The Shareholder Association for Research and Education (SHARE) has begun pushing the big five Canadian banks to consider their role in financing greenhouse gas (GHG) emissions.

In a new report, SHARE says that it has begun engaging the big banks on their efforts to mitigate their reputational, and other risks, associated with their ‘financed’ GHG emissions.”

SHARE says that it requested information from all of the banks on their strategies to deal with three sets of issues: reputational and long-term financial risks from sizeable and sustained fossil fuels financing, including through tracking and reporting on their “financed” GHG emissions; potential exposure to a ‘carbon bubble’, in which fossil fuel reserves priced into the stock price of companies may turn out to be ‘unburnable’; and, additional risks associated with financing companies and projects focused on extracting, or dependent on, harder-to-reach, higher-risk unconventional oil and gas resources, such as the oil sands.

It says it received responses from four of the five banks. CIBC did not respond, and some of the responses from the others did not address all of the issues raised, it notes. However, it also notes that TD Bank’s response has been most encouraging.

According to the report, TD indicated that it does track the GHG emissions associated with its credit and lending by keeping track of its lending to high-carbon intensity sectors; in 2011, TD had $2.8 billion in loans and trading lines to companies with major interests in renewable energy production; and, TD has developed sector-specific guidance for environmentally-sensitive sectors. It notes that the bank is also developing a climate position statement to be released in 2013.

Additionally, SHARE says that, as a direct result of its efforts, TD “has decided to join the pilot study of a new GHG Protocol Guidance that is being developed by the World Resources Institute and the World Business Council for Sustainable Development to help the financial sector account for GHG emissions associated with lending and investments and track emissions reductions over time.

SHARE reports that BMO provided a partial response, indicating that, among other things, the bank is familiar with the concept of ‘financed emissions’, but that it doesn’t track them. It also notes that the bank evaluates the risk profile of unconventional oil and gas, in line with its overall risk framework to assess all sectors.

It says that Scotiabank also does not currently track the GHG emissions associated with its loans, investments and/or other financial services; but that the bank takes climate change seriously and is “continuously working towards broader tracking and disclosure policies”; and, that it had approximately $1.4 billion in authorized credits to the renewables sector in North America.

RBC doesn’t currently track, or plan to track, GHG emissions associated with its clients’ activities either, it notes. It reports that, in 2011, RBC’s outstanding loans to companies involved in renewable energy exceeded $1.7 billion. And, it was told that that RBC evaluates potential borrowers with respect to how climate change impacts their business and how they are dealing with existing or proposed regulations, but it does not stipulate carbon emissions standards for high-pollution sectors, as it believes that is up to regulators to determine.

SHARE reports that it sent follow-up letters to BMO, Scotiabank and RBC to request additional information on a number of issues raised in their responses. “Among other things, we asked each bank to confirm whether they believe banks have a role to play in mitigating climate change through their financial operations and, if so, whether they would consider adopting goals to progressively reduce the carbon footprint of their lending and trading operations to move toward a low-carbon economy ahead of government action,” it says, noting that all of the banks have indicated they will respond to the follow-up questions in writing.

On another area of concern, SHARE also says that it provided detailed recommendations to the banks on how they could improve their procurement policies and practices to ensure that their suppliers uphold decent working conditions.

Additionally, SHARE says it sent letters to a number of companies, including CI Financial Corp., commending them for holding advisory votes on executive compensation, and requesting that they enhance disclosure related to their annual bonus plans.

Including the issues raised with financial firms, SHARE says it engaged with a total of 32 companies in the most recent quarter on a range of ESG issues, including: climate risk disclosure, hydraulic fracturing, sustainable forest management, conflict-free mineral sourcing, human rights, phosphate sourcing from Western Sahara, child labour in the cotton supply chain, executive compensation and sustainability reporting.