(Bloomberg) -- Canada’s financial institutions are falling short when it comes to the investment levels in renewables needed to reach net zero emissions, according to a new report.
Between 2016 and 2024, only three of the country’s largest banks, insurance providers, investment firms and pension boards hit a 2030 International Energy Agency target of having renewable energy account for 71 per cent of power-sector financing and investment, according to the report released Wednesday by Investors for Paris Compliance.
The IEA target is part of a broader pathway to limit global warming to 1.5C per the 2015 Paris Agreement, and to reach net zero by 2050.
Canada’s pension boards were some of the leaders in renewables: Caisse de Dépôt et Placement du Québec (CDPQ) and the Canada Pension Plan Investment Board met the IEA’s target for power-sector financing, and both have plans for a transition to net zero.
Big banks didn’t fare as well. Of Canada’s six largest banks, Bank of Nova Scotia ranked the lowest on renewable energy investing, the study found. National Bank of Canada, which in 2020 had 93 per cent of its electricity credit in renewables, has since seen those levels fall under the IEA threshold. Across Canada’s big banks, renewable credit financing increased by just one percentage point per year, on average.
“Despite all the banks assessed having made long-term, net zero commitments in 2021, and [having] adopted power sector-specific interim targets since, most have shown no real progress,” Investors for Paris Compliance wrote.
As of 2023, Canada had the world’s fourth-largest oil reserves and ranked as the fourth-largest petroleum producer, according to the U.S. Energy Information Administration, making banks’ commitment to renewables more challenging. The country’s five biggest banks each underwrote bonds for coal-powered utility companies last year, according to the report. The majority of coal and oil produced in the country is exported.
The Investors for Paris Compliance report highlighted some recent points of progress. Brookfield Asset Management is raising funds to invest in coal assets and transition them to clean power, for example, while Royal Bank of Canada plans to triple its lending to renewable energy to $35 billion (US$26 billion) by 2030 and Manulife Financial Corp. committed $690 million (US$512 million) for energy-transition investments.
But the organization, which represents investors and makes investments in Canadian companies to advocate for a transition to net zero, also noted that it would like to see more government measures to improve renewable-energy financing. “Weak power-sector policies by financial institutions, as well as the great variation in how these policies are applied, highlights the need for stronger voluntary guidelines as well as financial-sector regulations,” it wrote.
Earlier this year, Investors for Paris Compliance filed a complaint to Canadian securities regulators, urging them to investigate green financing claims from the country’s largest banks.
©2024 Bloomberg L.P.
