Green vs Growth Economy
An analysis of the Big Five's ESG Reports 2020-2023
This research explores the following question: can a green economy exist within a growth economy and what are the opportunities and or challenges in sustainable financing within the Canadian financial market? This research explores the relationship between green policies or directives and economic growth in the financial industry and how environmental, social, governance (ESG) values shape the financial contributions made by the Big Five Canadian Banks; BMO Bank of Montreal, CIBC Canadian Imperial Bank of Canada, RBC Royal Bank of Canada, Scotiabank Bank of Nova Scotia, and TD Toronto Dominion Bank. With increasing demand in financial industry regulations, ESG reports have become a mandated guideline for organizations to incentivize greener contributions whether through direct operations, indirect product/service offerings or partnerships (SASB Standards, n.d.). After the analysis of the Big Five's ESG reports spanning between 2020-2023 it's clear that sustainable financing, also known as green financing, is the key driver in achieving these ESG metrics.
Whether through lending or investing, sustainable financing aims to achieve, “both financial and or environmental benefits – ethical, responsible, environmental, social, and governance (ESG),” (Torre & Chiappinni, 2021, p.286). The push for green growth has become a crucial part in the decision-making process to manage climate risks confronted by business operations and for society as a whole (Bagheri et al., 2018). A common concern in this transition is that investor and borrower perception towards the expectation of growth may or may not always align with ESG mandates, ultimately affecting consumer loyalty and financial participation (Ferriani & Natoli, 2021; Semieniuk, et al., 2022). For Canada, as an oil-producing country, “sustainable finance presents very real opportunities and challenges,” and requires banks to proactively address ESG concerns (Bak, 2019, p.26). Although sustainable financing helps support the economic transition, Canadian financial institutions are still trying to navigate this landscape and balance a number of factors, some of which include; shareholder engagement, greenhouse gas emissions (GHGe) and the overall governance related to sustainable financing activities, products and services to support economic growth. To summarize this research I created a series of infographics which outlines the opportunities and challenges contributing to Canada’s economic shift towards a greener economy.
*Disclosure:
Although ESG reports are a regulatory requirement and publicly accessible under the Big Five Banks websites, the report data outlined in this research references each bank under aliases; Bank A, Bank B, Bank C, Bank D and Bank E. The decision to omit the banks names was simply that it had no bearing on this research to name and compare the efforts of individual banks in relation to each other. The purpose of this research aimed to explore the overall environmental contributions and considerations from Canada’s financial intermediaries and the existing challenges and opportunities they face to manage sustainable financing. This omission also ensures that the focus of the research remained on the quantitative and qualitative data without the influence of a banks potential reputational ranking.