09 May 2007

Banks Heed Green Policy Initiatives

The Globe and Mail, Tara Perkins, 9 May 2007

Banks are pushing forward with new environmental initiatives at a rapid clip, and wrapping money-making plans in green.

Yesterday, Citigroup Inc. announced that it will direct $50-billion (U.S.) over 10 years to address climate change. The money, which includes $10-billion that has already been spent, will go toward investments, financings and other activities that support alternative energy and clean technology both among clients and at the bank's own operations.

The financial sector is responding to pressure from non-governmental organizations (NGOs) and other groups, but the moves are not entirely altruistic. And the trend might make it harder for some less environmentally friendly projects to obtain financing.

Toronto-Dominion Bank, which has been criticized by the Rainforest Action Network, among others, for a perceived lack of green policies, is preparing to release a new environmental policy.

"We have been talking to a variety of NGOs, ethical investment funds [and] research centres on ideas regarding our environmental policy, and we should have something finalized within the next month or so," said Scott Mullin, vice-president of government and community relations.

One of the areas the bank has been looking at is environmental assessments. "There's a variety of steps that we will be looking to take to ensure that environmental risk is factored into our lending and investing decisions," he said.

If environmentalists have their way, initiatives like this will see banks tighten the purse strings when it comes to making investments in projects like coal-fired power plants and other carbon-intensive energy sources.

Nelson Switzer, the Royal Bank of Canada's senior manager on environmental risk management, said "any time there's going to be opportunity lost, there's going to be many gains."

"While it might prove to be more challenging to invest in those sectors, there are also going to be complementing opportunities for those sectors to borrow as well, such as funding carbon-capture and storage technology, or alternative scrubber technology, or clean coal-burning processes, or plasma gasification."

Mr. Switzer added that what's helped propel banks to make these decisions is "a lot of stakeholder engagement. For example, NGOs, some of our investors, as well as the companies we invest in, they have become more interested in this space."

There are two major reasons banks are heeding the call, he said. "One, it's the right thing to do. And the second reason is that is makes good economic sense. There's a market for it. And I think that industry wants to capitalize on the opportunity, as does finance. If the renewable energy market, for example, is going to be a growth market, well, we'd certainly like to be involved."