The Royal Bank of Canada (RBC) issued ‘Policy Guidelines For Sensitive Sectors and Activities,’ outlining the bank’s updated environmental and social risk management (ESRM) process to identify, assess and mitigate the environmental and social risks associated with financing clients. The new policy includes restrictions and limitations on financing coal-related projects, and Arctic exploration and development, particularly in the Arctic National Wildlife Refuge (ANWR), among others.
RBC noted in its new policy guideline that while coal-fired power remains a significant source of electricity generation around the world, it is also one of the largest global sources of greenhouse gas emissions and other pollutants. The bank introduced several restrictions on financing the coal sector, including not finance transactions where the proceeds will be primarily used to develop a new greenfield coal-fired power plant, thermal coal mine or Mountain Top Removal coal mining projects. RBC will also not provide financing to new clients who derive more than 60% of revenue from thermal coal mining, or coal power generation assets, unless the clients provide evidence of reducing their use of coal, reducing GHG emissions, or conversion to technologies that lower emissions.
In the Arctic portion of the new policy, the bank stated that given the vulnerability and cultural significance of the Arctic ecosystem, transactions that directly support exploration or development in the Arctic will require enhanced due diligence and approval by a senior oversight committee. RBC also stated that it will not provide direct financing for any project or transaction that involves exploration or development in the ANWR.
Additionally, according to RBC’s new guideline, the bank will not provide direct financing for any project or transaction that involves exploration or development in UNESCO World Heritage Sites, to their cultural and natural significance.
ESG Today spoke with RBC spokesman Andrew Block about the new policy guideline. Block said:
“We are committed to finding ways to balance the transition to a low-carbon economy while supporting efforts to meet global energy needs and our energy clients. We periodically review our internal policies and procedures, updating them based on our own expectations and those of clients and stakeholders. We have published recent changes to those policies which include stating that due to its particular ecological and social significance and vulnerability, RBC will not provide direct financing for any project or transaction that involves exploration or development in the Arctic National Wildlife Refuge.”
RBC’s initiative follows similar moves by other investors and companies to distance themselves from thermal coal and other fossil fuel sectors with poor sustainability profiles. Last month, for example, industrial giant GE announced that it was exiting the new build coal power market. This year has seen several prominent investors, pension funds and investment banks announcing similar policies.