RBC: ‘Let’s make climate hell happen’?

For the first time, a Canadian bank, Royal Bank of Canada (RBC), grabbed the top spot for financing fossil fuels, surpassing Wall Street banks with US$40.6 billion of financing flows going to fossil fuels last year (1). While fires rage across Canada, engulfing tens of millions of people in North America in filthy air, RBC can continue to finance the dirtiest fossil fuel, coal, due to its very weak coal policy. To ‘accelerate and support efforts to address climate change’ as it claims as a member of the Net Zero Banking Alliance (2), the Canadian banking giant must follow climate science by immediately ending the financing of coal expansion and fostering a rapid coal phase-out (3).

The latest financial data shows that RBC has continued to finance companies such as Glencore, the international miner and coal developer, even since it adopted its coal policy in October 2020 (4). Glencore is still among the biggest global coal mine developers according to the Global Coal Exit List (GCEL), with 9 projects still proposed in Australia and South Africa (5). RBC contributed US$150m to a revolving credit facility in March 2021, alongside other international banks (6). Glencore is not a new client for RBC and coal accounts for less than 10% of its revenue, so it is not excluded by RBC’s coal policy (4)(5). Given that climate science has told us for years that we must rapidly exit coal and that any new coal project is incompatible with a 1.5°C trajectory, a company like Glencore should be the first to be excluded from banks portfolios (7). Some 43 financial institutions globally, including La Banque Postale in France and Desjardins in Canada, already exclude all coal mine/plant/infrastructure developers (8). The 503 coal companies still planning new coal projects risk impacting countless Indigenous communities and frontline lives and livelihoods worldwide (5).

RBC has been criticised earlier this year for its involvement in the financing of the German company RWE which razed a whole village in western Germany to the ground in January 2023 to expand one of its coal mines (9). RBC helped arrange US$5.4b of ‘sustainability-linked’ financing for the company (10).

RBC’s coal policy states that ‘for existing clients that operate thermal coal mining or coal power generation assets, RBC will support the client in their transition to lower carbon emissions’ (4). It also claims on its website to be ‘helping clients as they transition to net-zero’ (11). But an analysis of the most recent coal deals made by RBC in 2022 indicates that the bank continues to support companies with no or weak coal phase-out plans, as shown in the table below including the following examples (6):

• US company American Electric Power (AEP) announced in 2020 that it would close half its coal fleet by 2030 but it still has to accelerate this process and adopt a coal exit date for its whole fleet (12);
• Duke Energy, also in the US, does have a coal phase-out exit date, but it is not aligned with climate science. 2035 is indeed several years too late compared to the 2030 deadline set by climate scientists for the OECD (13); Duke Energy has only explicitly committed to retire 18 percent of its coal generation by 2030 and intends to build over 5,400 MW of new gas capacity by 2030 (14).

Quality of coal phase-out strategies of companies in the GCEL financed by RBC from January to September 2022

Source: Global Coal Exit List, urgewald, October 2022 ; Financial data gathered by Profundo from January to September 2022 for the report ‘Throwing Fuel on the Fire: GFANZ financing of fossil fuel expansion’ published by Reclaim Finance in January 2023.

RBC has an important role to play in helping all these companies transition. It must ask them to provide a corporate coal phase-out plan with specific criteria starting with the adoption of the relevant deadlines, but also specific asset by asset deadlines and a commitment to close, not sell or convert, their coal assets (15).

All these dodgy deals can be explained by the very weak coal policy that RBC adopted in October 2020, which has two giant loopholes regarding the general financing of coal companies (4):

• The exclusion only covers new clients, and not existing ones, which is the biggest loophole that can be found in a bank sector policy. Big banks usually have a long list of existing clients – RBC has for instance at least 30 (16) – which makes the policy ineffective for such existing clients ;
• The relative exclusion threshold applied is very high, 60% of revenues for mining companies and 60% of power generation for utilities. These thresholds are a long way from best practice as seen at Desjardins in Canada (0% of revenues for coal mining companies and 10% of coal power capacity) or Credit Mutuel in France (20% of revenues/power generation from coal).
• RBC’s 60% exclusion thresholds do not cover:
  • 319 coal mining companies out of the 526 in the GCEL, 61% of the total;
  • 400 coal power companies out of the 604 in the GCEL, 66% of the total.

This makes the coal policy adopted by RBC one of the poorest among global banks.

If RBC wants to be considered credible and really ‘at work to tackle climate change’ while Canada burns, it must immediately update its coal policy, exclude all coal developers and foster the coal exit needed by 2030 in OECD and 2040 globally. So far 18 financial institutions globally already request such a mandatory coal phase-out plan (8). This is an easy first step since the bulk of the work for RBC on climate should be about its oil & gas activities, for which it only excludes projects in the Arctic: not even the bare minimum standard.