Canada’s “sustainable finance taxonomy” — named after a similar classification system in the European Union — will function as a label for green and climate-transition investments. Approximately 60 countries around the world have implemented similar taxonomies or are in the process of developing them.

“To stay competitive and attract investment, Canada needs to send clear signals of our climate-readiness to capital markets,” said Marlene Puffer, chair of a new governance council that is overseeing the initiative. Announcing the council last week, she said the goal is to help Canada attract an additional $115 billion annually in capital needed to finance its low-carbon transition.

The council — made up of representatives from the financial industry, universities and climate advocacy groups — will be federally funded but will operate on an arm’s-length basis from Ottawa. It’s scheduled to finalize taxonomy details for three as-yet-unnamed economic sectors by the end of 2026, and three more next year.

The two-year timeline means the taxonomy likely won’t have significant impact in the immediate future, including for investment decisions on infrastructure projects under review by the federal government’s Major Projects Office. But its usefulness is expected to grow as the climate and energy transition takes hold in the late 2020s and early 2030s.

Patricia Fletcher, chief executive officer of the Responsible Investment Association, the Canadian trade group for sustainable investment, says the taxonomy will help to ease greenwashing suspicions over climate claims by investment funds and asset managers. “It will make it easier for Canadian investors to understand what is green, what is not, and what is transition,” she says. “It’s ultimately going to be one of the tools that dispel concerns about greenwashing.”

Mitigation for oil and gas [such as carbon capture and storage] is almost by definition carbon lock-in.

– Matt Price, executive director, Investors for Paris Compliance

The European experience shows that taxonomies can help to raise climate-friendly capital. EU taxonomy-aligned investment reached €273 billion in 2024, bringing total capital to €742 billion since 2022. An academic study published last year found “robust evidence” that European stock of taxonomy-aligned companies traded at a premium over non-aligned companies.

The Canadian taxonomy was first proposed in 2019 by the Trudeau government’s expert panel on sustainable finance. A second consultative group produced a taxonomy roadmap in 2022. Two years later, the government completed preliminary work and last December handed over the project to the non-profit Canadian Climate Institute and the independent council. It was that council that was named last week.

How will the taxonomy work?

According to a 2024 Canadian government backgrounder, green-labelled investments would include low- or zero-emitting activities aligned with a 1.5°C increase in global warming as mandated by the Paris Agreement. Examples would include green hydrogen, wind and solar projects, electricity transmission lines and hydrogen pipelines. Transition-labelled investments would include activities that are currently emission-intensive but can convert to low-carbon technologies. Steel plants moving from coal-based production to natural gas, hydrogen or electricity would be an example.

The backgrounder cited six sectors crucial for the Canadian low-carbon transition: electricity, transportation, buildings, agriculture and forestry, manufacturing, and extractives (mining, processing and natural gas).

The new council is not bound by these green and transition definitions or specific sectors, although it’s expected it will use these sectors as the basis for its taxonomy.

Natural gas has been a contentious area. The EU taxonomy treats natural gas and nuclear energy as transitional investments if they meet certain conditions. It deems gas as a transition fuel because it is an alternative to higher-emission fuels such as coal. The EU taxonomy has assigned a transitional label to gas projects with the proviso that there are established phase-out periods for gas plants.

In an interview with Canada’s National Observer, Puffer said she would not speculate on whether the Canadian council would include liquefied natural gas (LNG) or carbon capture and storage (CCS) systems in its definition of transition activities. Climate advocacy groups maintain that LNG development can lead to additional long-term carbon emissions, known as carbon lock-in. CCS projects also pose a lock-in problem and have often failed to meet their ambitious carbon-dioxide-storage targets.

Taxonomy should be science-based: climate action groups

In a joint statement released last month, more than 30 non-governmental organizations and climate action groups outlined a set of basic principles they believe are essential for a credible taxonomy. The signatories contend that eligible activities under the taxonomy should be based on the Paris Agreement goal of limiting global temperature rise to between 1.5°C and 2°C. “This requires the rapid and systemic replacement of oil, gas and coal with clean energy,” according to the statement.

The signatories contend that the transition label should be restricted to high-emission activities for which there are no commercially available alternatives. Examples of these would include cement and steel, says Matt Price, executive director of Investors for Paris Compliance and a lead author on the document. “Mitigation for oil and gas [such as carbon capture and storage] is almost by definition carbon lock-in,” he said in an email. “LNG isn’t even mitigation unless a specific contract exists between that investment and closing a coal plant, and even that’s disputable on a life cycle basis.”

The group has also called for eligible investments to “do no significant harm” (a feature of the EU taxonomy) to ensure protection of important social and environmental considerations such as biodiversity preservation and labour rights. Additionally, the group calls for eligible investments to uphold Indigenous rights, including the free, prior and informed consent of Indigenous communities on projects affecting their resources.

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The group also recommends that the taxonomy be written with simple, clear language, making it interoperable (consistent) with other taxonomies. This would enable companies to use interchangeable reports from their disclosures under other taxonomies, easing their reporting burden if regulators eventually require public disclosure of their information.

Ralph Torrie, research director at Corporate Knights, says the taxonomy council should look to the Australian sustainable finance taxonomy released last year as a potential model for Canada. It’s a clear Paris-aligned classification system for green and transition investments, reflecting the needs of a similar resource-based economy. “People are paying a lot of attention to the Australian taxonomy,” he says.

Council begins work at a critical time

The council is beginning its work at a time of significant turmoil in energy markets, as the war in Iran has driven up oil and gas prices. This is creating expectations that Canada can benefit by building additional infrastructure for LNG export or CCS projects to expand oil-sands production, adding to carbon lock-in. Conversely, the energy crisis is also creating calls for Canada to electrify its economy to reduce dependence on increasingly expensive fossil fuels.

This issue is going to play a central role in the work of the council over the next two years. It will need to determine the boundaries for green and transition investments at a time when there are calls for expanding both clean and fossil fuel energy.

By flashing a green light on net-zero activities and a cautious amber on transition investments, the taxonomy should help to steer the capital markets of the 2030s into a more sustainable direction.

Eugene Ellmen writes on sustainable business and finance. He is a former executive director of the Canadian Social Investment Organization (now the Responsible Investment Association).

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Regulators and legislators rolled back pro-sustainable investment rules in the United States, tightened guidelines in Europe and paused headway in Canada in a global onslaught on green financing.

Assets invested in environmental, social and governance portfolios flattened as the ESG term itself fell into disfavour among the least committed green funds and investment managers. Even so, growing interest in climate transition industries and renewable energy buoyed the sector’s prospects, strengthening impactful areas of sustainable finance.

So what’s next for 2026? Here are my predictions for sustainable and responsible investment for the year ahead.

1. Sustainable funds will assume a low profile in the battle for market share

The share of the total investment market in the United States held by sustainable finance held steady in 2025 at 11% of total assets under management in 2025, a slight decline from 12% a year earlier, according to the U.S. Sustainable Investment Forum (US SIF), the industry’s trade group. Sustainable assets were US$6.6 trillion in 2025 and total assets under management were US$62 trillion. The estimate includes institutional and individual assets specifically labelled as “sustainable” or “ESG.”

Maintaining this market share in 2026 will be a challenge. The industry is facing a continuing barrage of anti-ESG rhetoric from the Trump administration. The attacks were exemplified by a September speech by Trump pension policy adviser Justin Danhof, who told an international conference in Paris that “ESG at its core, looks a lot like a Marxist march through corporate culture.”

The industry is taking a low profile in the face of such bombast. Only 10% of sustainable investment managers surveyed by US SIF this year said they planned to add significantly to their assets in the next 12 months, and about a quarter said they plan to moderately increase their allocation. About half are planning to hold their sustainable assets at the current level.

Some asset managers have become reluctant to publicly associate their sustainable funds with ESG strategies. One in four sustainable investment managers surveyed by US SIF said they have stopped using the ESG acronym.

Launches of new sustainable funds around the world have largely dried up. Morningstar said there were only 26 new sustainable funds launched in the three months ending September 30, down from 92 in the second quarter and significantly lower than the 200 funds launched in the fourth quarter of 2022. Of the 26 launches, 20 were in Europe.

The takeaway: As the Trump assault on ESG continues, large mainstream investors like BlackRock, State Street and Vanguard will keep their heads down. Don’t expect a revival in sustainable fund launches or increased ESG marketing in 2026 and not until 2028 near the end of Trump’s term.

2. Banks will ramp up financing for liquefied natural gas projects

The world’s largest banks provide important financing to fossil-fuel and renewable-energy companies through loans and underwriting services. As a major source of capital to oil and gas, climate action groups are pressuring banks to phase out their fossil fuel financing.

Initial data show that banks reduced fossil fuel financing by about 25% in the first seven months of 2025 compared with the same period a year earlier. The current glut in oil supplies has put a damper on new drilling and reduced demand for capital, particularly in the United States.

Nevertheless, lending and underwriting to the fossil fuel industry is expected to grow in the coming year because of a continued global expansion in liquefied natural gas (LNG) infrastructure. According to Paris-based Reclaim Finance, there are 279 new LNG projects  planned around the world. If completed, these projects will produce enough gas to create more than 10 billion tonnes of carbon dioxide annually (or more than a quarter of all current energy-related emissions), “destroying any hope of achieving global climate goals,” Reclaim Finance says. The group estimates that global banks have already provided US$174 billion to LNG projects between 2021 and 2024.

The takeaway: With some exceptions such as a possible new oil pipeline in Western Canada, demand for bank financing for oil companies and projects will weaken in 2026 along with lower oil prices. But the massive expansion in LNG projects will continue to  create demand for gas infrastructure financing. This will trigger added pressure on the banks by climate action groups and Indigenous communities to turn off the taps to the gas industry.

 3. Renewable-energy and climate-transition industries will be a bright spot

As 2025 came to a close, stock markets became increasingly jittery over prospects for the highly concentrated tech sector, especially the so-called Magnificent Seven stocks that make up about 35% of the S&P 500 index. Concerns are growing that the colossal run-up in these stocks caused by massive investments in data centres is coming to an end.

The stocks (Apple, Microsoft, Nvidia, Amazon, Meta, Alphabet and Tesla) were darlings of conventional investment portfolios in 2023 and 2024. Many broad-based sustainable portfolios with ESG screens also held them based on neutral to positive rankings on most environmental and social issues.

Popularity among ESG investors started to cool in 2023 after the introduction of ChatGPT raised concerns over the massive energy demands of AI data centres and other environmental issues such as water use. There are also exploding concerns over the role of social media in shaping political views among many groups such as young men.

Now, some conventional analysts are suggesting that investors should take their profits from the Magnificent Seven and rotate into other sectors such as energy and industrial stocks. For sustainable investors, this could be a good time to buy shares in clean-energy companies, which outperformed both tech and oil in 2025, and climate-transition industries.

Examples of such companies can be found in the Morningstar Sustainalytics 21-company climate transition list. The names include Italian utility Enel, electrical component manufacturer Schneider, Norwegian aluminum and energy producer Norsk Hydro, industrial gas manufacturer Air Liquide and wind power systems company Vestas.

The takeaway: Look for continuing strength among renewable-energy stocks in 2026, as well as some surprise breakouts in industrial and basic materials companies with strong carbon dioxide emission policies and product lines that will benefit from the climate transition.

Read Eugene’s predictions from last year

Seven sustainable finance predictions for 2025

4. European sustainable fund turmoil will come to an end

Europe, where about 85% of the world’s sustainable fund assets are located, has been embroiled in a year-long controversy over how its sustainable funds should be named or described to investors. Morningstar estimates that more than 1,500 funds with a value of more than US$1 trillion, or 28% of the sustainable funds in Europe, have been renamed since the beginning of 2024. More than 700 of these were renamed in 2025.

The key issue is a new set of rules stipulating that funds with environmental terms in their names must exclude fossil fuel holdings and ensure that at least 80% of their portfolio meets environmental goals. Funds using a “sustainable” name must show meaningful holdings in sustainable assets. The rules were established by the European Securities and Markets Authority (ESMA) with a May 2025 compliance deadline.

Most funds that changed their names dropped the terms “sustainable,” “ESG” or “responsible” from their labels but didn’t change their objectives or strategies. The controversy has created confusion among investors and reinforced greenwashing suspicions.

In November, the European Commission proposed a set of amendments to its Sustainable Finance Disclosure Regulation (SFDR) to further clarify naming rules for sustainable funds.  Going forward, funds will fall under three labels: sustainable, transition and ESG basics.

The Institutional Investors Group on Climate Change welcomed most of the changes, saying they are useful tools for fund transparency. However, IIGCC also said that a streamlined list of mandatory criteria for assessing assets could help to promote greater comparability between funds. The package will now go to the European Council and Parliament for final approval.

The takeaway: Now that the ESMA renaming controversy has eased, European fund managers and advisers have a better framework to explain the differences in sustainable fund approaches. And while the new SFDR rules won’t be finalized until 2027, fund companies and advisers can immediately discuss investments with their clients using the new framework, suggesting options for clients concerned about issues such as fossil fuel holdings in ESG funds.

5. Canadian pipeline plans won’t find private investors

A sustainable-investment controversy is brewing in Canada over the recent agreement between Prime Minister Mark Carney and Alberta Premier Danielle Smith to work toward a new pipeline to ship oil-sands bitumen to the West Coast. Almost immediately after the November announcement, industry experts and critics said the pipeline is not feasible since there is no private-sector proponent, required Indigenous approval is unlikely, and the British Columbia government is opposed to lifting a West Coast tanker ship ban.

What few people have talked about is that it is also unlikely that a major bank, consortium or equity investor will also come forward. There is no official cost estimate for the project. However, based on other recent pipelines, it would likely be in the tens of billions of dollars, a cost too high to be recovered through oil transit tolls, according to the International Institute for Sustainable Development. Investment analysts have expressed skepticism that the pipeline will receive private-sector support.

Even if the economic model for the pipeline worked, any bank or consortium of lenders or equity investors would be hesitant to back the project. One of the last major pipelines constructed in Canada – Coast GasLink – triggered multi-year vocal protests at RBC, one of its lenders. Given the high-profile nature of the  West Coast oil pipeline, similar protests could be expected at any bank or equity investor supporting the project.

The project is also unlikely to fall within the green or transition “taxonomy” guidelines to be developed starting in 2026, governing which Canadian investment activities will be officially labelled as sustainable. Development of the guidelines will be led by the Canadian Climate Institute think tank and Business Future Pathways, a coalition headed by a who’s who of sustainable-investment champions and representatives of climate action NGOs. Even if oil shipped through the pipeline will be produced with lower per-barrel process emissions than present oil-sands oil, it will be tough for the new group to give such an investment a transition label given the high level of Scope 3 or end-use emissions it will facilitate. It’s highly unlikely that banks or equity investors will be able to proclaim investment in the pipeline as a transition investment.

The takeaway: The lack of a pipeline company or group of companies to champion the project in 2026 will enable banks and equity investors to stay on the sidelines. Given the longstanding glut in oil supplies, there will be little progress on the project in the coming year despite ongoing political support from Ottawa and Alberta.

The big picture

The Trump administration is ramping up its attacks on sustainable finance and ESG and its support for fossil fuels. This has provided hope for oil and LNG proponents that the financial community will get behind an expansion in conventional energy. The economics of alternative energy sources suggest that renewables should win out, but this is not a sure thing. What’s known is that inexpensive green energy and climate-friendly manufacturing are moving ahead. The crusade against ESG will continue for a few more years, but it won’t stop the smart money from supporting the industries of the future.

Eugene Ellmen writes on sustainable business and finance. He is a former executive director of the Canadian Social Investment Organization (now the Responsible Investment Association).

The post Five sustainable finance predictions for 2026 appeared first on Corporate Knights.

Our most recent reporting reveals a contradiction in the investing practices of Canada’s largest life and health insurers – Manulife, Sun Life and Great-West Lifeco. This disconnect is a financial and reputational liability. At a time when the science is unequivocal about the harm caused by fossil fuel combustion – from deadly air pollution to worsening wildfires – Canada’s life insurance companies remain out of step with both health science and global expectations for climate-aligned investing.

Fossil fuels directly threaten the people insurers protect

Fossil fuels are not an abstract threat to human health. Their combustion is responsible for millions of premature deaths every year. Air pollution is one of the world’s leading killers, contributing to respiratory disease, cardiovascular conditions and higher mortality from heat and wildfire smoke. Wildfire smoke, now an annual feature of Canadian summers, is up to 10 times more toxic than pollution from burning fossil fuels. One five-day period of wildfire smoke in Ontario in 2023 alone cost more than a billion dollars in healthcare impacts.

Last month saw air pollution caused by fossil fuel combustion in New Delhi reach record highs. Notably, Sun Life and Manulife are expanding their life insurance business in India and across Asia. Delhi’s air quality index maxed out at 500 – 50 is the limit recommended by the World Health Organization. Air quality indexes showed that actual data reached 850. People were warned not to go outside. Hospitals were filled with people struggling to breathe.

For life and health insurers, the implications are direct. Rising illness and mortality drive claims. Climate-fuelled disasters increase volatility and undermine long-term actuarial assumptions. Every dollar invested in fossil fuels is a dollar invested in future morbidity – and future costs.

A gap between pledges and practice

Yet despite this, Canada’s major insurers are lagging in redirecting their general account capital toward solutions good for both health and the climate. BloombergNEF shows that financial institutions should be targeting a low-carbon to fossil-fuel investment ratio of at least 4.8:1 by 2030 if they wish to align their portfolios with a 1.5°C warming future.

According to our recent analysis, based partly on estimates, none are close. Manulife is estimated at 2:1 – ahead of peers, but still far from alignment. Sun Life sits near parity at 0.9:1. Great-West Lifeco is furthest behind at 0.28:1. These ratios reveal that, to date, all three insurers are not yet aligning their investments in the clean-energy future they believe is both necessary and inevitable.

More troubling, none have yet set quantitative targets to increase renewable-energy or climate-solution investments in their general accounts – the portfolios used to protect policyholder liabilities. Manulife and Sun Life don’t fully disclose their fossil fuel exposure, forcing analysts to estimate their holdings.

Meanwhile, European peers AXA and Allianz and Canadian peers RBC and the Co-operators have moved toward clearer “climate solutions,” “low-carbon solutions” or “renewable energy” investment or lending targets that increase credibility and reduce the risk of greenwashing.

The business case for climate-healthy portfolios

Life insurance companies invest their client premiums so they can pay out future claims, which can sometimes be decades in the future. These long-duration insurance liabilities are perfectly suited to corresponding stable, long-term investments in renewable energy, clean infrastructure and climate-resilient assets. These investments reduce exposure to volatile fossil fuel markets and support healthier environments and healthier populations.

Insurers should be natural leaders in health and climate-solution financing. Leading medical institutions, including the Canadian Medical Association and the World Health Organization, describe fossil fuel financing as a direct threat to public health.

Three things insurers can do now

To realign their portfolios with their purpose and reduce risk, Canada’s life insurance companies can take three immediate steps.

1. Bring transparency to the numbers

Insurers can disclose clear, comparable data on fossil fuel exposure and renewable-energy investments within their general accounts. Without transparency, neither policyholders nor markets can assess credibility or progress.

2. Set clear investment targets

Life insurance companies need explicit, quantitative goals – whether framed as targets, envelopes or sleeves – for increasing their exposure to renewable energy and climate solutions. Vague “sustainable finance” labels are no longer enough. Real impact requires real numbers.

3. Integrate climate and health science into underwriting

If air pollution, wildfire smoke and extreme heat are driving mortality and morbidity, insurers should reflect that reality in their actuarial models and disclosures. Failing to account for these rising health risks leaves a critical gap.

Finally, insurers can use their influence to advocate for policy reforms that better align financial incentives with health and climate goals. If markets undervalue climate solutions today, life insurance companies – given their expertise – are well placed to help correct that.

Kyra Bell-Pasht is the director of research and policy at Investors for Paris Compliance.

The post How life insurance companies are undermining their own business model appeared first on Corporate Knights.

Propolis Housing Cooperative is partnering with Tapestry Community Capital, a non-profit investment organization, to fundraise through community bonds: investments typically bought by, and returning profits to, local residents. “They can be such a great solution for people to know that they’re having an impact with their investment, helping to build the affordable housing that we so desperately need – and they get a financial return on their investment at the same time,” Propolis director Lindsay Harris tells The Energy Mix.

The post Banks won’t solve the housing crisis, but community bonds just might appeared first on Corporate Knights.

Last month, the Canada Pension Plan Investment Board (CPPIB) released its 2022 Report on Sustainable Investing, highlighting its commitment to be net-zero by 2050 and its engagement strategy to pressure companies to manage climate risks. Our $523-billion national pension manager is making big promises to decarbonize its portfolio by making large investments in climate solutions, pledging to report its absolute emissions, and using its influence and capital to help transition high-carbon industries. 

It’s potentially a smart approach, but it stands in stark contrast to public commitments CPPIB officials have made to continue investing in fossil fuels.  

At the end of September, Richard Manley, the head of sustainable investing at CPPIB, told The Globe and Mail that we could see “Big Oil become Big Energy, but also no-carbon oil over time.”  

This comment should be a red flag for Canadians concerned about the security of their pensions and the stability of our climate.  

It’s part of a broader argument that financial institutions should continue to flow capital into the oil and gas industry indefinitely, in spite of pension funds’ fiduciary duty to invest in members’ best long-term interest and climate commitments to reach net-zero emissions by 2050. For example, CPPIB said earlier this month that it will “support conventional energy companies that are committed to reducing their emissions and are well positioned for the energy evolution.”  

Many emissions-intensive industries – like cement, agriculture, buildings, transport and utilities – have credible, profitable pathways through the energy transition, but the oil and gas sector does not. 

Manley also said that “we’re already seeing Big Oil become Big Energy,” but this belief is mistaken. Five of the global supermajors are spending around US$750 million annually on greenwashing while allocating just 12% of capital expenditures to “low-carbon” activities, according to think tank InfluenceMap. Canada’s six largest oil and gas producers are making record profits but failing to invest significantly in emissions reductions while lobbying to undermine ambitious government climate policies.   

The notion of “no-carbon oil” is absurd – a marketing attempt to obscure reality. Crude oil is composed of long chains of carbon strung together. It’s consumed primarily via combustion to extract energy, releasing that carbon into the atmosphere in the process. Global production and the use of 100 million barrels of oil per day is a leading cause of the climate crisis. 

The underlying argument that institutional investors like CPPIB should continue to flow capital into oil and gas companies to finance carbon-cutting innovations sounds reasonable – until you consider reality. The technologies available to reduce oil and gas emissions have to date proven ineffective, unreliable, expensive and unavailable at the required scale.  

The leading proposed solution, carbon capture utilization and storage (CCUS), has not measured up to hype, with oil companies unwilling to invest profits into this expensive technology that increases production costs. CCUS may eventually prove important for hard-to-abate sectors like cement or fertilizer, but better, cheaper, zero-carbon substitutes for oil and gas already exist. 

Even if CCUS somehow became inexpensive, scalable and effective, it cannot address oil and gas life-cycle emissions. There’s no taking the carbon out of the barrel. The overwhelming majority of emissions are the result of using oil and gas products as designed – for combustion. Depending on the blend, between 70 and 80% of the carbon pollution from a barrel of crude comes from the tailpipe.  

Disruptive technologies and new policies are already destroying oil demand, with an estimated six million electric vehicles expected to be sold in China alone this year. There is little reason to believe that a market for non-combustion uses of crude might arrive at scale in time to stop the industry’s decline. Optimistic marketing around “bitumen beyond combustion” that could drive future demand growth for oil-sands production lacks credibility, considering that only 7% of crude oil consumed in the United States is for non-combustion use. 

CPPIB reported this summer that it has $21.72 billion invested in fossil fuel producers. It is deeply entangled with the fossil fuel industry through its board and staff. A long-time member of CPPIB’s global leadership team is now CEO of the Canadian Association of Petroleum Producers. 

As the Intergovernmental Panel on Climate Change and the International Energy Agency have made clear, limiting global heating to 1.5℃ requires an immediate end to fossil fuel expansion and a rapid phase-out of production. The Glasgow Financial Alliance for Net Zero and the Investor Leadership Network already provide investor guidance for the responsible phase-out of high-emitting assets. 

CPPIB’s mandate, to invest the CPP funds to achieve a maximum rate of return without undue risk of loss, does not involve assuming extraordinary climate-related financial risks to prop up an industry facing structural decline. Fossil fuel companies are desperate to preserve their business model and prolong the use of oil and gas, but our pension capital cannot be their lifeboat. 

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But Ecojustice lawyer Matt Hulse said Canada’s current regulatory system still requires citizens to play “whack-a-mole” against the behaviour of individual banks, rather than taking a systemic approach to greenwashing and fossil fuel finance.

The claim accuses RBC of touting its commitments to climate action while continuing to finance fossil fuel development, Ecojustice said in an October 11 release. Adam Zimmerman, senior competition law officer in the bureau’s Cartels and Deceptive Marketing Practices Branch, confirmed the launch of the inquiry September 29, in a short letter to Hulse and lawyer Andhra Azevedo.

“Moving forward on a complaint alleging greenwashing in advertising shows that government agencies are increasingly willing to crack down on companies who misrepresent their environmental credentials to the public,” Ecojustice wrote. “If the Competition Bureau’s inquiry confirms that RBC’s statements are misleading and false, RBC could be forced to stop advertising itself as supporting the principles of the Paris Agreement and aiming to achieve net-zero emissions targets by 2050.”

The six applicants in the case—Kukpi7 Judy Wilson, Eve Saint, Chloe Tse, Jennifer Roberge, Jennifer Cox, and Richard Brooks—are also asking the Competition Bureau to assess a C$10-million fine against the bank.

“RBC is deceiving the public by claiming to be taking climate action while expanding its financing of climate-destroying fossil fuels,” said Wilson, secretary-general of the Union of BC Indian Chiefs. “Climate change disproportionately impacts Indigenous peoples around the world as well as here in Canada. Until RBC stops financing fossil fuels, advertising itself as Paris Agreement-aligned is greenwashing—and it shouldn’t be tolerated.”

“On the first anniversary of signing onto the UN’s Global Financial Alliance for Net-Zero (GFANZ), and weeks before COP 27, RBC continues to bankroll toxic fossil fuel projects that are violating Indigenous rights, such as Coastal GasLink, while publicly professing to be a climate leader,” added Richard Brooks, climate finance director at Stand.earth. “This is disingenuous greenwashing at best, and unlawful at worst. It’s time for RBC to cut the empty rhetoric, stop working against Canada’s climate goals, and start aligning its financing with science and justice.”

The Ecojustice release identifies RBC as the fifth-largest fossil funder among the world’s biggest private banks, and biggest in Canada. In August, The Canadian Press reported RBC may be at risk of being kicked out of GFANZ as the international body introduces tougher standards for climate compliance.

RBC spokesperson Andrew Block told The Globe and Mail the bank “strongly disagrees with the allegations in the complaint,” claiming that an “orderly” climate transition includes financing fossils’ search for cleaner sources of fuel. “It’s critically important that we get the transition to net-zero right in order to address climate change, and we have taken a measured, thoughtful, and deliberate approach in our climate strategy,” he said.

Last month, Lindsay Patrick, head of ESG and strategic initiatives at RBC Capital Markets, maintained the country won’t reach its net-zero goals without “innovative” investment in oil and gas. That was just a few months after analysis by a group of international climate advocates showed the world’s 60 biggest banks pouring US$4.6 trillion into fossil investments in the six years after the Paris climate agreement was signed.

Overall spending plateaued in 2021, but that still meant $742 billion in fossil investment in a single year—just over $2 billion per day, or $1.4 million per minute—despite urgent calls by the Intergovernmental Panel on Climate Change, the International Energy Agency, and countless others to begin drastically scaling back fossil fuels of all kinds.

The same report showed RBC and the TD Bank leading a 51% increase in oilsands investment in 2021. Canadian banks took five of the dozen top spots for the biggest increases in fossil financing between 2020 and 2021, with RBC placing second at $19 billion.

Hulse said the Competition Bureau published its first guide to environmental claims for industry and advertisers in 2008, and the Ecojustice release pointed to a $3-million fine against the Keurig coffee company for misleading claims that its coffee pods are recyclable. Lately, he said the Bureau’s interest in greenwashing appears to be rising.

“More and more companies are realizing the power of signalling to be green and to be part of the movement towards climate action,” he said in an interview. “Consumers are increasingly demanding this from products and services they buy, and companies are responding. Whether they’re doing so and backing it up with action is a different issue.”

With more citizens expecting “action to address climate change and the environmental harms of the products we produce and consume,” he added, “government is taking it more seriously. They’re realizing that false claims and a lack of action are a broad social and cultural issue.”

Hulse said the months it took to prepare the claim, and the couple of before the Competition Bureau completes its review, point to the limitations of a regulatory system can’t move as quickly as the climate emergency demands.

“We’re playing whack-a-mole, in the sense that consumers have to come forward with complaints to address issues they see in the marketplace,” he said. “What’s necessary to create more systemic change is stronger regulations. We need better standards around what it means to be compliant with net-zero and the Paris goals, and to ensure that all the banks are de facto complying with those standards, instead of having to rely on consumers making complaints one at a time.”

Ecojustice has no other complaints drafted for Canada’s four other big banks, Hulse added. But “if a client came forward with a valid case that a complaint needed to be made, we would certainly consider it.”

This article is republished from The Energy Mix. Read the original article.

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To most people, central banking is a mystery. When central bankers talk about increasing the credit supply, injecting liquidity or expanding the balance sheet, I’d wager that most people think – as I used to  –  “I’m not smart enough to understand this stuff.”

The key is to know that, while a bank creates money as a loan that needs to be repaid, a central bank creates it as a gift to the economy at a time of crisis that does not need to be repaid. When it prints money like this, however, it should do so for the benefit of society as a whole. If central bankers come to believe that “their tribe” is their fellow bankers and investors, not society as a whole, we are all losers.

Here in Canada, Conservatives have called for greater scrutiny and oversight of the central bank. The party’s newly elected leader, Pierre Poilievre, has even said that if he becomes prime minister, he will fire the bank’s governor, Tiff Macklem. I’m not sure how that would fix the myriad problems of central banking, but here are my solutions.

1. Confront the climate crisis head-on

Some central banks have begun to require climate risk disclosures from financial institutions. It’s necessary, but it’s nowhere near enough. In September, 90 organizations led by the World Wildlife Fund urged the world’s central banks to add a strong climate commitment to their mandates: a 50% reduction in greenhouse gases by 2030, as well as net-zero emissions and full biodiversity recovery by 2050. These groups want central banks to publish detailed annual transition plans to achieve these goals and to require all regulated financial institutions to do the same. They want: loan time horizons to be extended to 30 years, to avoid short-termism; an end to asset purchases in companies and sectors considered environmentally harmful; and the use of a lower interest rate to encourage investment in climate solutions.

2. Create money to tackle a crisis

Since 2008, the world’s central bankers have pumped $33 trillion into the global economy through a process called Quantitative Easing (QE). They did it in times of economic hardship when low interest rate policies were insufficient: first to bail out the bankers and restore the economy after the 2008 financial meltdown; then to stimulate economic recovery; and then to halt the market meltdown that happened in the early weeks of COVID, when the bankers and CEOs saw looming disaster. In each instance, the central banks injected money by buying bonds off the banks, and (in 2020) off the big corporations. Each time they did so, the markets recovered, the Dow Jones Industrial Average blossomed, and housing prices rose to new heights, pushing more people into a state of housing crisis. Investors realized that they could take greater risks because the central bank had their back. In a future financial crisis they could equally well achieve the necessary economic stimulus by dropping “helicopter money” directly into people’s bank accounts, instead of giving it to the banks.

So, if they can inject all this money into the economy to stave off a financial crisis, why can’t they do the same to tackle the climate crisis or the affordable housing crisis? The answer is that if the crisis threatens the health of the economy, as both crises do, they could. A government could create $100 billion in climate solutions bonds or affordable housing bonds, and the central bank could buy them, just as it did for corporate debt. It’s known as “QE for People.” There are only two conditions: It must be a real crisis, and the economy must be able to absorb the money without creating more than (say) 2% inflation.

3. Underwrite critical public loans

Just like a private bank, a public bank can create money. Unlike a private bank, however, it can do so at zero interest, since it does not need to maximize profit for its shareholders. In Germany, Sweden, Denmark, Italy, Spain and France, community and state-owned public banks serve as much as 64% of the banking market. In Germany, Kreditanstalt für Wiederaufbau (KfW) has been the main source of financing for building retrofits to tackle the climate crisis. The United States’ new Green Bank has been set up to do the same. When a public bank provides finance to address such a crisis, the central bank could underwrite its loans, guaranteeing its stability.

4. Issue credit guidance

Many governments have worked with their central banks to issue credit guidance that direct money creation towards national goals. In the post-war period, the central banks of Europe, Canada, the U.S., Japan, Taiwan, South Korea and China all used credit guidance to direct loans towards productive industries for export. In Europe and Canada, this ended in the 1970s, resulting in an excess of debt creation for private purposes. Given the urgency of the climate and the affordable housing crises, central banks could use credit guidance to prioritize investments in climate and housing solutions, and they could also offer them a discounted green interest rate. On the danger side of the equation, they should either ban investments in fossil fuel expansion and speculative property purchases or penalize them by requiring higher regulatory capital and liquidity requirements and charging a punitively high red interest rate.

5. Seek democratic guidance

Central bankers insist on their independence, fearful of how an unscrupulous politician could abuse the power to print money and cause hyperinflation. And yet to whom should they be answerable? Their actions since 2008 indicate that their primary allegiance has been to their fellow bankers and investors. We need them to be more responsive to the climate, biodiversity and housing crises, but political edicts can cut both ways. In Germany, a simple majority in the Bundestag can change Bundesbank law, but this could backfire if the far-right Alternative für Deutschland was to win a majority. Some kind of middle ground is needed, perhaps with a parliamentary debate on central bank policy resulting in democratically driven recommendations.

It is time to remove the mystery that surrounds so much of central banking’s activities. We need the world’s central bankers to step up and help us tackle these critical problems.

The post Five ways to give central banking a makeover appeared first on Corporate Knights.

GFANZ, which made international headlines and represented one of the planet’s best hopes for meaningful climate action a year ago, is facing growing discontent within its membership of global banks, insurers, investment managers and consultants, and asset owners. The displeasure, especially by large North American banks, threatens to rupture the increasingly fragile alliance.

“Those are some of the biggest players on Wall Street, and if they leave does that cause some kind of domino effect, giving the impetus to other parties to say, ‘Hey, if they left why can’t I leave?” says Baltej Sidhu, an analyst with National Bank of Canada, in an interview with The Globe and Mail.

Carney, the former governor of the Bank of England (and Canada) established GFANZ with billionaire Michael Bloomberg at the COP26 UN climate summit last November in Glasgow. Under the initiative, more than 400 financial institutions from 45 countries managing assets of US$130 trillion agreed to the goal of net-zero portfolio emissions by 2050, as well as interim CO2 reductions. 

But in the last 12 months, there has been heavy criticism over the lack of climate action by GFANZ’s leading members, most notably U.S. and Canadian banks and large investment managers. 

Former U.S. vice-president Al Gore, the co-founder of sustainable investment firm Generation Asset Management, tells Bloomberg the commitments by GFANZ members are “very welcome,” but “it’s become apparent that some who made impressive pledges did not immediately begin to put in place a practical plan to fulfill those pledges.”

While a potential rupture in the membership could weaken the massive global alliance, some insiders and critics say this could be a good thing.

Those are some of the biggest players on Wall Street, and if they leave does that cause some kind of domino effect?

-Baltej Sidhu, an analyst with National Bank of Canada

James Vaccaro, a former renewables banker who sits on GFANZ’s advisory board, says the departure of “quarter-hearted” members would “unlock a little more enthusiasm and energy from those who do want to race to the top.” 

This is a sentiment shared by Richard Brooks, climate finance director for Stand.earth, a climate- and forest-protection NGO.

“Good riddance,” Brooks tweeted about the disaffected banks. “If you [departing signatories] won’t meet minimum standards in line with the climate science and bodies like the [International Energy Agency] who said we don’t need new fossil fuel infrastructure, then quit and stop ruining these bodies for other banks who are taking responsibility.”

Matthew Kiernan, who has been involved in sustainable finance since the early 1990s, says the huge influx of mainstream finance into ESG (environmental, social and governance issues) in recent years has diluted its meaning, and only about half the assets tagged by networks like GFANZ and the UN-supported Principles for Responsible Investment (PRI) fit the sustainability label.

“I’d guesstimate that only 50 to 60% of the $100-plus trillion in sustainable assets under management claimed by the PRI could reasonably be called ‘sustainable’ by any remotely rigorous definition of the term,” says Kiernan, who co-founded Innovest Strategic Value Advisors, which became part of the massive ESG rating service of MSCI. “Greenwashing is truly a clear and present danger.”

Earlier this year, Race to Zero, a grassroots network established to oversee bodies making net-zero commitments under UN rules, upped the ante for the GFANZ signatories, establishing a rule that signatories would not be able to finance any more coal projects or unabated oil and gas projects and they would need to plan to phase down unabated fossil fuel portfolio emissions. 

“We want to be unequivocal on this point: there is no rationale for financing new coal projects,” Carney and Bloomberg said in a joint statement, endorsing the Race to Zero ban on coal investments. 

While Race to Zero has subsequently loosened the criteria to give institutions more flexibility, Fiona Macklin, Race to Zero’s campaign manager,  asserts that the amended rules still require members to phase down and phase out all unabated fossil fuels, including coal.

If you won’t meet minimum standards in line with the climate science… then quit and stop ruining these bodies for other banks who are taking responsibility.

-Richard Brooks, climate finance director for Stand.earth

The Race to Zero rules caused two pension funds – Australia’s Cbus and Austria’s Bundespensionskasse AG – to leave the alliance, saying they lacked the internal resources to continue. U.S.-based investment consultant Meketa has also left GFANZ, according to Capital Monitor.

A number of U.S. banks, including JPMorgan, Morgan Stanley and Bank of America, threatened to leave the alliance, citing risks of lawsuits under Securities and Exchange Commission rules if they are also required to meet the stringent Race to Zero policies. The European Central Bank also noted that GFANZ commitments raise a risk of lawsuits against banks if they make the pledges and fail to deliver. 

Although unnamed, a group of Canadian banks have also threatened to leave GFANZ, according to The Globe and Mail, quoting anonymous sources saying the banks have legal concerns, as well as fundamental issues with the requirement to withdraw funding from fossil fuel companies.

Brooks says many of the GFANZ signatories never intended to live up to their commitments.

“They signed up as a defensive tactic to buy them some green cover that comes with being associated with Mark Carney, anything called net-zero and a peer group,” he says via email. “It’s a classic duck and seek cover amongst ‘friends’ response.”

Kiernan argues that climate action must move from voluntary commitments to regulatory and legal requirements, a point underlined recently by a group of Canadian NGOs in a public policy roadmap on climate regulation for financial institutions.

Kiernan envisions a smaller core of financial institutions making and keeping strong climate commitments voluntarily, while the larger pool of financial institutions would be required to reduce emissions through regulation.

“In the end what we need is government regulation with consequences,” says Brooks, adding this will be encouraged by investor-driven lawsuits against banks failing to meet their climate pledges.

“I think the goal should be to use some combination of pressure from asset owners, activists and regulators to force the laggards to either raise their game or quit making duplicitous claims about the sustainability of their investment processes and products,” says Kiernan. “My distinct preference would be for the former.” 

Eugene Ellmen is a former executive director of the Canadian Social Investment Organization (now Responsible Investment Association). He writes on sustainable business and finance.

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“Finance is the next front in climate accountability,” Alan Andrews, climate director for Ecojustice, told a conference on sustainable finance that Environmental Defence, Ecojustice and Shift hosted along with the UN-backed Principles for Responsible Investing in Toronto on September 13. 

In a report released the same day, the three advocacy groups recommend that Ottawa’s banking regulator require financial institutions to adopt a “credible climate plan” that would include interim targets for 2025 and 2030. 

Canada’s big banks, pension funds and insurance companies are members of the Glasgow Financial Alliance for Net Zero (GFANZ), under which they have committed to bring their investment and lending practices in line with a net-zero economy by 2050. The banks’ climate plans need to be mandatory, subject to enforcement and fully aligned with climate science including a planned phaseout of high-emitting assets, said Andrews. 

The day-long session focused on aligning financial policy with Canada’s climate goals, including federal commitments under the Paris Agreement to reduce GHG emissions by up to 45% below 2005 levels by 2030 and achieving net-zero emissions by 2050. 

The audience included representatives of the major banks and officials from Finance Canada as well as Environment and Climate Change Canada with speakers from the European Commission and the U.S. Treasury Department. 

The federal government is imposing emissions regulations on the oil and gas sector, power utilities and automakers, but it has not set climate targets for banks, pension funds or insurance companies.  

Instead, the Office of the Superintendent of Financial Institutions (OSFI) is proposing guidelines that would require federally regulated financial institutions (FRFIs) to disclose the risks that climate change poses to their businesses and how they will manage the transition to a net-zero world. 

The advocacy groups argue that the banks and other institutional investors should be required to not only disclose how climate change will impact them but also align their lending and investment practices with deep emissions reduction plans.  

While the OSFI proposal is couched in the language of guidelines and expectations, the federal regulator does have a range of supervisory tools to promote compliance with its guidelines and address issues that are identified, a spokeswoman said in an email. 

Still, its focus is firmly on the risks that climate change poses to the banks and Canada’s financial system and not how those institutions are contributing to climate change. 

“Our job is to ensure Canada’s FRFIs can operate through a period of economic disruption triggered by a global move away from GHG energy sources,” OSFI superintendent Peter Routledge said in a speech on September 8. 

In a submission to OSFI, three environmental groups argue that while its proposal is a significant step forward, it “falls well short of requiring action at the scale and pace commensurate with the challenge.” The letter was submitted on August 29 by Environmental Defence, Ecojustice and an umbrella group called the Climate Action Network Canada. 

Finance is the next front in climate accountability.

–Alan Andrews, climate director for Ecojustice

Senator Rosa Galvez is also critical of the regulator’s approach. Galvez introduced legislation earlier this year that would require federally regulated financial institutions to produce and meet net-zero climate plans. The senator, who attended the Toronto conference, said she is hoping her bill will be sent to committee this fall. 

In a draft submission to OSFI provided to Corporate Knights, Galvez said the regulator needs to take a tougher line. Canada’s banks are “dangerously over invested in fossil fuels” and are placing “the stability of our entire financial system at risk,” she said in the draft letter. 

The banks’ willingness to finance fossil fuel expansion projects will make it increasingly difficult for Canada to meet its climate commitments, she added. 

The banks argue that they are moving with due diligence, with lending that will help the oil industry reduce its own emissions.  

Oil and gas companies represent less than 5% of outstanding loans by Canadian banks. And the banks insist they remain fully committed to the GFANZ, which was announced ahead of last year’s Glasgow climate summit by former Bank of Canada governor Mark Carney. 

“Banks understand that the financial sector is central to securing an orderly transition to a low-carbon economy,” said Aaron Boles, spokesman for the Canadian Bankers Association, in an email.  

“That’s why several banks in Canada have begun implementing climate action plans that set specific targets to meet the demands of this global challenge, including committing to climate-related financial disclosures, adapting their risk management frameworks and aligning their lending to low-carbon outcomes.” 

Still, Canada’s banks remain among the world’s largest financiers of oil and gas companies, a fact that reflects this country’s role as a major producer and one that relies on commercial companies rather than state-owned firms. 

While four of the five top banks have released their GFANZ climate plans, critics complain they fall well short of the actual commitments required for alliance membership. Several speakers at the conference described Canada as a laggard when it comes to aligning the financial sector with the country’s climate goals. 

While the Europeans are taking a more regulated approach, the United States expects that the generous public funding for clean energy projects under the recently passed Inflation Reduction Act will provide incentives for banks and other institutions to commit their own money. 

The OSFI proposal for mandatory disclosure of risk does provide some incentives for financial institutions to shift their business away from fossil fuels.  

Their disclosures will signal to the rest of the world, including their own shareholders, whether they are reducing their financed emissions. The more invested they remain in carbon-intensive assets, the greater the risk they face of holding stranded assets that lose value due to the transition. The regulator has signalled that it may require larger capital cushions for more vulnerable institutions, a move that would erode the profitability of a bank. 

Despite those inducements for action, there is plenty of scope for the banks to backslide. We have grown accustomed to seeing ambitious voluntary targets that are never met. With the increasing urgency of climate action, the federal government may have to use its regulatory powers to drive a faster pace of change in the financial sector. 

The post Advocates urge regulation of banks’ climate commitments to avoid greenwashing appeared first on Corporate Knights.

The squeeze is causing the environmental, social and governance (ESG) industry to push back against conservative attacks by asserting that its only goal is to protect investors from social and environmental risk. 

But some industry leaders say the conflict demands a new approach based on real-world impact – particularly on CO2 reductions – and away from the sole reliance on environmental and social risk. 

In August, Texas banned 10 asset managers and about 350 investment funds from doing business with the state, including management of US$300 billion in public pension funds, for supposedly “boycotting” oil and gas companies from their portfolios. 

Recently, Republicans have focused their attacks on BlackRock, the largest asset manager in the world and a high-profile proponent of ESG investing. Nineteen Republican-led states accused the company of ignoring investor needs by supporting climate commitments that “force the phase-out of fossil fuels, increase energy prices, drive inflation, and weaken the national security of the United States.” 

BlackRock is scrambling to push back against the attacks, insisting it’s simply working to manage the risks of the energy and climate transition. ESG industry analysts have joined BlackRock in condemning the attacks. “These efforts are an attempt to gin up another phony grievance about how ‘liberal elites’ are destroying the country,” says Morningstar ESG analyst Jon Hale, adding it’s laughable to think of Wall Street money managers as left-wing ideological warriors.  

Former U.S. vice-president Mike Pence helped kick off the conservative backlash when he declared in May that “the woke left is poised to conquer corporate America and has set in motion a strategy to enforce their radical environmental and social agenda.”  

Republican denunciations of sustainable investing are an absurd caricature of the industry, but they have helped to expose the confusion and lack of standardization in ESG assessments, making the industry and the money managers that rely on them vulnerable to attacks from both climate-concerned investors and business-as-usual conservatives. 

Take BlackRock, for instance. The company is a strong proponent of “stakeholder capitalism” and is a prominent member of the Net Zero Asset Managers (NZAM) initiative, a global network pledging signatories to reduce financed emissions to net-zero by 2050. But these declarations contrast greatly with BlackRock’s record. 

The company holds more than US$300 billion in fossil fuel investments, including more than $100 billion in Texas companies. In its NZAM disclosures, BlackRock says it expects its portfolio companies to evolve toward net-zero, which means that it doesn’t need to divest its fossil fuel investments. It has also said it plans to vote for fewer climate-related shareholder resolutions in coming years as investors ask for increasingly detailed and demanding greenhouse gas commitments from their investee companies. 

These efforts are an attempt to gin up another phony grievance about how ‘liberal elites’ are destroying the country.

-Jon Hale, ESG analyst at Morningstar

But BlackRock isn’t the only financial company with an ESG reputation problem. Banks, investment managers and asset owners all rely on the global system of ESG ratings, which has faced growing criticism.   

In addition to confusion in ESG assessments, a recent Bloomberg investigation found that rating agencies like MSCI focus more on a checklist of corporate policies rather than actual company impacts. It cited the example of McDonald’s, which received a rating upgrade after improving some environmental policies despite the fact the company’s massive beef purchases produce more greenhouse gas emissions than the country of Portugal.  

This is prompting some industry leaders to call for reform. 

“That checklist is a blunt instrument that doesn’t reflect the challenges, subtleties and trade-offs of ESG,” says David Blood, who co-founded Generation Investment Management with former U.S. vice-president Al Gore. “People say sustainability or ESG is always a win-win – of course it isn’t. There are trade-offs.”   

This question of trade-offs is becoming increasingly important. The energy crisis triggered by the Ukraine war is forcing some asset managers to sacrifice CO2 reductions needed in the next decade for growing fossil fuel profits. This goes against traditional sustainable finance belief that there’s no conflict between financial return and ESG performance.  

“Investors increasingly want both sides of ESG: to mitigate risk and to make a difference in the world,” says Morningstar CEO Kunal Kapoor. “These are not the same, and they come with a new set of trade-offs for investors to make.” 

The current situation is causing ESG rating agencies to add impact metrics to their product listings, in part to meet new European Union sustainable fund classifications. And while many small investment managers have specialized in ESG impact for years, giant asset manager JPMorgan recently announced a new “double materiality” product, incorporating present risk and future impact. 

The UN-backed Race to Zero initiative also has the potential to drive real-world impact. Earlier this year, Race to Zero mandated that all entities pledging to achieve net-zero by 2050 under UN rules will need to avoid new fossil fuel investments, starting within 12 months. This includes banks, insurers, asset managers and asset owners that are members of the US$130-trillion Glasgow Financial Alliance for Net Zero. 

This is expected to put enormous pressure on companies like BlackRock and the world’s largest banks and asset managers to reject new oil, gas and coal investments, setting the stage for even more conflict with Republican lawmakers. 

But this may be a necessary consequence of needed ESG industry reform. If the sector can evolve toward a model of transparent, real-world corporate assessment, rather than relying solely on the notion of present-day risk, it will be better equipped to withstand the clash from conservative and sustainability critics. 

Eugene Ellmen is a former executive director of the Canadian Social Investment Organization (now Responsible Investment Association). He writes on sustainable business and finance. 

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