Socially responsible investing company Ethical Funds is urging Canadian banks to give greater consideration to climate-change-related risks.

In its 2008 Sustainable Investing Program Annual Report, Ethical Funds outlines some of its activities from 2008. One key activity has been encouraging the banks to adopt and disclose procedures for evaluating climate change-related credit risk in their commercial lending policies.

“Canada’s major banks may not be large direct emitters of greenhouse gases, but because they provide capital to heavy industry they can play a vital role in combating climate change by encouraging their clients to tackle the issue,” the report says.

In 2008, Ethical Funds filed resolutions with the Bank of Nova Scotia and the Bank of Montreal requesting this disclosure, and both banks agreed to comply.

The company also provided feedback to Bank of Nova Scotia, Bank of Montreal, CIBC, Toronto-Dominion Bank and Royal Bank of Canada on their implementation of policies on climate change and lending, as well as other aspects of environmental policy.

Other highlights from Ethical Funds’ 2008 activities included encouraging more Canadian companies to participate in the Carbon Disclosure Project, raising awareness of the risks related to Alberta’s oil sands, encouraging companies to eliminate sweatshop-related supply chain risks, and others.

“The Sustainable Investing Program is designed to fulfill our dual mandate: to express the values of our investors through our investment activity and to provide better returns with less risk by ensuring companies work toward maximizing long term sustainable value,” said Bob Walker, vice-president of sustainability at Ethical Funds. “We believe companies that proactively address environmental, social and governance challenges have a long-term competitive advantage over companies that choose to ignore these issues.”

The report encourages investors to foster change across entire sectors and within regulatory agencies, particularly as capital market integrity has become a key concern.

For the first time, the Ethical Funds report incorporates a compliance index based on the UN-backed Principles for Responsible Investment. The UN-backed PRI is a global coalition of 360 investment institutions worldwide, which aims to help investors integrate consideration of environment, social and governance issues into investment decision-making.

In 2009, Ethical Funds plans to focus on three main issues: investor risk in Canada’s oil sands, corporate impacts on human rights and communities, and restoring integrity to capital markets.

IE