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The tar sands tide may finally be turning at Canada's biggest bank. RBC is among the largest financiers of Canada's Tar Sands but so far lacks policies adopted by other banks that seek to limit harm to Indigenous rights, water quality and climate.
That may be changing. Last week, representatives from RBC showed us a summary of the new draft Environmental Risk policy that it hopes will fill the gap. It's too early to draw conclusions- the early draft has yet to be ratified by the bank's Senior Management-but here's our initial take on where we see progress relative to other banks, and where we still see distance.
Bottom line, we think bank is moving in the right direction on Indigenous rights and the environment but falls well short of establishing a significantly new standard for responsible banking. On a scale of 1 (worthless) to 10 (perfect), we gave the draft a 5. Here's why:
On Indigenous rights, the policy acknowledges "free, prior and informed consent" (FPIC) as an international standard established by the UN, but requires it from clients only where FPIC is national law. Elsewhere (including in Canada's tar sands), the bank relies on the weaker World Bank standard of "free, prior, informed consultation" and meaningful accommodation. Essentially, RBC is proposing the same "recognize" language on FPIC that TD adopted in 2007, though RBC claims its application will be more robust.
We've been asking RBC's to require evidence of consent from its clients no matter where they operate, especially in Canada's tar sands where recent studies show that Indigneous communities are facing elevated rates of cancer. RBC maintains that demonstrating consent is impractical given the inconsistent interpretation of "consent", the lack of a legal framework for establishing "consent" in Canada and overlapping and unresolved land claims and interests. We disagree. Our view is that consent is really just the product of consultation that takes "no" for an answer. It's a hard pill for industry to swallow, but it's the right thing to do.
On land and water, the bank singles out clients operating in "environmentally sensitive areas" which it defines as tropical forests, UNESCO world heritage sites, critical habitat for species at risk and High Conservation Value Forests. The policy would require an assessment of whether clients "prevent or mitigate" irreversible adverse impacts to these areas, but stops short of imposing clear penalties if they don't.
We've been asking RBC to phase out financing to companies that can't do business without wrecking the environment. Despite the bank's assurances that these new guidelines will help weed out bad apples, we remain unconvinced. We like to see the bank defining "environmentally sensitive areas" but the policy lacks the teeth to avoid doing them harm.
Finally, we've been asking RBC to meet Unicredit's commitment to measure and reduce its "financed emissions" of CO2 by reigning in financing to tar sands operators and other large CO2 emitters. They offered to encourage clients to disclose emissions under the Carbon Disclosure Project, but won't cut clients that don't. Again, good sentiment, but ultimately lacking teeth.
We want to see the policy improve but really it's the practice that counts. And there's no shortage of test cases in the queue. Analysts expect more than $100 billion to flow into tar sands developments within the next decade. We're keeping an eye on two: the Enbridge Northern Gateway Pipeline strongly opposed by a number of well organized First Nations, and the Total Joslyn North Mine which threatens the Athabasca watershed with yet another toxic tailings pond. Both companies will likely come knocking at RBC for financial backing for these projects. How will RBC respond?
But enough pontificating from us. Let's hear from you! One way or another, this policy will impact how the banks relate to the growing controversy over tar sands. How should we respond? Please give us your questions and ideas in the comments.