Claims of green financing lead activists to sue Canadian banks

Investors for Paris Compliance, an activist organization concerned about climate change, filed a complaint on Tuesday asking securities regulators to look into big Canadian banks for climate-related statements and claims of deceptive disclosures.

In their complaints filed with the Ontario Securities Commission and the Autorite des Marches Financiers in Quebec, Royal Bank of Canada (RY.TO), Toronto-Dominion Bank (TD.TO), Bank of Nova Scotia (BNS.TO), Bank of Montreal (BMO.TO), and Canadian Imperial Bank of Commerce (CM.TO) were highlighted.

A group calling itself Investors for Paris Compliance has claimed that certain sustainable finance investments may actually raise emissions of greenhouse gases and that banks’ green-lending operations fail to adequately disclose the effect these activities have on carbon emissions.

At worst, it is greenwashing of carbon-intensive businesses, misleading investors and the general public, according to Matt Price, executive director of Investors for Paris Compliance.

Investors are wary of the “net-zero financed emissions” targets set by a number of Canadian banks for the year 2050 because of the vagueness of the targets.

Concerns about “greenwashing,” in which businesses make false claims about their commitment to environmental sustainability, have grown among European and American regulators in recent years.

According to the Canadian Bankers Association, “Canadian banks follow prevailing North American market standards on environmental, social, and governance (ESG) disclosure and comply with applicable disclosure rules and regulations” (email statement).

A number of environmental organizations and individual investors have leveled accusations of “greenwashing” against Canada’s biggest banks, arguing that these institutions are using sustainability-linked finance (SLF) schemes for show rather than substance.

Factors like climate change and worker diversity are part of ESG, and investors and companies are starting to take notice because they believe these issues may impact the reputation and performance of businesses.

Large Canadian banks have had a rough year, with larger loan-loss provisions, a slowdown in dealmaking, and sluggish loan growth all putting pressure on profitability. This complaint follows on the heels of that.