RBC Drops Climate Finance Goals, Citing Changes to Competition Law

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(Bloomberg) — Just months after pulling out of the world’s biggest climate alliance for banks, Royal Bank of Canada is abandoning its sustainable finance commitments.

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RBC, Canada’s biggest bank, cited changes to the country’s Competition Act that restrict the kinds of environmental claims firms can make. The lender, which provided the update in its sustainability report on Tuesday, also pointed to “evolving” methodologies in general.

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The developments mean RBC will be “retiring our sustainable finance commitment,” it said. 

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In January, RBC joined its peers in the US and Canada in leaving the Net-Zero Banking Alliance, marking a seismic shift in North America’s approach to climate finance. The development, which coincided with Donald Trump’s return to the White House, is part of a bigger shift in which sustainable finance has faced headwinds on several fronts.

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RBC’s latest decision follows other banks that have walked back their environmental commitments. Earlier this year, Wells Fargo & Co. dropped its net zero target and HSBC Holdings Plc delayed some of its goals to cut emissions.

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Recent data published by Morningstar Inc. shows that sustainable funds, globally, suffered their worst outflows on record last quarter, due both to political backlash and lackluster returns. That’s as America’s anti-climate, pro-fossil fuel agenda makes it increasingly untenable for banks seeking to do business in the world’s largest economy to publicly embrace climate policies.

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RBC said it would continue to help clients work toward a low-carbon transition by providing advice and products to support their progress. 

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“In addition, we continue to integrate climate considerations into our business and operations, including reducing emissions associated with the real estate we occupy,” the Toronto-based bank said. But achieving net zero emissions in its loan book “will ultimately require changes in government policy, technology and consumer demand,” the company said.

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RBC also said it will no longer be able to report its progress against a goal of increasing its lending to low-carbon energy to $35 billion by 2030 and to triple its lending to renewable energy to $15 billion by 2030. In March, RBC said it was committed to facilitate C$500 billion ($361 billion) in sustainable finance by 2025. 

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“While the pace of change is uncertain and we don’t expect progress to be linear, we remain committed to supporting the transition to a low-carbon and resilient economy,” RBC said. “We will continue to recalibrate our strategy where appropriate to reflect changing circumstances.”

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