Julie Segal is the senior manager of climate finance at Environmental Defence and a 2021 Corporate Knights 30 Under 30 Sustainability Leader.
In early April, Wet'suwet'en hereditary Chiefs and environmentalists looked to attend the Royal Bank of Canada’s annual general meeting, hoping to speak with the bank’s CEO, David McKay. They wanted to engage with him on RBC’s support for the Coastal GasLink pipeline construction across unceded Wet'suwet'en territory, despite the bank committing to net-zero emissions by 2050.
RBC cancelled the in-person meeting at the last minute and declined an opportunity to engage with the community representatives. The incident highlights how some Canadian financial institutions recognize the need for a “just transition” only to fail when it comes time to deliver.
The term “just transition” was coined by labour and environmental movements in the 1970s to support workers shifting away from polluting industries. Today, the term is used in the context of the climate emergency to ensure that workers and communities have alternatives while our economy pivots away from crude oil, natural gas and coal. But financial institutions use the term amorphously.
Over the past two years, investors and other financial players have collectively made “net-zero” pledges and recognized a just transition as a central tenet. RBC, among other Canadian banks, has celebrated that it joined the global Net-Zero Banking Alliance, to help “accelerate and support efforts to address climate change, and support an orderly and just transition to our net-zero future.”
But the financial sector is sidestepping two core principles of the just transition: taking early action to shift the economy away from fossil fuels and engaging affected people in the transition process. Most Canadian financial institutions continue to support new fossil fuel projects, despite the International Energy Agency calling for an end to investment in new oil and gas projects after 2021, if we’re to be net-zero by 2050.
RBC’s support of the Coastal GasLink pipeline is a stark contrast to the principles of a just transition. The project not only fosters continued economic reliance on natural gas, but also violates fundamental consultation principles for Indigenous communities, formalized in the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP). The project has also been the site of significant police violence against Indigenous leaders, resulting in a UN committee sending three admonishing letters to the provincial and federal governments, the most recent one in late April.
Another member of the Net-Zero Banking Alliance, U.K.-based HSBC, recently gained attention when the bank’s senior responsible-investing executive, Stuart Kirk, dismissed climate change during his presentation at a sustainable finance conference in late May. Kirk asked, “Who cares if Miami is six metres underwater in 100 years’ time,” suggesting that the financial sector should not bother considering climate change and the related risks. Complaining that he spends too much time evaluating social and climate issues, Kirk showed disregard for the workers and communities already impacted by the climate emergency and the energy transition. Meanwhile, HSBC has published reports supporting the just transition.
To align with a just transition, the financial sector has to start with prioritizing good outcomes for workers and communities instead of business as usual. It should take its cues about the net-zero transition from vulnerable communities and workers. Quebec’s “solidarity economy” model can be a guide, where financial institutions collaborate with labour at the mandate and governance level to invest capital back into the community. Quebec financial institutions are known for being trendsetters on climate action, with Desjardins financial cooperative leading as the first Canadian financial institution to commit to 1.5°C-aligned climate action by, for example, excluding investments in coal. The solidarity-economy model, while imperfect, demonstrates that finance can take guidance from labour, climate and community.
Ultimately, governments should be driving forward climate finance policies with just-transition plans at their core, but Canada’s environment commissioner reported in April that the federal government is not delivering what’s needed. Environment Commissioner Jerry DeMarco said at the time that the government has been “unprepared and slow off the mark.” But the financial sector should not use this policy gap as an excuse to continue making harmful investments.
A just transition should be central to any net-zero plan even if an organization has yet to paste the term on its marketing materials. Climate inaction creates risks for the whole financial system, and ignoring the true principles of a just transition worsens climate inaction. In the most recent report from global scientists at the Intergovernmental Panel on Climate Change about reducing emissions, the authors write that “attention to equity and broad and meaningful participation of all relevant actors in decision-making” will seed a more successful climate transition. Focusing on environmental justice, planning for sunsetting industries, and including affected people in decision-making would make climate action more effective. Financial organizations have to deliver a transition that is equitable for people and communities to avoid being hypocritical and to make net-zero plans reachable.
Canada’s financial sector loosely uses the term “just transition” to vaunt their climate credentials, but they have to deliver on what that term means.