Royal Bank of Canada was named the largest financier of the fossil fuel sector in 2022, beating JPMorgan. This is as Canadian banks increasingly become the “lenders of last recourse” for controversial, carbon-intensive projects.
A coalition of campaign groups, led by the Rainforest Action Network, produced an annual report on fossil fuel finance. It found that RBC provided $42.1bn funding for fossil fuel companies and projects in 2022. This included $4.8bn to tar sands. Another Canadian bank, Scotiabank, was also included in the top 10 list.
Researchers found that Canadian banks are becoming the backstop to fossil fuel financing. This could allow them to finance projects and companies not being funded by European lenders. The study revealed that Canadian banks have contributed $862bn to fossil-fuel companies since the signing the Paris Agreement.
Stand.earth’s climate finance director Richard Brooks said that it was absurd that “RBC” is the worst banker in the world for fossil fuels.
He said that “RBC is moving completely in the wrong direction. It drags our climate ambitions backwards, and positions Canadian banks as fossil fuels lenders of last resort.”
RBC and Scotiabank didn’t respond to our request for comment.
This report comes at a time when the role of banks in driving global warming by financing carbon-intensive projects and companies is under intense scrutiny. The report found that 43 banks, including JPMorgan and RBC, were members of the Net Zero Banking Alliance. This alliance’s members have pledged to take climate action, while 49 others had committed to net zero emissions.
Research found that fossil fuel financing by the 60 world’s largest banks amounted to $673 billion in 2022. This is a decrease of 16 percent from the previous year. This was the lowest figure between 2016 and 2022. However, this was due to “unusual geopolitical economic conditions” and not “shifts in bank policy,” according to the report.
Although oil and gas companies are not investing as aggressively in new production now as they did a decade ago despite the fact that Russia’s war against Ukraine and subsequent energy crisis resulted in record profits for many companies, some of the largest oil companies, such as Shell and ExxonMobil, asked banks to stop financing them in 2022.
Research found that 30 companies seeking to expand their liquefied gas operations wanted to nearly double the funding in 2022 compared to 2021 as countries like Germany increased the use of LNG over gas from Russia.
Maaike Beenes (Campaign Lead for Banks and Climate at BankTrack) called BankTrack’s decision to increase their funding for LNG in the last year irresponsible.
She stated that gas projects would not be able “to address Europe’s short term energy needs or reduce household expenses — rather, they will force us into dependency on fossil fuels over the next decade.”
The US banks remained the dominant financier of fossil fuel financing. They accounted for over a quarter all financing between 2016-2022. After six years of being the top-ranked financier, JPMorgan was second with $39.2bn financing.
JPMorgan stated that it provides financing “across all the energy sector”, which includes “supporting energy safety” and helping clients transition to cleaner business models.
The list also included Citigroup, Bank of America, and Wells Fargo. Citi and Wells Fargo declined comment while BofA didn’t respond to a request. Numerous Japanese banks were also among the top 10.
According to the report, $150 billion was channelled by 60 banks into top 100 fossil fuels investment companies last year.
It was found that although some banks did have fossil fuel financing policies, they did not cover equity or bond underwriting. They also targeted specific projects, but not general corporate financing.