Green financing surges to more than $1.1 trillion at top banks

Talk of where banks do and don’t put their money doesn’t usually make the red carpet. But in September, 200 actors and filmmakers signed an open letter calling on the Toronto International Film Festival to stop accepting sponsorship money from RBC. As Avengers star Mark Ruffalo tweeted, “RBC is one of the biggest funders of fossil fuels with the worst record of green washing and First Nation abuses through their fossil fuels and extraction projects. They fight against us.” In the fight against climate change, banks can be seen as villains – but also, depending on where they invest their money, heroes.

We’re still building the global frameworks for companies to report their progress in greening their products and operations. But some early returns are coming in – and showing that trail-blazing companies do exist and are starting to change the world.

This fall, Corporate Knights and U.K.-based financial publication The Banker collaborated to produce the 2023 Sustainable Banking League Table, the second annual report monitoring how global banks are helping finance the green transition. This year, the study wrested sustainability-based data out of 87 banks participating in the U.N.-organized Net Zero Banking Alliance (NZBA) – up from 60 last year.

The good news? In fiscal 2022, these banks earned a hefty US$53 billion in sustainable revenues from their loan books, investment portfolios and underwriting and advisory services.

Better still, these 87 banks posted a total outstanding sustainable loan book of nearly US$1.1 trillion, a 55% increase over 2021. Their combined revenue from underwriting sustainable bonds and providing sustainable advisory services reached nearly US$1.5 trillion this year, up 144%.

Some of the increases in green financing stem from a growing willingness on the part of banks to disclose their sustainability-related details. But unlocking these trillion-dollar levels demonstrates just how much business is in the green economy – and should encourage more bankers to up their games.

In first place, for the second year in a row, is Vancouver-based Vancity, with a sustainable revenue ratio of 24.3%. The values-based co-op earns significant revenues from loan-support services that help high-emitting clients improve their emission measurement and reporting practices – demonstrating the new opportunities that leadership provides.

Asked to comment on the bank’s best-in-class performance, Jonathan Fowlie, the chief external relations officer who leads Vancity’s impact-strategy division, turned the focus on people and planet. “When a financial institution prioritizes sustainability, its impact resonates throughout the broader economy and helps to create a better future for us all.” He hopes other institutions will catch up soon: “There’s no time to delay our journey towards a more sustainable society.”

Runner-up this year is Germany’s ProCredit Holding, which serves small and medium-sized businesses mainly in eastern and southeastern Europe and in Ecuador. In its first year on the list, ProCredit earned a sustainability revenue score of 22.2% – just ahead of third-place Netherlands’ Triodos Bank. Triodos posted a sustainable ratio of 21.3%, based on its lending activity in sectors such as organic foods, renewable energy and environmental technologies.

The bad news is that trillions in financing are still going to oil and gas. In fact, in the seven years since the Paris climate agreement was signed, the 60 biggest banks in the world contributed US$5.5 trillion to the financing of fossil fuel projects, according to a report released earlier this year by the Rainforest Action Network. Fossil fuel financing is dominated by a handful of banks in the United States, Canada and Japan, the report notes, with RBC appearing for the first time as the leading lender to the industry, providing a whopping US$41 billion in 2022.

Another report, released in September by ActionAid, looked specifically at fossil fuel financing in the Global South and found that some $3.2 trillion has flowed to those operations since 2016.So where does RBC stand when it comes to financing sustainable solutions? It ranks middle of the pack, in 40th place, well behind rivals Vancity and BMO (22) – but ahead of National Bank (45), Scotiabank (46), TD (77) and CIBC (86).

“While we have seen significant increases in the size of the sustainable loans, when we compare these figures to the financing being provided to the fossil fuel industry by the 60 largest banks in the world, it is evident the industry has a long way to go,” says Malinsky. “Banks need to slash their fossil fuel financing and immediately abolish any funding to expansion projects, while continuing to increase their exposure to projects funding the transition to the low-carbon economy.”