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Canada’s major banks are starting to fill in the blanks on how they plan to deal with their biggest climate problem – the carbon emissions from their industrial clients.

These are by far the largest sources of greenhouse gases stemming from the business of the financial institutions. They are the hardest to tally and out of their direct control. But these “financed emissions” must be dealt with if the banks have any hope of achieving their commitments to get to net-zero emissions by 2050.

Last October, the big Canadian banks all signed on to the UN-convened Net-Zero Banking Alliance, which committed them to setting 2030 targets within 18 months of joining, and setting new interim goals every five years after 2030 until 2050.

This is certainly an inexact science. The banks concede that today’s estimates include a lot of assumptions. But at least they are getting down to the work required, and it starts the process of being able to judge how effective the programs will be over time.

In their latest environmental reports, Toronto-Dominion Bank TD-T, Bank of Montreal BMO-T and Bank of Nova Scotia BNS-T say they have taken the early steps of setting interim targets for financed emissions from key sectors. Canadian Imperial Bank of Commerce CM-T and Royal Bank of Canada RY-T plan to announce their targets this year.

TD aims to report a 29-per-cent reduction by 2030 in emissions intensity – or emissions per unit of production – from fossil-fuel energy, such as oil and gas and coal. TD is including the full spectrum of emissions categories, known as scopes. Scope 1 includes emissions from a company’s operations. Scope 2 encompasses emissions from the power and heat it buys for the operations. Scope 3 is where things get tricky. These emissions stem from customers using the end products.

TD also targets a 58-per-cent drop in emissions from its power-generation clients.

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In the same period, BMO aims for a 33-per-cent decrease in emissions intensity from oil and gas, as well as a 24-per-cent drop in Scope 3 emissions. The bank also wants to reduce CO2 in its power-generation portfolio by 45 per cent. As a bonus, it is planning for all new loans on passenger cars and light-duty trucks to be for zero-emission models by 2035.

For its part, Scotiabank wants to reduce its power and utilities emissions intensity by 55-60 per cent by 2030. For oil and gas, the bank is shooting for an emissions-intensity reduction of 30 per cent. That’s for Scopes 1 and 2 emissions. For Scope 3, it seeks a decrease of 15 to 25 per cent.

These numbers, and all this stuff about emissions scopes, show the complexity of the problem. First, there’s the challenge of coming up with passable estimates, when not all clients have tried to quantify Scope 1 and 2 emissions, let alone Scope 3. There are formulas that the banks employ to come up with their numbers, spelled out by the Partnership for Carbon Accounting Financials, or PCAF, a global organization to which they have joined. But executives acknowledge there’s years of work ahead to improve their precision.

RBC, for instance, has estimated its “balance-sheet-wide” financed emissions at 45 million tonnes, including business loans and commercial real estate loans, mortgages, motor-vehicle loans, corporate bonds and project financing. And the accuracy varies by asset class and sector, using various assumptions spelled out by PCAF, said Lindsay Patrick, head of the sustainable finance group at RBC Capital Markets.

Importantly, the banks also must have some confidence that their clients will be as dedicated to reducing emissions as they are. They have pledged to push their borrowers to drain carbon out of their operations, rather than cutting them off. This has been to the dismay of environmental activists that seek a halt in fossil-fuel funding.

All have dedicated money and other resources to setting up programs and institutes to help corporate clients navigate the science and finance of decarbonization, and it won’t be known for a number of years how successful this will be.

It won’t silence the banks’ critics, who want to see tougher action. Nor should it. This work, however, will put numbers to the magnitude of the problem, and help the rest of us see if financial institutions are serious about climate action.

Jeffrey Jones writes about sustainable finance and the ESG sector for The Globe and Mail. E-mail him at

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