Five of the largest banks in Canada – TD Bank, Bank of Montreal, National Bank of Canada, Canadian Imperial Bank of Commerce, and Scotiabank – have recently made the decision to withdraw from the UN-convened Net Zero Banking Alliance (NZBA). This move follows a trend set by their US counterparts, with JP Morgan being the latest American bank to depart from the alliance.
The NZBA’s primary goal is to unite banks that are dedicated to aligning their lending, investment, and capital markets activities with net-zero greenhouse gas emissions by the year 2050. However, the recent exits of these Canadian banks have significantly reduced the membership within the alliance, leaving only six North American banks as members, with Royal Bank of Canada (RBC) being the sole member with over US$1 billion in annual revenue. Although RBC had considered leaving the alliance earlier in January, they have not yet followed suit.
Dave McKay, the chief executive of RBC, emphasized that withdrawing from the NZBA does not indicate a lack of commitment to achieving net zero or addressing climate change. He suggested that the organization may not be the most effective mechanism for overseeing policies and rules related to these goals.
Criticism of the NZBA has not been limited to the departing banks. NGOs, including BankTrack, have raised concerns about the lack of ambition displayed by US banks within the alliance. BankTrack has stated that the NZBA does not ensure that its members are genuinely planning to transition to net-zero emissions banking.
Despite the criticisms directed at the NZBA, activists have expressed disappointment with banks choosing to leave the alliance. Stand.Earth, a Canadian climate campaign organization, accused the banks of entering the NZBA to “greenwash” their fossil fuel financing and gain favorable perception from customers and investors. They believe that the banks misled investors about their intentions and view the decision to withdraw as out of touch with the urgent need for climate action.
Furthermore, Stand.Earth highlighted that two of the departing banks, TD Bank and Scotiabank, were identified as part of the “dirty dozen” in 2023, ranking among the 12 largest fossil fuel financing banks globally. This revelation adds to the scrutiny faced by these banks for their environmental practices.
In response to inquiries from GTR, representatives from TD Bank and Bank of Montreal confirmed their withdrawal from the alliance. TD Bank emphasized their ability to continue advancing their strategy independently, while Bank of Montreal highlighted their internal capabilities to adhere to international standards in support of their climate strategy.
The remaining three banks that exited the alliance did not provide comments at the time of publication. The departure of these Canadian banks from the NZBA reflects a broader trend of financial institutions reassessing their commitments to sustainability initiatives.
The decision of these banks to withdraw from the NZBA underscores the challenges and complexities faced by financial institutions in aligning their operations with climate goals. As stakeholders increasingly demand transparency and action on climate-related issues, the banking sector will continue to face scrutiny and pressure to demonstrate genuine progress towards a sustainable future.
