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Royal Bank of Canada (RBC) announced a series of new sustainable finance goals and initiatives, […]]
RBC Adds “Decarbonization Finance” Category for Hard-to-Abate Sectors to Sustainable Finance Framework – ESG Today
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Energy Transition/ Sustainable Finance
RBC Adds “Decarbonization Finance” Category for Hard-to-Abate Sectors to Sustainable Finance Framework
Mark Segal
March 11, 2024
Royal Bank of Canada (RBC) announced a series of new sustainable finance goals and initiatives, including the establishment of a new “decarbonization finance” category within its Sustainable Finance Framework, aimed at increasing clarity for clients on the eligibility of decarbonization activities, and to help accelerate capital deployment to emissions reduction efforts in high-emitting, hard-to-abate sectors.
According to RBC, the launch of the new category is intended to help facilitate the allocation of capital to high-emitting and hard to abate sectors, such as natural gas, steel and cement, that will continue to provide essential products, while recognizing the risks of supporting activities in these areas that do not make a meaningful contribution to clients’ transition plans.
The bank introduced criteria for activities to be eligible under the new category, including the activity being an eligible decarbonization activity and the client having a sufficiently robust transition plan. According to RBC, the eligibility criteria can rely on an assessment of the client’s transition plan under the bank’s sector-specific transition readiness framework, and won’t necessarily require 1.5⁰C aligned emissions reduction targets, as some sectors do not yet have a clear path to achieving those goals.
In its framework, RBC said:
“We believe this is a pragmatic approach that recognizes the need to make urgent progress on decarbonization today while the broader economic transformation required to achieve net-zero continues to unfold.”
In addition to the updated framework, RBC also launched new targets to grow the bank’s overall low-carbon energy lending to $35 billion by 2030, and to triple its lending for renewable energy across RBC Capital Markets and Commercial Banking by 2030, from its current base of $5.2 billion, as well as to allocate $1 billion by 2030 to support the development and scaling of innovative climate solutions, aimed at helping clients to achieve their own climate goals.
The new actions were announced alongside the release of RBC’s 2023 Climate Report, outlining the bank’s progress in managing climate-related risks and opportunities in line with its climate strategy. RBC set a goal in 2021 to mobilize $500 billion in sustainable finance by 2025. According to the new climate report, the bank increased its cumulative sustainable finance facilitation by over $100 billion in 2022, reaching $394 billion towards its 2025 goal.
Jennifer Livingstone, Vice President, Climate at RBC, said:
“The actions we are announcing today will help support our clients in their efforts to reduce emissions, contribute to bringing more renewable energy online and provide needed capital to innovative climate solutions.”
Mark founded ESG Today following a 20 year career in investment management and research. Prior to founding ESG Today, Mark worked at Delaney Capital Management (DCM) in Toronto, Canada, most recently as the firm’s head of U.S. equities. While at DCM, Mark was part of the firm’s ESG team, responsible for evaluating and tracking the sustainability factors impacting portfolio companies, and assessing the suitability of companies for portfolio inclusion. Mark also spent several years in the sell-side research industry, covering the technology and services sectors. Mark holds an MBA from Columbia University in New York, a BBA from the Schulich School of Business at York University in Toronto, and is a CFA charterholder.
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