Canadian banks scale back fossil fuel funding, but 'not declining nearly fast enough': Climate group

Canada’s biggest banks cut down on financing to the fossil fuel industry in 2023, according to a new report from a coalition of environmental groups.

However, the analysis of 60 major global lenders found Bank of Nova Scotia (BNS.TO), Canadian Bank of Imperial Commerce (CM.TO), Bank of Montreal (BMO.TO), and Royal Bank of Canada (RY.TO) did proportionally more business with the industry last year than U.S. peers JPMorgan Chase (JPM), Citi (C), and Bank of America (BAC).

JPMorgan tops the Rainforest Action Network’s 15th annual “Banking on Climate Chaos” report published on Monday. The New York-based bank’s estimated fossil fuel financing in 2023 rose to US$40.8 million in 2023 from US$38.7 million the prior year.

Overall, the report found that the list of 60 private banks provided US$6.9 trillion in financing to the fossil fuel industry since the signing of the Paris Agreement in 2016, including US$705 billion in 2023. Those figures include lending as well as debt and equity underwriting. The authors say this year’s figures do not compare directly with those published in previous years due to changes in methodology.

The 60 banks profiled funnelled US$349 billion in 2023 into 874 companies expanding fossil fuels, including Enbridge (ENB.TO) and TC Energy (TRP.TO).

Mizuho Financial (MFG), Bank of America, Mitsubishi UFJ Financial (MUFG), and Wells Fargo (WFC) round out this year’s top five.

Canada’s largest lender by assets, Royal Bank, ranked number seven this year, providing an estimated US$28.2 million in fossil fuel financing in 2023. Bank of Nova Scotia ranked number 10, followed by Toronto-Dominion Bank (TD.TO) at number 11. BMO and CIBC ranked 15th and 16th, respectively.

All of Canada’s largest banks reduced their financial exposure to the fossil fuel industry last year. TD and Royal Bank led those declines, booking 19 per cent and 16 per cent reductions, respectively.

“Bank financing for fossil fuels is not declining nearly fast enough,” April Merleaux, a research and policy manager at the Rainforest Action Network who co-authored this year’s report, stated in a news release. “In 2023, we saw nearly US$350 billion financed to companies expanding fossil fuels, which is dangerous and inconsistent with real climate commitments.”

Canada’s banks rank higher when their size is factored in. Scotia and CIBC placed second and third, respectively, when ranked by fossil fuel financing as a percentage of assets. BMO and Royal Bank ranked seventh and eighth by this measure.

“This finding is consistent with recent reporting that suggests regional and smaller banks are increasingly important for the sector,” the authors wrote in the report. Last month, Bloomberg News reported that U.S. regional banks are increasing lending to oil, gas, and coal clients.

When it comes to bankrolling Canada’s oilsands, Royal Bank, CIBC, and Scotiabank booked a three-way tie in 2023 at US$523 million each. According to the report, the top 36 oilsands companies received US$4.4 billion in financing in 2023, a US$4 billion drop from the previous year.

Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.

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