Will RBC’s New Social Standards Prevent Investments in Climate Change?

Consistent with a growing trend in which banks are acknowledging the impacts of their investments on environmental health, social welfare, and climate change, Royal Bank of Canada has created a new “Policy on Environmental and Social Risk Management for Capital Markets,” which could have major implications for the bank’s involvement in dirty energy projects. According to the Rainforest Action Network (RAN), one of the most reliable watchdog groups keeping track of the environmental policies of major banks, the new policy could be a significant step forward for RBC—if it is followed in a meaningful way.

RAN is particularly concerned about RBC’s investments in the Canadian tar sands, which are one of the fastest growing sources of industrial carbon emissions in the world. RBC is one of the biggest providers of financing for tar sands oil extraction projects, which not only contribute to climate change but also to destruction of Canada’s boreal forest, pollution of local water supplies, and displacement of indigenous communities. For two years RAN and other NGOs have been putting pressure on RBC to pull out of the tar sands, and whether the company’s involvement in tar sands projects is substantially scaled back may be the defining test for the strength of its new policy.

If RBC decides to stop financing the tar sands, the climate change implications will be huge. However the section of the bank’s new policy most likely to trigger a move away from tar sands is not specifically about climate change at all, but rather about indigenous rights. RBC’s social and environmental policy includes a goal of only financing projects that impact indigenous lands and resources if the affected communities have given “free, prior, and informed consent.” The implications for tar sands projects, which are strongly opposed by many First Nations in the region, should be clear. In Canada more than sixty First Nations are opposing a proposed Enbridge oil pipeline that would cut through or otherwise impact their lands. Enbridge needs over five billion dollars to build the project, and RBC is one of the banks that could potentially supply that financing.

According to the Rainforest Action Network’s Brant Olson, “If RBC steps in to underwrite that bond , the bank’s policy will have meant little to the communities which it purports to honor. If RBC opts out, it will be a new day in the banking world.” RBC’s refusal to bankroll the tar sands could send a strong signal to other companies, and help establish tar sands extraction as a socially and environmentally destructive activity that responsible financers and investors should have nothing to do with. That would be a victory for indigenous rights, the local environment, and the global fight against climate change. All that remains is for RBC to demonstrate a willingness to stand firm in adherence to its own policy.

Photo credit: Tavis Ford