RBC helped arrange US$5.4B of ‘sustainability-linked’ financing for company expanding German coal mine – National | 24CA News

Royal Bank of Canada is one in every of many international lenders that wish to present that being inexperienced isn’t solely in regards to the color of cash, however current revelations about its funding in fossil gas corporations name into query its climate-action bona fides.

Global News has realized — from monetary knowledge agency Refintiv — that these preparations embody involvement in two vital credit score strains to power large RWE, most lately within the news for its growth of a coal mine in western Germany.

Data compiled in an evaluation by environmental NGOs exhibits that since 2016, RBC is estimated to be the fifth-largest international financier of fossil gas tasks.

The 2022 Banking on Climate Chaos Report, which makes use of info from monetary knowledge supplier Bloomberg LP, additionally estimated that the Toronto-based financial institution is the fortieth largest funder of coal mining and the twenty fifth largest for coal energy era in that interval.

RBC has promised to place $500 billion into so-called sustainable finance investments by 2025.

At RBC’s upcoming annual basic assembly in Saskatoon, a bloc of U.S. buyers is asking on the financial institution to be extra accountable to its personal objectives.

On April 5, shareholders will vote on a proposal for the financial institution to set an “absolute” goal for decreasing the quantity of financing it’s going to present to the oil and fuel and energy era sectors by 2030, though not coal mining, particularly.

“Shareholders applauded these banks when they set net zero goals — but it can’t be all talk,” mentioned New York City Comptroller Brad Lander in a press launch in January.

“We expect them to take the steps needed now to reduce emissions on the timeline to which they have committed.”

RBC spokesperson Adam Lister advised Global News that it might be improper to remark additional on proposals which have but to be voted on.

An absolute goal means RBC would wish to determine a concrete quantity for decreasing these investments, slightly than a goal that could be a share of its complete portfolio.

The New York City Comptroller and three of the town’s public retirement funds collectively personal round US$28 million in RBC shares.

The financial institution’s board is recommending that shareholders vote in opposition to the proposal, citing instability attributable to fluctuating commodity costs, and a need to acknowledge the “global need for essential goods and services produced by high-emitting” sectors.

Ever since 195 international locations signed the 2015 Paris Agreement on local weather change, banks all over the world have needed to point out they’re all about sustainable funding.

Net-zero banking implies that any emissions associated to investments could be absolutely offset by initiatives to take away carbon from the ambiance resembling tree planting, buying carbon credit or carbon seize expertise.

But the Refintiv knowledge, exhibiting RBC’s involvement within the credit score strains for Germany-based RWE in 2022, raises difficult questions on how banks attain these local weather objectives.

The knowledge signifies that the financial institution is one in every of 25 funding corporations that prolonged credit score strains totalling US$5.4 billion.

RWE operates the controversial Garzweiler coal mine, the place in January riot police eliminated a whole lot of protesters, together with local weather activist Greta Thunberg.

The firm is increasing its 35-square-kilometre mine, a web site that’s used to gas two coal-fired energy stations. According to power assume tank Ember, each RWE vegetation are within the prime three of CO2-emitting sources within the European Union’s Emissions Trading System.

But power corporations like RWE are not often both soiled or clear. They will be each.

In current years, RWE has invested closely in wind and photo voltaic power, changing into one in every of Europe’s largest producers of renewable power.

But it additionally will be demonized as a paleo power dinosaur, mining and burning coal — probably the most polluting fossil gas for over a century.

When Global News requested RWE if it was utilizing any of the cash to increase the coal mine, firm spokeswoman Regina Wolter mentioned solely that the credit score strains “are used to finance our green growth and normal working capital needs.”

Since Russia’s 2022 invasion of Ukraine, RWE’s operations have highlighted tensions on the very core of German politics; the on a regular basis want for power safety versus efforts to scale back emissions.

In response to the stoppage of pure fuel from Russia, Germany has reopened some lignite coal-fired energy era vegetation and extended the operation of others.

More broadly, although, any RBC involvement with RWE would additionally symbolize the nuances of moral funding.

In 2020, RBC pledged the financial institution would not lend cash to new coal-fired energy turbines, thermal coal mines, or coal mines that require mountaintop removing.

But the wording of that coverage permits the financial institution to proceed investing in its present prospects who’re increasing coal mines, resembling RWE.

“You look at all of the policies that the Canadian banks have in regards to coal, and they have so many loopholes in them that you could drive a coal excavator through those loopholes,” mentioned Richard Brooks, local weather finance director with Stand.earth, a Canadian-U.S. environmental NGO that campaigns to guard forests and promotes renewable power sources.

“We should not be trying to reduce our emissions in Canada while increasing emissions in another country just so we can make some money.”

Earlier this 12 months, the London-based Bureau of Investigative Journalism (TBIJ) reported that HSBC financial institution contributed US$340 million of the financing to RWE, regardless of HSBC’s dedication in 2021 to section out coal financing inside 9 years from that date.

HSBC confirmed to Global News that it, too, is concerned, however wouldn’t say how a lot it contributed.

According to info from monetary knowledge agency Refintiv, RBC is the one Canadian financial institution among the many 25 establishments that helped finance the credit score strains.

Other banks embody Deutsche Bank, Goldman Sachs and HSBC.

The knowledge doesn’t specify how a lot RBC contributed to the financing, solely that the financial institution is assessed as one of many arranging banks.

“Unfortunately, we do not discuss specific client matters,” RBC mentioned.

Ultimately, until banks explicitly say they’re financing a inexperienced undertaking, there aren’t any assurances about the place the cash finally ends up.

Brooks says that after RWE will get the money, it may well do what it needs with it.

“It’s completely a black box,” Brooks mentioned. “There’s no restrictions put in place to ensure that money is going into a climate solution or renewables project.”

Brooks is amongst six Canadian activists who lodged a criticism with the Canadian Competition Bureau in 2022 over alleged “deceptive marketing practices” associated to RBC’s local weather claims. The bureau is now conducting an investigation.

“We disagree with the allegations in the complaint and believe the complaint to be unfounded,” mentioned RBC’s Adam Lister.

Sustainability-linked financing

More and extra Canadians are opting to place their cash into Environmental, Social and Governance (ESG) investments; a sector estimated to be price greater than $3 billion in Canada.

As a part of the ESG growth, the funding arms of banks can choose to finance loans and bonds labelled as: “green,” “social,” “sustainability,” or “sustainability-linked.”

Sustainability-linked financing (SLF) incentivizes corporations to satisfy a set of ESG targets to keep away from going through increased curiosity funds.

According to the Refintiv knowledge, the RWE credit score strains involving RBC are categorized as SLF.

The financing has three targets, one in every of which requires the corporate to extend the share of renewables in its portfolio.

Theoretically, that situation might nonetheless permit RWE to extend its fossil gas emissions, so long as it concurrently will increase its renewables by a bigger quantity.

What’s extra, SLF guidelines permit RWE to resolve its personal SLF targets.

Canadian entrepreneur Tariq Fancy is a former head of sustainable investing on the world’s largest asset administration agency, BlackRock. Fancy is now a vocal skeptic of SLF transactions.

“If you’re your own referee, you’re not going to penalize yourself or put yourself in a corner, even if it’s in the public interest to reduce exposure to fossil fuels,” Fancy mentioned.

Since leaving his function at BlackRock, Fancy has written about his disillusionment with how the sustainable funding sector at the moment works, calling it a “dangerous placebo.”

Fancy maintains that funding banks will solely transfer away from fossil fuels when they’re compelled to take action.

“Economic history has shown us that if we want that to happen, it has to be government regulation. It has to be mandatory compliance rather than voluntary compliance,” Fancy mentioned.