National Bank of Canada | Interfaith Center on Corporate Responsibility

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<h4>Resolution Details</h4>
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<strong>Company:</strong>
<p>National Bank of Canada</p>
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<strong>Year:</strong>
<p>2025 </p>
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<strong>Issue Area:</strong>
<p>Climate Change </p>
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<strong>Focus Area:</strong>
<p>Climate Financing </p>
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<strong>Status:</strong>
<p>Filed</p>
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<h2>Resolution Text</h2>
<p dir=”ltr”><strong>Resolved:</strong> Shareholders request that National Bank disclose how its renewable energy vs. non-renewable energy lending commitment relates quantitatively to its 2030 sectoral targets for financed emissions.</p>
<p dir=”ltr”><strong>Supporting Statement: </strong></p>
<p dir=”ltr”>This is the second year submitting this proposal. It was withdrawn last year in favour of discussions, but despite a polite dialogue, the bank did not change anything.</p>
<p dir=”ltr”>In 2021 National committed to achieving net zero in its financed emissions by 2050. National has also set 2030 sectoral emissions reductions targets in its commercial lending, oil and gas and power lending portfolios.</p>
<p dir=”ltr”>National’s most prominent initiative to meet these targets is its commitment to “continue to grow the portfolio of loans related to renewable energy at a faster pace than the portfolio of loans related to non-renewable energy.”</p>
<p dir=”ltr”>While National’s use of a financial metric in this regard is laudable, its current construction makes it impossible to relate to its 2030 targets because both factors – renewables and non-renewables – are unrelated numerically to any climate model.</p>
<p dir=”ltr”>As currently stated, non-renewable energy loans can keep rising as long as renewable loans growth stays ahead. As such, financed emissions can go up, not down. This happened in 2023 when non-renewable energy loans increased by 0.2% and renewable energy loans increased by 0.5%, resulting in an increase of 1.5 megatonnes.</p>
<p dir=”ltr”>National also does not currently include underwriting as part of this initiative, even though this plays a significant role in energy financing of all kinds.</p>
<p dir=”ltr”>In 2022, BloombergNEF released a landmark report, Investment Requirements of a Low-Carbon World: Energy Supply Investment Ratios, that aggregated climate scenarios to conclude that the ratio of investment in low-carbon energy vs. fossil fuels needs to hit a minimum of 4 to1 by 2030. It found National’s 2022 ratio was 1 to 1:1.</p>
<p dir=”ltr”>Other banks are setting financial targets for either/both the numerator (renewables) and denominator (fossil fuels) in such a ratio. For example, BNP Paribas has set a 2030 target of “40 billion euros in credit exposure for low-carbon by 2030, and especially renewable energy production,” and “by 2030, financing for oil extraction and production will have been cut by 80%<strong> </strong>and will total less than 1 billion euros.”</p>
<p dir=”ltr”>Since the last filing, RBC also set a target of $35 billion for low-carbon energy lending by 2030, including a tripling of renewable energy financing to more than $15 billion.</p>
<p dir=”ltr”>Without a similar kind of financial benchmarking by National, investors are in the dark about whether and how National’s energy lending commitment relates to climate scenarios and its financed emissions targets, thereby raising the prospect of unforeseen transition risk.</p>
<p dir=”ltr”>The acquisition of Canadian Western Bank (CWB) should not stall National’s progress. In fact, CWB has a proportionally lower exposure to fossil fuel loans.</p>
<p dir=”ltr”>Shareholders therefore request more comprehensive disclosure from National regarding its renewable vs. non-renewable energy financing commitment, including relationships to climate scenarios and its 2030 targets, and the role of underwriting.</p>
<p dir=”ltr”>1 https://drive.google.com/file/d/1mF3VQWJyNh6Enw9UStMJ1phGa-snFtOX/view?usp=sharing</p>
<p dir=”ltr”>2 https://group.bnpparibas/en/our-commitments/transitions/energy-transition-and-climate-action</p>
<p dir=”ltr”>3 https://www.rbc.com/community-sustainability/_assets-custom/pdf/climate-report-2023.pdf</p>

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<h3>Lead Filer</h3>
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<div class=”views-field views-field-nothing”><span class=”field-content”> Matt Price</span></div><div class=”views-field views-field-title views-field-field-shareholder”><span class=”field-content”>Investors for Paris Compliance</span></div>
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Resolution Text

RESOLVED, shareholders urge the Board of Directors of National Bank of Canada (“National Bank”) to oversee and publish a third-party racial equity audit analyzing National Bank’s adverse impacts on non- white stakeholders and communities of colour. Input from civil rights organizations, employees, and customers should be considered in determining the specific matters to be analyzed. The report should be prepared at reasonable cost and omitting confidential or proprietary information.

Supporting Statement

As critical intermediaries, financial institutions play a key role in society as they allow businesses and individuals to access essential economic opportunities through a broad range of financial products and services, including facilitating transactions, providing credit and loan services, savings accounts, and investment management. Financial institutions have therefore a responsibility to ensure their business operations, practices, policies, products and services do not cause adverse impacts on non-white stakeholders and communities of colour.

A report from the Financial Consumer Agency of Canada studying frontline practices of Canadian banks, including National Bank, suggests that racialized or Indigenous bank customers are subjected to discriminatory practices.1 Compared to other customers, visible minorities and Indigenous customers were more likely recommended products that were not appropriate for their needs, were not presented information in a clear and simple manner and were offered optional products, such as overdraft protection and balance protection insurance.

A December 2020 academic review commissioned by the British Columbia Securities Commission estimates unbanked Canadians (no official relationship with a bank) ranged from 3%-6%, and underbanked Canadians (who rely on fringe financial institutions like payday lenders) ranged from 15%- 28%.2 The review found under/unbanking has a disproportionate effect on Indigenous peoples, and that “financial access has been cited by researchers as an endemic problem in ‘low-income communities of color.”

Canadian financial institutions, including National Bank, have a responsibility to address financial discrimination and provide greater access to credit and other financial services to ensure all communities become economically resilient.

In recent years, National Bank has been subject to negative media coverage, including allegations of racial discrimination.3 Such controversies may be indicative of systemic racial equity issues in the Company’s operations.

National Bank’s Inclusion and Diversity commitments are insufficient to identify or address potential/existing racial equity issues stemming from practices, policies, products and services.4 National Bank’s three-year action plan for 2020-2023 focuses primarily on workplace diversity, equity, and inclusion issues—and National Bank has no meaningfully plans to identify, address, or mitigate racial equity in its practices, policies, products and services, including but not limited to the racial wealth gap, unfair discrimination stemming from its use of AI, or racial profiling.

Racial equity issues present meaningful legal, financial, regulatory, and reputational business risks. A racial equity audit will help National Bank identify, prioritize, remedy, and avoid adverse impacts on non-white stakeholders and communities of colour beyond the workplace. We urge National Bank to assess its behaviour through a racial equity lens in order to obtain a complete picture of how it contributes to, and could help dismantle, systemic racism.

1 https://www.canada.ca/en/financial-consumer-agency/programs/research/mystery-shopping-domestic-retail- banks.html
2 https://bcbasicincomepanel.ca/wp- content/uploads/2021/01/Financial_Inclusion_in_British_Columbia_Evaluating_the_Role_of_Fintech.pdf
3 https://globalnews.ca/news/4275234/racial-discrimination-human-rights-complaint-national-bank/
4 https://www.nbc.ca/content/dam/bnc/a-propos-de-nous/responsabilite-sociale/pdf/inclusion-and-diversity- booklet-2021.pdf

Clean Energy Financing Ratio

Resolution Details

Resolution Text