Good morning!
Today marks the beginning of April and, starting next week, AGM season.
This month, executives and shareholders at Canada’s biggest banks will gather to reflect on the past year and look ahead to the next. Shareholders will also get the chance to vote on proposals pressing banks to act, mostly on their climate and environmental policies. When they do, Matt Price will be watching.
Matt is a director of corporate engagement with Investors for Paris Compliance (IPC), a shareholder advocacy group that pushes big publicly listed companies in finance and energy to spell out exactly how they plan to make good on their net-zero promises. I spoke to him this week about what IPC is up to this year and what banks, shareholders and regulators are — and aren’t — doing to steer the finance world toward a cleaner future.
As always, you can let me know what you think of this newsletter at [email protected].
Have a great weekend and stay safe!
— Dana Filek-Gibson
Looking for more CNO reads? You can find them at the bottom of this email.
No more ‘tea and biscuits’
As climate change gets harder and harder to ignore, banks around the world have pledged to bring their greenhouse gas emissions as close to zero as possible and cancel out whatever’s left over. This means convincing the companies they do business with to bring down their planet-warming pollution, too — or get dropped as clients. But these net-zero commitments aren’t worth much if banks can’t — or won’t — actually make them happen. So Matt Price is pressing them for specifics.
This year, he and the rest of the Investors for Paris Compliance team put forward seven shareholder proposals at banks, insurance firms and fossil fuel companies, with one calling on TD to create a detailed transition plan outlining how it intends to reach its goals for reducing emissions in specific sectors, like oil and gas. That proposal goes up for a vote later this month.
When I ask Matt whether banks have changed their tune on net-zero pledges since last year, he tells me their attitudes are “pretty status quo.” To be fair, he says, banks worked on measuring and disclosing emissions from companies they helped finance. But if 2022’s AGM season was about understanding the scope of the problem, he explains, “now our focus is really shifting to ‘OK, well, what are you gonna do about it?’
“We're seeing a lot of inertia, not much movement, to be honest.”
Where Matt is seeing some change — though not enough, he adds — is inside the federal agency that oversees banks. Last month, the Office of the Superintendent of Financial Institutions released B15, its guidance on managing the risks posed by climate change. In the document, OSFI explicitly says financial institutions must have a climate transition plan. But what’s in that plan is another story, Matt explains.
“Canadian regulation really isn't (regulation); it's guidance, broad principles, you know?” he says. “They have nice, quiet chats behind closed doors. This is kind of the way that we've always sorted things out in Canada, for better or for worse, and potentially in this case, for worse.”
Another shift that’s changing how the corporate world handles climate change comes from shareholders themselves. As more and more of the business world sets net-zero goals, shareholders are also trying to live up to their own net-zero promises. That means keeping track of their financed emissions and pushing the businesses they invest in to bring them down.
“If I own your company, those are my financed emissions. So then suddenly, your choices become consequential for me in terms of how I'm tracking my net-zero commitment,” Matt explains. Let’s say you own a big pension fund that holds shares in TD: “Then TD's financed emissions are that pension's financed emissions,” he says, and if the pension fund is trying to hit net zero, it has to push TD to get there, too.
That’s exactly what the New York City comptroller is doing by calling on RBC — Canada’s biggest fossil fuel funder — to set targets for cutting its overall emissions, not just intensity targets, which Matt calls “a get out of jail free card.” Intensity targets measure emissions per barrel of oil, for example, or cubic foot of natural gas. Achieving them means less pollution from each unit produced, but if your product is, say, one of the main drivers of climate change, the planet won’t benefit from having more of it. Instead, Matt explains, intensity targets tell shareholders that banks are “not actually serious about changing anything in the short term.”
It’s rare to see a large institutional investor take on a bank like this, Matt tells me.
“There's a cultural barrier, especially in Canada, where, you know, it's not supposed to do this,” he says. More often, Matt and his team will talk to institutional investors who support their cause but don’t want to speak up themselves.
By making their own net-zero promises, he explains, shareholders are “signing up” to engage with banks on climate change. “But up until now, it's been what we call ‘tea and biscuits’: we have a nice, polite chat, and nothing ever changes.”
What investors need to do, Matt says, is turn that “tea and biscuits” into escalation. Shareholders should lay out their expectations for banks, he adds — and what happens if they don’t meet them. Maybe that’s voting against bank directors, for example.
Whatever happens, he knows shareholder proposals don’t fix everything. None of last year’s climate-related proposals at major Canadian banks passed, including one filed by Investors for Paris Compliance. But they did shine a spotlight on the issues threatening our financial system and our planet — in plain view of every shareholder, no less.
“We're starting to introduce some accountability to the system,” Matt says.
Check out this year’s shareholder proposals at Canada’s Big 5 banks — RBC, BMO, TD, Scotiabank and CIBC — here. We’ll update this spreadsheet as shareholder voting results come in.
More on the finance world’s climate conundrum
- Canadians’ $100B oil and gas problem (June 2022)
More CNO reads
Stick to the facts. The federal environment minister has good reason to clap back at Ontario Premier Doug Ford — but hyperbole won’t help, writes managing editor Adrienne Tanner.
Liberals lose more farm fuels from carbon-pricing scheme. The Conservatives, NDP, Greens and Bloc Québécois joined forces to pass a bill exempting natural gas and propane used to dry grain and heat livestock barns from the federal rule, Natasha Bulowski reports.
Will B.C.’s shift to clean transportation take rural communities along for the ride? The province is putting together a clean transportation plan. A coalition of climate and community groups argues it should include more support for rural and Indigenous communities, Rochelle Baker reports.
“If I needed it, others need it.” When Colleen Cardinal went looking for other survivors of the ’60s Scoop, she didn’t know where to start. Now, she’s mapping out “a network of belonging” to help other survivors, too, Isaac Phan Nay reports.
A ton of tax credits. Tuesday’s federal budget laid out more than $56 billion in new or increased subsidies for investments in clean electricity, hydrogen, carbon capture, critical minerals and cleantech for electric vehicles, nuclear and energy storage, John Woodside reports.
Budget 2023 tells corporate Canada to take the wheel on climate action. So says Hadrian Mertins-Kirkwood with the Canadian Centre for Policy Alternatives: “That’s a concerning abdication of government leadership at a pivotal moment for climate action.”