In just one year, Toronto’s largest financial institutions financed fossil fuel companies to the tune of $1.4 trillion. That money was used to expand oil and gas projects around the world, generating over a billion tonnes of climate pollution.
In fact, if Bay Street were a country, it would be the fifth biggest emitter in the world, behind only the United States, India, China and Russia — and responsible for nearly double Canada’s entire pollution in a given year.
The staggering findings were identified by University of Toronto researchers at the Toronto Climate Observatory, and published Tuesday to coincide with a major UN sustainable investing conference kicking off in Toronto this week.
The report said Bay Street is putting even its own stability in jeopardy.
“Not only are these emissions accelerating the climate emergency, they also create economic and financial risks for the FIs (financial institutions) themselves, as climate-related risks and impacts could seriously affect the operations of these companies, thus threatening the stability of Canada’s financial sector and economy as a whole,” the study found.
“A key take-away from this report is the need for mandatory, credible, and transparent climate transition plans from these financial institutions, to show how they plan to reduce their financed emissions and advance climate resilience.”
The study considered all emissions a bank is responsible for, including its own energy use and operations, as well as the emissions generated by projects they loaned or invested in, called “financed emissions.”
The report found “widespread under-reporting of financed emissions.” Specifically, researchers identified 2,200 per cent higher emissions with BMO than the bank self-reported. Similarly, National Bank of Canada was found to be responsible for 2,755 per cent more emissions than it self reported, and RBC was estimated to be 512 per cent higher than its self reported emissions.
“Such discrepancies were common across banks and asset managers included in this assessment, with non-pension fund FIs (financial institutions) consistently underreporting their emissions,” the report found.
The findings come with some caveats. Researchers combed through the publicly available financing for 18 Toronto-based financial institutions in 2022 to identify the total sum of fossil fuel investments –– but not every firm had data for that year. In some cases 2021 figures were used, while in others 2023 data was used. Researchers also said that due to data limitations, the total figures identified are almost certainly an undercount.
No city ‘better placed to do the hard work’ than Toronto
Despite the findings offering a glimpse into the sheer scale of Toronto’s financial sector’s role driving climate change, University of Toronto assistant professor Robert Soden, the research lab’s lead, told Canada’s National Observer there is a major opportunity for the city to assume a leadership role by setting a good example.
“Given the City of Toronto's progressive action in many areas on climate change, and its deep connection to its financial sector, it's almost a unique opportunity to lead on this,” Soden said. “It would be difficult to imagine a city that is better placed to do the hard work of thinking through a transition of the local financial sector in a direction that science and experts have been telling us for decades we need to go.
“It could set an incredible example for other cities around the world… But I think it really starts with us assuming this is our responsibility,” he said.
Even though it is the federal government that regulates banks, pension funds and asset managers, there is precedent for cities taking steps to address emissions from their financial sectors, Soden said.
London has adopted a green finance strategy that requires better reporting on emissions, government oversight on corporate transition plans, and mobilizing capital for climate solutions. The strategy was developed between the city itself and the national government, and for three years in a row the city has been ranked as the top green financial centre, according to the Global Green Finance Index.
Richard Brooks, Stand.earth’s climate finance director, said that as the biggest city in the country, with a high-profile mayor, Toronto should use its leverage with the federal government to encourage stronger policies to align the financial sector with emission-reduction goals.
Given just 18 companies in Toronto’s financial district are responsible for nearly double the country’s entire pollution, “it paints a really dirty picture of Canada and also of Toronto,” he said.
“I like to think that I'm in a city that is taking climate change seriously… but all of that goes out the window –– it's a wash –– when you account for the emissions from Canada's big banks, Canada's big pension funds, and the biggest asset managers based in Toronto,” he said.
“It's clear that the banks and pension funds on their own are not taking this problem seriously… so what we really need to see is legislation and regulation at the federal level that will change the system,” he said. “That will incentivize investments in energy and climate solutions, and incentivize business as usual and the trillions of dollars that are basically continuing to flow into oil and gas companies, that are just leading to increased emissions, which obviously leads to increased impacts on cities across the country.”
RBC, Scotiabank, BMO, CIBC, TD, National Bank, Sun Life and Manulife did not return requests for comment before deadline.
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