What can we learn from shareholder climate action at North American banks?

Image credit: Matthew Higginson 2022

By Richard Brooks, Climate Finance Director, Stand.Earth.

A growing number of investors in the largest North American banks are taking climate action during key shareholder meetings by opposing select board directors and putting forth independent resolutions. In 2022, several investor groups filed climate-related resolutions at six of the largest American banks, calling on the institutions to stop supporting fossil fuel expansion. Climate-related resolutions were also filed at many Canadian banks.

Currently, many North American banks rely upon distant net zero commitments and weak intensity targets to deflect criticism of the massive amounts of financing they continue to pour into fossil fuel companies. With more than $4.6 trillion in fossil fuels since the Paris Climate Agreement was signed in 2016, banks are clearly a major enabler of the climate crisis. While claiming to want to support climate solutions, their rhetoric relies excessively on unproven technologies like carbon capture, offsets, hydrogen and small scale nuclear reactors. None of that addresses the massive toll current fossil fuel extraction, transport, and burning takes on our communities and our health or how fossil fuels and the profit they create are the engines behind dangerous autocrats’ war machines.

RBC Investors for Paris resolution & its impact

At the Royal Bank of Canada AGM, one of the first bank shareholder meetings of the “season”, climate was front and center and clearly making management uncomfortable. Investors for Paris Compliance had filed a shareholder resolution calling out the bank for using “sustainability linked bonds” to support new oil pipelines, including the highly contested Line 3 which is transporting tar sands oil from Alberta, Canada to Superior, Wisconsin.

RBC also financed a “sustainability linked” bond issuance for Tamarack Valley Energy, which, as a company, does not account for its Scope 3 emissions and only sets intensity emissions targets, allowing its overall emissions to grow. RBC had also been involved with financing a number of major fossil fuel projects that failed to secure free prior and informed consent of Indigenous communities including the notorious and controversial Coastal GasLink fracked gas pipeline currently under construction in British Columbia, Canada.

With less than 24 hrs notice, the bank’s management canceled the in-person portion of their AGM after it was announced that Wet’suwet’en hereditary chiefs were set to attend the meeting and confront management for their financing of Coastal GasLink. With this move, they reiterated their lack of respect for Indigenous rights and commitment to fossil fuels, but in the process energized critics and landed themselves many negative media stories.

While RBC ignored investors’ calls for stronger action on the climate in 2022, investors clearly need to step up the pressure on the bank during the coming year as the bank’s absolute financed emissions are set to increase and with no sign the bank intends to walk away from controversial fossil fuel projects like Coastal GasLink or the Transmountain tar sands pipeline.

US bank AGMs and their impact

Wells Fargo & Co, Bank of America Corp. and Citigroup Inc. then held their annual shareholder meetings in late April. These were significant because they provided shareholders an opportunity to weigh in on engaging the banks to stop the financing of new fossil fuel infrastructure in time to prevent more climate destruction.

At Citi, just under 13 percent of shareholders backed the ‘no fossil fuel expansion’ resolution, while 11 percent supported similar proposals at both Wells Fargo and Bank of America. While the results are in the low teens as these banks, it’s important to recall that these results are significant and impactful for several reasons:

1. They represent tens of billions of dollars of shares, wielded by many institutional and retail shareholders at each bank. That’s no small sum.
2. These were all first year resolutions and were more prescriptive than previous resolutions – so the bar for gaining support was higher than a request for a report or new committee.
3. Any support over 5% allows the resolution to be refiled a second year.
4. Any support over 10% is very difficult for management of a company to ignore and they do so at their peril.

Significantly, 34 percent of shareholders at Citigroup’s annual shareholder meeting supported a resolution in support of Indigenous People’s rights after Indigenous land defender, Tara Houska, founder of the Giniw Collective, addressed attendees of the online meeting with powerful testimony.

The support given to this year’s resolutions to date and the “strength” of their wording demonstrates increased appetite for climate action from an important segment of the institutional investor community including leading pension funds like New York City and State, Seattle and others who all declared their support in advance of the votes. Even Texas’ pension voted in favor of these resolutions according to the New York Times.

The Citi result was a step in the right direction but accelerating climate action in the timeline we need to see is going to require more institutional pressure including from big asset managers like Blackrock and Vanguard who own large percentages of each of the banks and seemed to have sat out this round of the fight.

Reflecting and learning 

With the JP Morgan Chase and Morgan Stanley AGMs approaching, it is important to keep the pressure up and for more pension funds, foundations, asset and wealth managers and retail investors to step up.

Following these AGMs, the investor community must stay engaged, and endeavor to hold these banks to account to ensure they deliver on their long into the future net zero commitments by putting in place short term absolute financed emissions targets, plans and draw the line at financing companies actively expanding fossil fuel infrastructure in line with climate science. For banks like Citi and the Bank of Montreal, who have already set absolute emission reduction targets, albeit ones that are not scientifically sound, investors must push for a scale of up ambition and establishing red lines on new fossil fuel projects.

For the laggards and worst offenders including banks like RBC, who demonstrated utmost disrespect for impacted communities and an outright refusal to take accountability for their contribution to the climate crisis, investors must increase the pressure. We cannot let banks get away with silent support for finance that enacts violence on people and the planet.

While it will require a lot more action to bring about the end of fossil fuel financing, the results of this AGM season so far are certainly promising and indicate a growing level of support from leading investors in the fight for climate action. Now, investors must lead by example and continue to pressure banks, adding consequences if they do not act in a timely fashion and preparing for the 2023 shareholder season.