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Royal Bank of Canada has set interim targets to help clients cut carbon emissions in heavily polluting sectors by 2030, even as executives said the bank may need to direct more money to some industries in the near term to drive their decarbonization efforts.

With the targets announced Wednesday, Canada’s biggest bank aims to reduce the intensity of emissions – reductions per unit of economic output, rather than absolute cuts by its clients in the oil and gas, power generation and automotive sectors by anywhere from 11 per cent to 54 per cent in the next seven years. That means those companies would need to be more energy-efficient about how they do business or produce goods, but could still emit more carbon overall if their businesses expand.

RBC is the last of the Big Five banks to outline its 2030 emissions targets, after its rivals set similar goals early this year. The bank also released a revised sustainable-financing framework that outlines how it plans to meet its goal of providing $500-billion in loans and equity issues for green projects by 2025.

RBC’s new targets were shaped in part by guidance from a global net-zero alliance of financial institutions led by Mark Carney, the former central banker. The Net Zero Banking Alliance (NZBA) advised member banks to focus first on high-emissions industries that make the most impact, said Lindsay Patrick, head of strategic initiatives and ESG for the bank’s capital markets division. The group, a high-profile attempt to spur financial institutions to reach net-zero goals, has seen tensions among members surface in recent weeks.

Greenhouse gas emissions are categorized by “scopes.” Scope 1 and Scope 2 encompass emissions from a company’s operations and the power and heat it uses, while Scope 3 emissions stem from the use of products from industrial clients financed and served by banks. The latter are the largest by far and hardest to quantify.

In a new report, RBC said it is aiming for a 35-per-cent reduction in the intensity of Scope 1 and 2 emissions from its oil and gas clients, and an 11-per-cent to 27-per-cent drop in Scope 3 emissions intensity by 2030.

The bank is also aiming to reduce Scope 1 emissions from power generation by 54 per cent, and in automotive manufacturing and financing across all three scopes by 47 per cent over the same period.

The bank settled on intensity-based targets in part “because it creates better comparability across our portfolio,” making it easier to measure relative progress by clients in different sectors, especially as RBC’s overall loan book grows, said Jennifer Livingstone, RBC’s vice-president for climate.

“In the short term, to get to net zero we may actually need to increase our financing in some of these sectors to help them to invest in the decarbonization that’s needed for the future,” Ms. Livingstone said in an interview. “So for this time, physical emissions-intensity targets were the right approach.”

After RBC’s annual meeting last April, RBC chief executive officer Dave McKay told reporters that the only emissions-reduction target “that really counts over time is absolute reduction,” and the bank was taking extra time to set its targets given the complexity of the task.

Ms. Livingstone said absolute reduction targets are still RBC’s ultimate goal, and it will continue to publish absolute emissions.

Last month, RBC and Canada’s other big banks expressed qualms about the terms for membership in the Glasgow Financial Alliance for Net Zero, or GFANZ, the umbrella organization for the NZBA. They worried they were being forced to adhere to guidelines set by a UN climate campaign, Race to Zero, that suggested an eventual need to halt financing of high-emitting sectors, notably oil and gas, a major part of the national economy.

Concerns that Canadian banks were growing uncomfortable a year after joining the group followed reports that a trio of U.S. banks were threatening to quit GFANZ and the NZBA, fearing legal dangers. Mr. Carney said this week none of the CEOs had expressed to him a desire to leave.

RBC’s Ms. Patrick said an open letter from NZBA leadership to member institutions last week helped allay RBC’s concerns about governance of the voluntary organization as it charts its own path to net zero. The chair of the NZBA steering committee wrote that Race to Zero does not have the power to impose requirements on the NZBA as a whole or on individual members.

“I think their role, and the governance around their role, is much clearer now,” Ms. Patrick said. “We feel that we can continue to work with the NZBA.”

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