Pension boards lead in renewables, but Canada's major banks struggle to meet net zero targets
A recent report from Investors for Paris Compliance reveals that Canada's financial institutions are not investing enough in renewable energy to meet the necessary levels for achieving net zero emissions.
According to BNN Bloomberg, the report indicates that between 2016 and 2024, only three of the nation’s largest financial institutions met the 2030 International Energy Agency (IEA) target.
These institutions, including banks, insurance providers, investment firms, and pension boards, achieved the goal of directing 71 percent of power-sector financing and investment toward renewables.
The IEA target is part of a broader strategy to limit global warming to 1.5°C in line with the 2015 Paris Agreement and to reach net zero by 2050.
Among Canada’s financial institutions, pension boards like Caisse de Dépôt et Placement du Québec (CDPQ) and the Canada Pension Plan Investment Board were leaders, having met the IEA’s renewable energy financing target and outlined plans to transition to net zero.
However, Canada’s major banks have fallen behind. The report found that the Bank of Nova Scotia ranked the lowest in renewable energy investment among the country's six largest banks.
National Bank of Canada, which in 2020 had 93 percent of its electricity credit in renewables, has since fallen below the IEA threshold. On average, renewable credit financing across Canada’s big banks has only increased by one percentage point per year.
Despite these banks making long-term net zero commitments in 2021 and setting sector-specific interim targets, the report states that “most have shown no real progress.”
The challenge is compounded by Canada's position as the world’s fourth-largest oil reserve holder and petroleum producer, with most of its coal and oil production being exported. In 2023, the country’s five largest banks each underwrote bonds for coal-powered utility companies.
The report does acknowledge some positive developments.
Brookfield Asset Management is raising funds to transition coal assets to clean power, Royal Bank of Canada plans to triple its renewable energy lending to $35bn by 2030, and Manulife Financial Corp. committed $690m to energy-transition investments.
Despite these efforts, Investors for Paris Compliance stresses the need for stronger government measures to enhance renewable energy financing.
The organization highlighted that “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.”
Earlier this year, the organization filed a complaint with Canadian securities regulators, urging an investigation into the green financing claims made by the country’s largest banks.
