Major bank hit with backlash after changing course on $500 billion deal: 'Disappointing and concerning step backward'

The Royal Bank of Canada is ditching a multibillion-dollar commitment to sustainable financing and is pointing to regulatory changes around greenwashing as a key reason.

What's happening?

The Canadian Press reported that RBC has scrapped its plans to facilitate $500 billion in sustainable financing after discovering problems with its methodology. Canada's largest bank said updates to the Competition Act requiring metrics to align with internationally recognized methods informed its decision. 

As a result, RBC said it will also not release information about its energy-supply ratio, which measures financing for low-carbon and high-carbon projects. 

"Recent amendments to Canada's Competition Act limit the information we can share on certain sustainability disclosures," said Jennifer Livingston, RBC's vice president of climate. "We are disappointed not to share these metrics externally but will continue to monitor and report them internally to measure our progress."

Why is this important?

RBC's refusal to report its energy-supply ratio casts doubt on its climate commitments and is particularly troubling because it has a history of financing dirty fuel projects. 

Last year, the Banking on Climate Chaos report named RBC as one of its "Dirty Dozen" banks accelerating the use of dirty fuels, which account for more than three-quarters of global planet-warming carbon pollution linked to disease spread, food insecurity, and economic losses.   

Transparency is essential to climate reporting, helping regulators formulate evidence-based policies, which boosts accountability and builds trust in institutions. 

Richard Brooks, climate finance director of the environmental group Stand.earth, said that RBC's "scrubbing of data is a disappointing and concerning step backward," according to The Canadian Press, which paraphrased Brooks' statement. 

Tanya Jemec, a finance lawyer at Ecojustice, wrote in an email to the Canadian Press that RBC could have employed existing methodologies to report its energy-supply ratio. However, that might have revealed unsavory details about the bank's climate progress. 

"If the bank adopted a standard, like BloombergNEF's, it might be able to meet Canada's greenwashing requirements — but doing so could expose its poor performance," Jemec said.

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What is being done about this?

RBC touts its commitment to responsible investment, sustainability finance, and support for a net-zero economy in its latest sustainability report, acknowledging that a warming climate and biodiversity loss are "two of the biggest environmental challenges facing the planet." 

While the latest report indicates that RBC has a long way to go to live up to its promises, the banking giant does list specific actions it is taking to reduce pollution from dirty fuels. For instance, it intends to replace more than 1,500 outdated HVAC systems with energy-efficient, cost-effective heat pumps across its retail network by 2035. 

Brooks suggested that more robust climate-related regulations would also push financial institutions to adopt more sustainable practices. 

"RBC is stepping further back, so in my opinion, this means [Prime Minister Mark] Carney must step forward and acknowledge voluntary measures will not work and regulation must be accelerated," Brooks told the Canadian Press. 

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