The same Canadian lenders doubled their financing for heavy-polluting oil sands projects last year, according to the Banking on Climate Chaos report jointly released by several environmental organizations, including the Sierra Club and Reclaim Finance. Since 2016, when Canada signed the Paris Agreement, Canadian banks have channeled $911 billion into oil, gas and coal—nearly 20% of the $4.6 trillion global total.

Only one lender out of the five—BMO—has pledged to curb its absolute carbon emissions by 2030, says a Bloomberg breakdown of the banks’ most recent ESG reports. BMO has promised a 24% reduction in its ‘Scope 3 emissions’—which refer to indirect supply chain emissions like the fossil fuel burning activity of oil, gas, and coal firms bankrolled by lenders—that are the main source of banks’ greenhouse gases. RBC will release its 2030 emissions reduction goals in the fall, though the bank hasn’t specified whether it will target absolute emissions. The other three have only pledged to reduce the intensity—rather than the absolute level—of their emissions, meaning that the banks’ total emissions could still rise.

Canadian banks’ strong ties to Big Oil underscore the country’s continued struggle to shift to net-zero while still maintaining economic growth. The energy sector accounts for 10% of Canada’s $1.7 trillion gross domestic product (GDP) and employs hundreds of thousands of people across the country, despite federal regulations to speed up the country’s green transition.

Canadian banks have defended their actions. RBC spokesperson told Canadian publication The Tyee that the Banking on Climate Chaos report doesn’t sufficiently measure “how the funds are used,” suggesting that clients could be using the banks’ financing to implement green transition plans.

Canadian lenders say that helping finance fossil fuel companies’ carbon-reduction efforts will help the banks reach their own emissions reductions targets. Canada’s oil sands industry, for instance, is targeting net-zero emissions by 2050 by utilizing carbon capture technology.

RBC attributed last year’s surge in fossil fuel financing to the market’s pandemic bounce back. Global banks’ fossil fuel financing dipped in 2020 to $750 billion from $830 billion the year prior as COVID-19 restrictions weighed on demand, making the 2021 increase especially big.

RBC CEO Dave McKay acknowledged at a media briefing last Friday that “absolute [emissions] reduction… is the only [ESG target] that really counts over time,” but he excused the bank’s delay in setting reduction targets. “We’re just taking a little bit more time. In a 10- and 30-year journey, does two months make a big difference?” McKay asked.

Scientists are urging governments and corporations to rapidly and substantially scale down absolute carbon emissions. A 45% reduction in global carbon emissions is needed by 2030 to avoid a climate catastrophe, according to the Intergovernmental Panel on Climate Change (IPCC). With this deadline in mind, it would seem that, yes, every month—if not every minute—matters.

Yvonne Lau
– yvonne.lau@fortune.com
@yvonneylau

CARBON COPY

Japan's Russia conundrum 

Japan last week announced a ban on Russian coal imports, following similar actions by the EU and G7. Japan—the fourth-largest importer of Russian coal—will be hard-pressed to find alternatives. Some Japanese power plants are more suited towards Russia's grade of coal, and alternative coal from Australia and Indonesia may not be easy an substitute. Japan hasn't been able to cut itself off from Russian energy completely. The country is keeping its stakes in the Sakhalin-1 and 2 oil and gas joint ventures with Russia, projects that are essential to Japan's energy security, said Japanese Prime Minister Fumio Kishida. Bloomberg

Half-way point 

German luxury automaker Mercedes-Benz announced a plan to slash carbon emissions in half by 2030, a "half-way" goal to becoming carbon neutral by 2039, the company said on Monday. The carmaker aims to halve CO2 emissions per passenger car by electrifying its fleet, upgrading car battery technology, and helping customers charge their cars with green energy. A key part of Mercedes's strategy is to use renewable power during car production. Renewables will power more than 70% of its energy needs by 2030, the automaker says. Reuters

Bay du Nord 

Canada's Environment Minister Steven Guilbeault has given the go-ahead to Bay du Nord, a deepwater oil project off the coast of the country's easternmost province that will extract up to 1 billion barrels of crude over 30 years. Guilbeault, a longtime environmental activist, and Canadian policymakers are championing Bay du Nord as a clean, low-emissions initiative whereby citizens will be the ultimate beneficiaries. Yet environmental and indigenous groups are opposed to the project. "Climate change is already here... unreliable sea ice, warming temperatures, more frequent storms, unpredictable weather... [are] already changing how we live on these lands," said Amy Norman, a member of the Labrador Land Protectors activist group. The Narwhal

How to keep the sea out

West African nation Liberia is embarking on an ambitious plan to try to keep seawater from flooding its capital city Monrovia, while ensuring citizens still have access to their traditional livelihoods. Liberia is one of the most climate-vulnerable nations in the world with 70% of its population living in coastal areas. The $26.5 million Monrovia Metropolitan Climate Resilience Project, run by the United Nations Development Agency and Liberia's Environmental Protection Agency, will finance coastal defense structures and provide climate-friendly equipment and training for residents working in the fisheries industries. Bloomberg

IN CASE YOU MISSED IT

Europe is planning to crack down on Russian coal. It's bad news for Putin, but won't devastate the EU by Will Daniel 

Oil is entering a New World Order. Here are the big winners and losers by Bernhard Warner

How Russia is managing to sell the oil and gas no one wants to buy by Yvonne Lau 

A flying, all-electric tax sounds like sci-fi, but some experts say you could be sitting in one in just 3 years by Bernhard Warner

Companies embrace employee sustainability education to tackle climate emergency by Lisa Held

CLOSING NUMBER

17 parts per billion

For the second year in a row, the world has experienced a record annual increase in methane emissions, according to the National Oceanic and Atmospheric Administration (NOAA). Global methane emissions—the second-biggest contributor to human-induced global warming after carbon dioxide—grew by 17 parts per billion (ppb) in 2021, averaging 1,895.7 ppb last year, 162% higher than pre-industrial levels. Methane is 25 times more potent than carbon dioxide at trapping heat in the atmosphere, though it stays in the atmosphere for shorter periods of time. The upside? Scientists estimate that fossil fuel production and use accounts for 30% of all methane emissions, which means that these methane sources are "relatively simple to pinpoint and control using technology," NOAA says.