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Canada’s six largest banks are joining a global alliance, led by former central bank governor Mark Carney, that commits them to net-zero emissions targets tied to their lending.

The Net-Zero Banking Alliance (NZBA) is an industry group convened by the United Nations to speed up efforts to combat climate change. Mr. Carney, who formerly led the Bank of Canada and the Bank of England, is a UN special envoy on climate action and finance.

Royal Bank of Canada, Toronto-Dominion Bank, Bank of Nova Scotia, Bank of Montreal, Canadian Imperial Bank of Commerce and National Bank of Canada jointly announced Friday that they are signing on to the alliance. The news comes ahead of the 26th UN Climate Change Conference of the Parties, or COP26, which is being held in Glasgow and runs Oct. 31 to Nov. 12.

As signatories, banks commit to reaching net zero in their lending and investment portfolios by 2050 but also to setting intermediate targets by 2030 or sooner.

Most major Canadian banks have already set individual targets to reach net zero by 2050, but they did not immediately join the NZBA when it was launched in April, drawing criticism from environmental groups. Until now, the only Canadian financial institution to join was Vancouver City Savings Credit Union.

Banks will play a central role in the transition to a greener global economy through their financing of energy companies and emerging clean technologies. Until that shift picks up speed, however, they remain major lenders to Canada’s oil sector, a pillar of the country’s economy – and a major emitter.

Banks have grappled with how to calculate their “financed emissions” – greenhouse gases that emanate from projects and companies financed by banks through loans and capital raises – using methods developed by an international body called the Partnership for Carbon Accounting Financials.

In addition to the Canadian banks, 63 others from 32 countries with US$40-trillion in assets are signatories to the NZBA. They include Bank of America Corp., Citigroup Inc. and Morgan Stanley in the U.S., as well as a number of British and European Banks such as HSBC, Deutsche Bank AG, UBS Group AG and Société Générale S.A.

The NZBA is a subset of the Glasgow Financial Alliance for Net Zero (GFANZ), which includes insurers and fund managers and is also led by the UN and Mr. Carney.

“Canadian banks, by joining NZBA and GFANZ, are bringing their deep expertise and strong balance sheets to drive solutions for the sustainable economy that Canada and the world needs,” Mr. Carney said in a news release.

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