Climate Transition Plan and Financed Emissions Reduction Goals

Resolution Text

RESOLVED: Shareholders request that Scotiabank disclose, at reasonable cost and omitting proprietary information, 1) its expectations of what a credible transition plan is for clients in sectors most exposed to climate-related risks and 2) procedures to ensure these transition plans will help Scotiabank reach its 2030 interim targets to reduce the financed emissions associated with its lending portfolios.

SUPPORTING STATEMENT

Climate change is a global crisis that requires urgent action. Exceeding a 1.5°C warming scenario presents risks to the planet, economies, investors, and ultimately to the long-term profitability of banks: projections have found that limiting global warming to 1.5° degrees will save $20 trillion globally by 2100, while exceeding 2 degrees could lead to climate damages in the hundreds of trillions. Estimates show that 10% of global economic value stands to be lost by 2050 under current emissions trajectories.1

Reflecting this, Scotiabank states that climate change is one of the most pressing issues of our time and has the potential to pose significant risk to the bank’s business.2 Investors strongly agree with this sentiment and feel the bank can be a leader in the climate space.

The bank’s ability to meet its net-zero target relies on disclosure and reduction of financed emissions. Publishing emissions data associated with Power and Utilities, Oil and Gas, Residential Mortgages, and Agriculture lending is a positive first step. Additionally, the existing target to achieving net-zero emissions by 2050 and associated 2030 interim targets for the Oil & Gas, and Power & Utilities portfolios bolsters the bank’s commitment to climate.

Despite this, investors are left with significant uncertainty around Scotiabank’s ability to meet these targets and thrive in a carbon constrained economy. Investors lack key information such as the proportion of clients who are misaligned with the bank’s climate targets, the timeline for reporting on additional sectors’ financed emissions, and expectations of existing and future client’s transition plans calls decarbonization targets into question. While Scotiabank has referenced communication of climate ambitions with clients, investors continue to lack clarity on how expectations and standards are conveyed, and how climate ambitions shape the lending process.

Several of Scotiabank’s peers provide more clarity on how they are implementing transition plans. For instance, CIBC has disclosed their Carbon Risk Scoring Methodology and a weighted average aggregate score of client transition preparedness while ING and UBS both provide details on their lending strategies and sector alignment. Standards and guidelines exist to help financial institutions and their clients operationalize net zero commitments and can help ensure investors that Scotiabank has appropriate strategies in place to meet 2030 targets.

From an investor vantage point, failing to set these expectations could expose Scotiabank to material financial risks, including (but not limited to): significant counterparty risks due to stranded assets, declining credit quality, increased risk in other portfolios, and loss of goodwill. The disclosures requested in this proposal will help assure investors that both Scotiabank and its clients have effective, accountable transition plans in place for achieving 2030 emissions reduction goals.

1 https://www.swissre.com/institute/research/topics-and-risk-dialogues/climate-and-natural-catastrophe- risk/expertise-publication-economics-of-climate-change.html 

2 https://www.scotiabank.com/content/dam/scotiabank/corporate/Documents/Scotiabank_Net_Zero_Report_2022-EN.pdf