Bank of Montreal BMO-T is buying Calgary-based Radicle Group Inc., a prominent adviser to companies on sustainability and measuring carbon emissions, as the bank tries to meet surging demand from its clients for advice about how to navigate a global energy transition.
With 4,000 clients and 130 staff, Radicle Group has emerged as one of Canada’s most advanced developers of carbon offsets, which generate credits companies can buy and sell to compensate for emissions they are unable to cut from their operations. Companies counteract their emissions by paying for measures that have a positive environmental impact, such as protecting trees or capturing and storing carbon.
Radicle also helps companies measure their emissions so they can target ways to reduce them and document their progress. Management and employees of Radicle are expected to join BMO’s global markets unit under the umbrella of the bank’s capital markets division. But the Radicle team is expected to work with an array of bankers to advise clients across investment and corporate banking, commercial lending and wealth management.
BMO did not disclose financial terms of the deal, which it expects to close by the end of this year.
The acquisition is the latest sign of major banks’ growing interest in building tool kits and expertise to help their clients measure carbon emissions and manage a difficult transition toward net-zero emissions commitments. It is also an effort by BMO to leapfrog to the forefront of efforts to develop new products tailored to the climate transition, including carbon offsets.
Climate, energy transition and net-zero targets come up “in almost every client conversation we have,” said Dan Goldman, co-head of BMO Global Markets, in an interview.
“It’s not topical, it’s front and centre in terms of thinking about how the world evolves,” he said. “Helping our clients navigate what is clearly going to be an enormous part of their agenda going forward was paramount.”
To meet their own net-zero goals, banks also need to improve their capacity to measure and reduce emissions by the companies they finance, which are vastly greater than what banks emit with their own operations.
BMO executives decided that building the necessary expertise from scratch would take too long and striking partnerships wasn’t enough. Instead, they set their sights on Radicle, which was exploring a sale.
“This is too big a priority for us,” said Levent Kahraman, co-head of BMO Global Markets with Mr. Goldman. “The key get here is [intellectual property].”
BMO isn’t the only Canadian lender to wade into the market for carbon offsets. Last year, Canadian Imperial Bank of Commerce joined three other global banks to launch a pilot marketplace for buying and selling voluntary carbon credits run on a digital ledger. The initiative was called Project Carbon and the other banks taking part were Britain’s NatWest Group, National Australia Bank and Brazilian lender Itau Unibanco. The first trade was completed in September between the Nature Conservancy of Canada and NatWest.
Carbon offsets, which some environmental groups criticize as less effective than absolute reductions in emissions, are a key area of expertise for Radicle. But they will not necessarily be BMO’s main focus. Mr. Goldman and Mr. Kahraman expect the bank will continuously develop and adapt new products with Radicle’s expertise.
“The technology with which the whole world attacks this problem might change, in terms of the carrots and sticks that people have to use to get all of us to save the planet,” Mr. Kahraman said.
As a BMO subsidiary, Radicle expects to be able to “accelerate its emissions reduction efforts, scale its activities across BMO’s client network, develop additional sustainability services and enter new markets,” said Saj Shapiro, Radicle’s chief executive, in a news release.
BMO already has a climate institute set up as a hub for gathering and sharing expertise from inside and outside the bank. The institute also acts as an incubator for environmental technologies.
On this transaction, BMO was advised by its own capital markets division, BMO Nesbitt Burns Inc., and law firm Torys LLP. Citigroup Inc. and Borden Ladner Gervais served as financial and legal advisers to Radicle.
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