RBC faces shareholder resolution over sustainability-linked debt
March 4th, 2022
A shareholder advocacy group has filed a resolution with the Royal Bank of Canada (RBC) regarding the bank’s use of sustainability-linked debt.
Investors for Paris Compliance (I4PC) filed the resolution because of concerns that the bank has greenwashing loopholes in its sustainability-linked debt, due to a lack of standardised rules.
The advocacy was prompted to file the resolution after RBC joined other Canadian banks in a $1.1 billion sustainability-linked bond (SLB) issued by the oil and gas pipeline company, Enbridge.
As part of the bond, Enbridge agreed to reduce its 2018 emissions by 35% by 2030 and reach 28% ethnic representation, 40% gender diversity in the workplace and 40% female representation on its board of directors. If not achieved, Enbridge would pay investors an additional interest of 0.5%.
However, a Reuters study into 48 SLBs found that almost half included a target that allowed the company to improve at a slower rate than previously achieved. Reuters found that Enbridge had already achieved two-thirds of its 2030 emissions target and was over halfway towards its diversity targets when the SLB was issued.
Further issues arose when it was discovered Enbridge could use the SLB to fund the expansion of one of its oil pipelines, a project expected to produce 193 million tonnes of CO2 emissions and which faced significant opposition from Indigenous communities.
As a result, I4PC is calling for RBC to tighten its sustainable finance policies to preclude fossil fuel activity and projects opposed by Indigenous peoples.
Matt Price, director of corporate engagement at I4PC, said: “Incentivising incremental change is fine, but only within a credible framework where we’re reducing emissions in line with climate science.
“But right now, the rules are so lax that banks are awarding green labels to companies taking us in the wrong direction, so that’s truly broken.”
RBC’s actions have called into question its commitments to the Net-Zero Banking Alliance and the Equator Principles, given it is a signatory of both.
RBC will respond to the resolution in March and it will be voted on at its annual general meeting on 7 April.
This story comes as the Canadian government delays efforts to implement national sustainability standards.