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We’ve heard from a lot of you that you’re as shocked as we are about the amount of funding the Big 5 Canadian banks are pouring into fossil fuels. In case you missed the number, that’s $500 billion (yep, with a B) in just the 5 years since the Paris Agreement was signed.

Many of you have asked about alternative investment options, and what else you can do, once you’ve emailed your bank’s CEO.

Although POW Canada can’t give you financial advice (we’d get into a lot of trouble if we tried, and we like to think we’re more fun than your accountant anyway), we can help you ask good questions of your financial institution, so you have the information you need to make decisions that are right for you.

We think you should be able to plan and save for your future, without compromising your values.

Do you have a prohibition on Arctic drilling?

The Background
Arctic drilling is one of the most dangerous and potentially destructive forms of fossil fuel extraction. The ice and extreme weather conditions make accidents more likely, and also make it almost impossible to mitigate damage: it could be impossible to stop a spill for up to two years, and there is currently no technology that could effectively contain a spill in an icy environment.

Why You Should Ask
Not only is Arctic drilling a really bad idea, estimates suggest the Arctic only contains enough oil supply to last two or three years. Meanwhile companies are investing billions in exploration with few returns to show for it. That’s not a great business model, but certain Canadian banks including TD are still funding speculative drilling in the Arctic.

Do you have a prohibition on funding of new or existing coal mines or power plants?

The Background
Coal is one of the most greenhouse-gas-intensive sources of electricity. Coal-fired power plants account for almost 40% of the world’s electricity, making carbon pollution from coal electricity a leading contributor to climate change. It is also known to contribute to asthma and other respiratory diseases and increases healthcare and other economic costs due to lost worker productivity.

Why You Should Ask
Around the world, many economies are phasing out support for coal as a power source. BHP, the world’s biggest mining company, announced plans to phase out mining coal for electricity generation in 2020. In Canada, the government launched the Powering Past Coal initiative in 2017, alongside the UK government, as part of its plan to reach 90% non-emitting electricity by 2030. Yet banks like Scotiabank and RBC remain heavily invested in both coal mining and coal-fired power plants.

Some financial institutions are moving away from funding coal as a power source, because there are lots of better, viable alternatives. But coal is still heavily relied on in industries such as steel manufacturing. Your bank may fund one or both of these forms of coal use, so by asking the question you can decide where your comfort levels lie.

Do you have a divestment policy for oil sands?

The Background
Oil from tar sands is known to be one of the most polluting forms of fossil fuel extraction. Producing it releases three times as much greenhouse gas pollution as conventional crude oil does. The processes used for extracting oil from tar sands, strip mining and liquidation mining, cause significant deforestation and have have also been found to release contaminants into downstream waterways. Due to the nature of extraction, once mines are closed, they are much harder to restore to a natural state.

Why You Should Ask
Financial institutions and major energy companies are turning their backs on the oil sands industry. According to Yale Climate, 57 major financial institutions have pledged to stop funding or insuring oil sands ventures, including big international banks. Unfortunately, this doesn’t currently include any Canadian banks. With major oil and gas companies declaring losses on the original value of oil sands assets (Exxon Mobil) and others selling out of oil sands and even Canadian oil and gas entirely, the long-term financial viability of this industry is in question.
Institutions investing in this industry, including pension and other investment funds, are making a short-term bet on profitability, but risk holding stranded assets that could cause significant losses.

Right now, every ‘Big 5’ Canadian bank has some degree of investment in Canada’s oil sands.

In addition to your corporate carbon reduction policies, how are you supporting your clients to reduce their climate impact – particularly those in fossil fuel and fossil-fuel adjacent industries?

The Background
Many banks have now employed sustainability experts and have set targets to reduce their carbon footprint, or even go carbon neutral. Often, when challenged on environmental sustainability, banks will point to their corporate carbon policies as evidence of all the good work they’re doing.

Why You Should Ask
Although it’s great that some banks are striving to be carbon neutral, as office-based businesses they actually have comparatively low footprints. Where banks have a huge impact though, is in their lending portfolios. The impact of the clients and projects they fund is exponentially greater than the impact in their own buildings.

Sometimes, banks will make the argument that it’s more effective to work with these clients from the inside, but they rarely disclose what they actually do steward better environmental practices. Asking this question will let your bank know that you expect measurable actions at the portfolio level.

Is your carbon neutral policy based around buying offsets and proven technologies, or is it in speculative technologies like carbon capture?

The Background
Banks will rarely exit clients unless that client poses an unacceptable financial or reputational risk. So, in order to establish their green credentials, they look to other initiatives, like net-zero pledges at the corporate level, investing in renewables, and new technologies like carbon capture.

Why You Should Ask
Actions like investing in renewables are GREAT and something we actively support at POW Canada. But it’s important to remember that renewables don’t cancel out the negative impact of fossil fuel investment.

When you’re looking at your bank’s other climate commitments, it helps to do a bit of research to decide what you’re comfortable with. Purchasing offsets is a popular approach with corporates, although not everyone agrees on whether it’s the best approach. Here’s a good summary of the pros and cons of offsets to get you started.

Banks also like funding new technologies like carbon capture (which is frequently led, incidentally, by big oil and gas companies). Recent studies show that carbon capture technology captures only a fraction of the claimed carbon, and according to research from Stanford, actually increases air pollution.

So it’s important to know whether your bank’s green initiatives are making the difference they claim to be.

Are your offset purchases independently reviewed and audited?

The Background
Many banks purchase carbon offsets as a way of reducing their overall carbon footprint. It’s an acceptable approach and one recommended by many sustainability economists. However, there’s now a huge global demand for offsets, which has led to the rise of poorer quality options. Things can be complicated by different global carbon accounting standards, especially when offsets are purchased from a different region to where the carbon impact is occurring.

Why You Should Ask
If your bank is pledging to go Net-Zero, you want to know that their actions are genuinely meaningful. Reputable agencies exist to advise corporations on their offset strategy and to independently audit sustainability claims, so you can be confident that they’re doing what they promised, and not buying low-grade offsets that allow them to greenwash.

Do your green policies apply not just to banking but to the funds on your investment book?

The Background
Most banks have a number of different business areas. Retail banking looks after individuals like you and me, providing checking accounts, mortgages and so on. Corporate banking looks after big, national companies and provides more complex financial instruments in addition to loans, like bonds, guarantees, debt purchasing and so on. Most banks also have an investment arm, which is responsible for managing funds for both individuals and corporations – for example our TFSA, or RRSPs. These funds own shares in a variety of global companies, as well as sometimes bonds and cash.

Why You Should Ask
These areas often operate quite independently of each other and the policies in one area may not apply in another. Your bank might have good sustainability initiatives at the retail level, but are these mirrored in funds the bank manages?

How can I find out which companies my TFSA/RRSP invests in?

The Background
Not all ‘sustainable’ funds are created equal. Some may invest exclusively in renewables, while others will make investing decisions like avoiding fossil fuels, but continuing to trade in equities of other polluting or extractive industries, like gold mining for example.

Why You Should Ask
Everyone has their own values and personal tolerances for investing in carbon-intensive industries. These need to be weighed up against your financial goals and risk tolerance. While financial institutions might promote their ‘green’ investments, it’s important to understand what that actually means, and to make sure that the investments align with both your values and your personal objectives.

What sustainable investment options can you offer me, and can you confirm that they are free of fossil fuels?

The Background
Some financial organizations are further down the path of sustainable investing than others. Some banks can offer a range of ‘ESG’ (environment, social and governance investing) funds, while others might tell you that if you only want exposure to renewable or low-carbon companies, you need to manage your own investments.

Why You Should Ask
Shopping around is really important when it comes to finding the right investments. You want to have the right balance that meets your values, your risk tolerance and your financial objectives. If your financial institution doesn’t offer sustainable funds or tells you that you have to self-manage, we suggest asking elsewhere. Switching funds is quite easy – the receiving company will always be happy to have your business and will help make the move simple.

What processes do you have in place for retail clients like me to share their concerns about where funds are invested?

The Background
If you’ve ever spent hours going round in circles in a bank’s automated call centre, you’ll know how hard it can be to get the help you need as a small retail customer. Your finances are important to your future, so you want to make sure that your voice is important to your bank.

Why You Should Ask
Being able to give your financial provider feedback is important. If there is a clear avenue to speak with a real person about real concerns, it will give you an indication of how much they value your business.

Credit Unions have a reputation for having excellent customer service at the retail level, because when you belong to a credit union, you are a member (like a shareholder), not just a customer. This also allows you to attend and vote at annual meetings, giving you a say in the investing and other strategic decisions the credit union makes.

But, like anything, you need to make sure that your investment choices meet your financial needs as well as being driven by your values.

The Final Word

Most of us like to ‘set and forget’ when it comes to our finances. The life administration of managing investments and daily accounts can take some effort, but the decisions you make today can have a big impact tomorrow.

The definition of sustainability is being able to meet our environmental, personal and social needs today, without detracting from the ability of future generations to meet their needs. Taking the time to research and ask questions about your finances can ensure that you meet your financial goals in a way that aligns with your goals for the future of our planet and the economic wellbeing of future generations.

We hope this helps. Good luck and let us know how your conversations go!


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