Green or Sustainable: Canadian Banks Wade Through Definitions

DBRS Morningstar released a commentary titled, “Green or Sustainable: Canadian Banks Wade Through Definitions.”

Key Highlights:
(1) The Big 6 Canadian banks have made strides in greening various aspects of their operations as they commit to various government-imposed goals and important global environmental initiatives. Importantly, there is a move to make TCFD disclosures a requirement for all Canadian banks.
(2) Issuances of green and sustainable bonds have become more frequent, with the latter leading the growth.
(3) However, owing to the importance of the oil and other fossil fuels sector to the Canadian economy, the Big 6 continue to provide financing and services to these sectors.
(4) Lending to this sector could lead to increased capital and risk requirements as the regulators map out their plan for the banking sector as Canada transitions to net-zero emissions by 2050.

“The Big 6 Canadian banks have continued to progress toward their goal of developing environmentally friendly operations, funding sources, and business practices. However, to the extent that oil and other fossil fuels remain important contributors to the Canadian economy, we expect the Big 6 will continue to play a role in financing the sector,” said Maria-Gabriella Khoury, Senior Vice President, Global FIG. “The introduction of OSFI's B-15 disclosure requirements is expected to help the banks, regulators, and investors navigate Canada's targets to achieve net-zero emissions by 2050. However, there is still a lot of work to be done to lay the foundation for this transition.”