Investors for Paris Compliance (I4PC) has filed a complaint against the Ontario Securities Commission and the Autorité des marchés financiers of Québec. The complaint argues that sustainable investing disclosures from Canada’s big five banks – BMO, Scotiabank, CIBC, TD, and RBC – are potentially misleading to shareholders.
The banks have been identified for possible discrepancies in their environmental, social and governance (ESG) disclosures. Notably, these institutions highlight “sustainable finance” as a key factor in their plans to achieve net-zero carbon emissions from their investments by 2050. However, according to the complaint, their ESG-related disclosures lack any quantitative standards or outcome measurements linked to sustainable finance.
The Ontario Securities Act and the Quebec Securities Act both apply to ESG reports, and they expressly prohibit misleading or untrue statements, including the omission of material facts. The I4PC champions adherence to these regulations.
Further in the complaint, the banks are suspected of “greenwashing”. This term describes disclosures or marketing strategies that can unintentionally or intentionally mislead investors about the ESG-related attributes of an investment. In conclusion, the complaint calls for an examination of these sustainable finance disclosures and requires the banks to either improve their disclosures or unveil report limitations.
I4PC Executive Director Matt Price, commenting on the complaint, stated: “Securities regulators in Canada have expressed a general concern with greenwashing, and now investors need them to follow through with specific action to protect bank securities holders. Meanwhile, we need the banks to get serious about shifting finance out of fossil fuels and into ventures that reduce emissions.”
The announcement also referenced a BloombergNEF report that found that these banks have “some of the worst ratios of low-carbon to fossil-fuel financing in the world.”
ESG investment criteria have been embroiled in numerous controversies recently. In 2023, US President Joe Biden vetoed federal legislation that would have overturned a Department of Labor rule permitting retirement fund fiduciaries to consider ESG factors.