Canadian bank becomes the world’s top fossil fuel financer

The Royal Bank of Canada (RBC) has surpassed the United States' JP Morgan Chase as the largest global investor in fossil fuel projects for the first time since 2019.

The Canadian bank invested $42.1bn (£33.7bn) in fossil fuel projects in 2022, according to the 'Banking on Climate Chaos' report commissioned by the Rainforest Action Network (RAN).

The investment included $7.4bn (£5.9bn) for fracking projects and $4.8bn (£3.8bn) for the excavation of tar sands deposits, the report said. 

The report found that RBC had invested a total of $253bn (£202bn) since 2016. Canadian banks have provided fossil fuel companies with $862bn (£689bn) in funding, with the RAN identifying them as “the banks of last resort” for fossil fuels. 

Since the 2015 Paris climate agreement, the world’s 60 largest banks have provided over $5.5tn (£4.4tn) in funding for fossil fuel projects, the report shows. In 2022 alone, the top 60 banks invested $673bn (£538bn) into companies including TotalEnergies, Venture Global, ConocoPhillips and Saudi Aramco.

This figure is down 16 per cent from 2021, but this is due to “unusual geopolitical and economic conditions, not shifts in bank policy,” according to the report.

According to the report's authors, the Russian invasion of Ukraine gave fossil fuel companies "a chance to rake in record profits" totalling $4tn (£3.2tn). This opportunity was further strengthened by inflation, fears of oil and gas shortages and higher interest rates.

Although RBC ranked as the largest fossil fuel financer of last year, JP Morgan continues to be the "worst bank overall" since the Paris Agreement, as it financed $434bn (£347bn) since 2016.

Mitsubishi UFJ Financial Group (MUFG) ranked as the worst of the Asian banks, financing $29.5bn (£23.5bn), while French bank BNP Paribas was identified as the largest fossil fuel financer in Europe, providing $20.8bn (£16.6bn) in funding in 2022.

Of the 60 banks profiled in the report, 59 "do not have policies robust enough to meet the goal of keeping global warming below 1.5°C", the RAN found, despite the fact that 43 of the banks investigated - including RBC and JP Morgan - are part of the Net Zero Banking Alliance whose members have committed to acting on climate change. 

The report also found that Spain’s Santander was the top investor in fuel extraction within the Amazon biome, while Chinese banks ICBC, the Agricultural Bank of China and China Construction Bank led financing for Arctic oil and gas expansion.

In response to the report, RBC’s president and CEO, Dave McKay, told Al Jazeera that its authors “do not validate their figures or findings with us and we can’t confirm their conclusions”.

He added: “Further, this report does not measure progress in meeting our climate goals. We are confident in our ongoing engagement with our clients and our climate strategy”.

During RBC's annual shareholder meeting last week, McKay had emphasised the importance of energy security and an orderly transition away from fossil fuel funding as he defended the bank's funding and climate record.

"We are actively working with government, our clients and many other stakeholders to achieve a net-zero economy," McKay said. "Our bank believes the transformation to net zero must be orderly and inclusive to be successful, recognising the significant changes that need to occur in our day-to-day lives and our economies and in how we consume energy and resources."

April Merleaux, research and policy manager at RAN and a co-author of the report, stated: “Our window of opportunity for keeping global warming below 1.5ºC is closing fast. We need a people-centred energy transition now.

"Profits now are a false economy because we simply cannot afford to continue burning fossil fuels: the costs down the road will be devastating. Fossil fuel companies are the ones dousing the planet in oil, gas and coal, but big banks hold the matches. Without financing, fossil fuels won’t burn.”

In February of this year, a group of 30 investors representing over $1.5tn (£1.24tn) in assets wrote to major European banks urging them to stop directly financing new oil and gas fields by the end of this year.