BMO aims to cut emissions from energy loans as part of a net-zero push

BMO’s new target is a 33% reduction in Scope 1 and 2 emissions from oil and gas borrowers

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Bank of Montreal has outlined a plan to significantly reduce emissions from lending to the energy and power generation sectors by 2030 as part of its longer-term goal to be net zero.

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Canada’s fourth-largest bank said its new target is a 33% reduction in Scope 1 and 2 emissions from oil and gas borrowers, which refers to emissions produced by the companies themselves and their suppliers. . The reduction is compared to 2019 levels.

The Toronto-based bank is also targeting a 24% reduction by 2030 in scope 3 emissions – those produced by the combustion of fuels produced by oil and gas companies. This implies that consumers will reduce their use of fossil fuels over time, Dan Barclay, head of BMO Capital Markets, said in an interview.

Banks are responding to increased pressure from shareholders and activists to take stronger action to help the global effort to slow climate change. Shareholders of Royal Bank of Canada, the nation’s largest lender, will vote next month on whether the bank should tighten rules and standards for sustainable finance, a move prompted in part by controversial support for a pipeline of Enbridge Inc. which has been criticized for greenwashing.

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The Bank of Montreal said it plans to reduce the carbon intensity of emissions financed by electricity generators by 45%. By 2035, new personal vehicle loans in Canada will be limited to zero-emission cars and trucks.

Climate goals

Bank of Montreal executives said they set the new targets based on government policies, industry trends and climate models from organizations like the United Nations. They said that although their data had gaps, they did not want to delay the implementation of their strategy.

“There could always be things with any of these goals that affect the transition of the global economy that we don’t control,” said Michael Torrance, chief sustainability officer at Bank of Montreal, in an interview. “But by setting these kinds of targets, it allows us to focus our thinking, our efforts and our strategic planning to respond to these trends.”

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For example, the commitment to fund only zero-emission vehicles by 2035 is based on the Canadian government’s plan to end sales of new internal combustion vehicles by then, Torrance said. Similarly, targets for oil and gas loans follow the oil sands industry’s stated plan to reduce emissions from its production processes.

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All of the bank’s major corporate clients have climate change as a top priority, according to Barclay. Bank of Montreal sees its role as helping its clients achieve these climate goals and does not plan to withdraw its business from certain industries or businesses, although it is not shy about making tough decisions if necessary, a- he declared.

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“If we have clients who choose not to be climate-sensitive or who choose to be a bad actor, we will make the choices that need to be made,” Barclay said. The bank announced in 2020 that it would end its oil and gas investment banking business in the United States and focus on assets in Canada.

The bank is developing expertise on climate science, policy and solutions – in part through the BMO Climate Institute announced last year – to help clients achieve their goals and create new business opportunities for the bank, Torrance said.

“The movement to decarbonize the global economy and shift our energy density from fossil fuels to others is probably one of the greatest capital movements of our lifetime, perhaps even since the industrial revolution,” said Barclay. “This movement of money is a huge opportunity.”

Bloomberg.com

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