IEEFA Canada: Royal Bank of Canada falls short on client engagement strategy
Key Takeaways:
In a policy document released in October 2023, RBC outlined a formalized engagement framework to assess the transition plans of its clients and the actions it intends to take in response. In important ways, RBC’s policy falls short.
Several sectors, including midstream oil and gas clients, are exempt from this policy.
RBC hints at the existence of an exclusion clause targeted at uncooperative clients but fails to provide adequate details on criteria and timelines guiding this critical element of the plan.
Although the Royal Bank of Canada (RBC) has adopted a plan to encourage its clients to transition to net-zero greenhouse gas emissions, it falls short of recommended global standards, according to a new Institute for Energy Economics and Financial Analysis (IEEFA) briefing.
RBC outlined an engagement framework to assess its clients’ transition plans and identify actions needed in October 2023, but the plan lacks a clear strategy to spur such action. The bank’s policy suggests it may exclude clients from services if they fail to take substantial action on energy transition, but the policy should provide transparency and consistency. RBC should provide its clients clear criteria and timelines for action to avoid denial or revocation of access to the bank’s products and services. IEEFA’s report provides examples of more robust policies.
“RBC’s engagement plan is a step in the right direction, but it is far too vague,” said Mark Kalegha, IEEFA energy finance analyst and author of the report. “RBC can and should use its leadership position to guide companies toward the net-zero transition that Canada must achieve.”
To make the RBC policy stronger, the bank should extend the plans’ coverage across all client sectors and explicitly spell out its exclusionary criteria to send a clear message to clients about the need to take climate planning seriously, while also providing transparency and consistency.
This briefing note follows an earlier report laying out in more details how RBC is falling short on climate change.
