Why shareholders need to pay attention to RBC
Introduction:
As Canada’s largest fossil fuel funder, the Royal Bank of Canada (RBC) has a responsibility to tackle its contributions to the climate crisis. However, the bank continues to lag behind its peers in terms of meaningful climate action.
With the RBC April Annual General Meeting (AGM) hot on our heels, shareholders will soon be inundated with guidance on how to cast votes.
Shareholders hold the power to push companies embedded in fossil fuels, like RBC, to take action to protect the profitability of their investments, the longevity of the business as well as communities and the climate from harm done by the company.
With the energy sector still in flux due to ongoing energy instability worldwide, shareholders serious about meeting net zero goals must think about how their voting behaviour can create long-term stability.
This year, the New York City Comptroller filed a resolution calling on RBC to develop and publish short-term climate targets, while Stand.Earth filed a resolution calling on the bank to adopt a policy for phasing out fossil fuel funding.
Here are five reasons why at this year’s AGM, shareholders should vote for both of these resolutions filed by the New York City Comptroller and Stand.Earth, respectively.
1. RBC is using your money irresponsibly.
RBC’s commitment to fossil fuels in its energy investments has led the bank to make irresponsible financial decisions, one example being its involvement with the Coastal Gaslink Pipeline.
Initially, the pipeline was projected to cost $11.2 billion. However, this has already been exceeded, with current costs now estimated to be around $14.5 billion. Despite this, the bank continues to push the pipeline to completion, and the costs associated with the project will continue to increase due to delays and legal red tape, all at the expense of shareholders.
2. Your reputation is collateral damage.
As a signatory of the Equator Principles, RBC is committed to upholding Free, Prior, and Informed Consent (FPIC) on projects that infringe upon lands owned by Indigenous communities. Yet, RBC’s involvement in the Coastal Gaslink Pipeline has proven that its commitments are smoke and mirrors.
From the moment the pipeline was announced, it faced widespread criticism and protests over the detrimental impact it will have and continue to cause on Indigenous communities.
RBC is aware of the criticisms, and have failed to respond adequately. Last year, the bank changed its AGM format from an in-person event to a virtual one on the day of the meeting, in an attempt to evade accountability and avoid discussions with Wet’suwet’en hereditary chiefs who had travelled across the country to attend the AGM. Despite this, by calling into the meeting, the Wet’suwet’en managed to voice their concerns to CEO Dave McKay, who boldly defended the project.
3. Regulators are cracking down on RBC’s greenwashing.
Canada’s Competition Bureau is investigating RBC due to its misleading climate claims. Specifically, the bank is being investigated for ill-defined and “deceptive marketing practices” as a result of the bank’s continued financial support of fossil fuels despite communicating targets for reaching net zero to customers.
While greenwashing is not uncommon among financial institutions, shareholders and regulators are becoming increasingly aware of the harmful impact of high-emitting sectors and their financiers. Their concerns are not only motivated by an interest to protect the environment and the communities that rely on it for survival.
Shareholders are strongly motivated to protect the businesses they invest in from greenwashing-related reputational and litigation risks. Regulators and asset owners, such as pension funds, are also motivated to protect their economy from financial damage caused by climate risks.
4. RBC have proven their commitment to fossil fuels.
RBC is the fifth largest fossil fuel funder in the world. With 99% of its energy finance dedicated to unsustainable sources, the Canadian bank has continued on its fossil-fuelled path to generating short-term profits at the long-term expense of its shareholders and its climate commitments.
For example, last year, RBC announced one of the largest acquisition deals of all time, buying out the Canadian arm of fellow fossil fuel giant HSBC at $13.5 billion. During the deal, HSBC announced its new policy of cutting direct financing and advisory ties to new oil and gas fields in response to increasing shareholder pressure to act on climate. However, RBC was conveniently excluded from this aspect of their deal, even though implementing a similar policy as part of its deal with HSBC would work towards RBC’s net zero targets.
5. Lack of strategy = lack of transparency.
Between RBC’s involvement with the Coastal Gaslink Pipeline, the hundreds of billions of dollars the bank is funnelling to the fossil fuel industry (including some under the guise of a sustainable finance label), and greenwashing-related litigation, it’s clear that a robust decarbonisation strategy is critically needed.
This lack of strategy underlines a need for more transparency. Shareholders have the right to know how a company they invest in plans to protect them from litigation, credit risks such as stranded assets as the economy inevitably transitions away from fossil fuels, and reputational risks.
Conclusion
RBC is showing no signs of implementing meaningful climate action any time soon. In fact, the bank is making it very clear that it wishes to do the opposite: continue banking on a fossil fuel future, even in the face of the inevitable global transition to renewable energy that’s already taking off.
Shareholders must assess whether a hands-off approach to their stake in RBC is prudent given the financial and credit risks at hand, the reputational damage already facing the bank, and future legal and regulatory consequences coming down the pike. Or is it time to communicate to the bank that immediate and tangible climate action is required by voting for shareholder climate resolutions filed at RBC’s AGM next month?
This year, the New York City Comptroller has filed a resolution calling on RBC to develop and publish short-term climate targets which highlights its contribution to high emitting sectors and commits to absolute emissions reduction plans in line with viable net zero pathways.
Similarly, Stand.Earth has filed a resolution calling on RBC to implement a time-sensitive policy to phase out any further funding of companies and projects tied to fossil fuel exploration, development and transportation.
At RBC’s AGM in early April, shareholders have the opportunity to mitigate the risk to their investments posed by the bank’s lack of a transparent and actionable transition strategy by voting in favour of the New York City Comptroller and Stand.Earth’s resolutions.