Research

The environmental action group calls on shareholders to press banks on assessing, mitigating and managing risks

By James Langton |

 

Banks could face blowback from activists, shareholders, and customers, over their funding of pipeline projects in the Canadian oil sands, says an investor alert from environmental action group Greenpeace.

Banks — including JPMorgan Chase, Barclays, Wells Fargo, Royal Bank of Canada and Toronto-Dominion Bank — and their shareholders could face financial and reputational risks due to opposition from Indigenous communities, pressure from civil society groups, and scrutiny from investors, for their role in financing controversial pipeline projects, the alert warns.

"In financing the construction of tar sands pipeline projects, banks therefore risk exacerbating climate change and climate risk," the Greenpeace alert says. "Investors must question whether the banks are adequately assessing and addressing the full range of risks inherent in these controversial projects and whether the banks' decisions to lend are in the long-term best interests of shareholders."

The group calls on shareholders to press the banks that are involved, or may get involved, in funding pipeline projects to understand whether these risks are "being adequately assessed, mitigated, and managed."

The major risks for bank shareholders, according to the alert, include the fallout from making lending decisions that are incompatible with a shift to a low-carbon economy, the risk of environmental damage and human rights impacts and,the threat of consumer backlash.

"The willingness of many banks to arrange and/or provide financing for tar sands pipelines suggest that they have failed to learn from the media, investor, and consumer criticism arising from [the Dakota Access Pipeline] and appear to be relying on outdated or inadequate risk assessment and mitigation frameworks," the alert says.

"These lending decisions will facilitate the expansion of Canada's tar sands and thereby risk undermining other work by investors, regulators, and some of the same banks to address climate risk," it adds.

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