Financial Institutions and Net Zero Ambitions

Dominique Barker: Welcome to the Sustainability Agenda, a podcast series focussing on the evolving complexities of the sustainability landscape with a view on addressing current issues in a concise format to help you navigate and take action. I’m your host, Dominique Barker. Please join me as we explore today’s most pressing matters with special guests that will give you some new perspective and help you make sense of what really matters.

Bindu Dhaliwal: And what are your 2030 goals or sooner in order to sort of move you in towards that path. So that’s sort of the two sort of big buckets. You look at it from that perspective, figuring out your baseline and then how are you calculating your interim targets and your incorporating your business strategy in that perspective?

Dominique Barker: At the time of CBC’s third quarter announcement in August, 2021, CBC announced its ambition of achieving net zero greenhouse gas emissions by 2050, as well as increasing our sustainable finance target to three hundred billion by 2030. Today, we’re going to walk through some of what all of this means. On today’s episode, I’m speaking with Bindu Dhaliwal. She joined us recently, about six months ago. She’s VP of environmental, social and governance. We’re pleased to welcome her to the sustainability agenda. Good morning, Bindu. How are you Doing?

Bindu Dhaliwal: Good morning, Dominque. Thanks for having me.

Dominique Barker: Yeah, great. So first of all, let’s just talk about net zero targets, and when we discuss net zero, we talk about it being associated with operational and financing activities. Can you explain to our audience what net zero means and then why targeting financed emissions for a financial institution is important?

Bindu Dhaliwal: Sure, no problem. So if we look at the concept of net zero, it’s focussed on the process of reducing GHG emissions. And so along that process of reduction, it’s the goal of balancing the emissions that we produce into the atmosphere. Along with balancing it against. We’re moving from the atmosphere to a concept of getting to zero seems kind of simple in the concept, but you know, a lot more complicated than that. So now for a lot of companies that are high emitters or even even a financial institution, what your first focus is obviously your operations, right? So for a lot of financial institutions, it’s the goal of getting to carbon neutrality by a certain year and focussing on things like sourcing of one percent of electricity from operations, from renewable sources. So that’s the operations side of thing. For financial institutions it’s not that heavy in terms of what we output. Where is, if you’re calculating emissions, where it’s probably where we hold it heavier in our book is on our lending side and what we call financed emissions. And so the thought is that as the world transitions both as emitters, but also those that finance these companies, that we should be focussed to reducing the emissions in their portfolio. And so our focus really remains at lending, you know, leading our clients through the transition in this to the low carbon economy and helping them move on this path, but also focussing on our own book.

Dominique Barker: Ok, great. And so financial institution like a bank, really, as you said, just doesn’t have much emissions themselves. And so it’s about tackling those financed emissions. So how is the financial sector tackling the net zero initiatives that we’re discussing?

Bindu Dhaliwal: So that’s really interesting because I think it’s, you know, it’s a really an emerging area and the methodology is really evolving. So first and foremost, on the what I call the finance side, it’s really to calculate the emissions in the portfolio as a baseline. And so to help guide us through this work, the Canadian banks, including CIBC, have joined the Partnership for Carbon Accounting Financials PCAFF, which is a global partnership of FIs that are working to get to a harmonised approach for assessing and disclosing GHG emissions associated with loans and investments. I mean, it’s really specific to that type of work. So that’s number one. It’s figuring out the baseline and the number two is really looking at what your clients are doing, what are their transition plans and how does that fit in your own strategy to set interim targets? And that’s been the discourse of late. I’d say the last year or so is there’s all these net zero commitments, but really, how are you going to get to that because 2050 still seems a ways away? And what are your 2030 goals or sooner in order to sort of move you in towards that path? So that’s sort of the two sort of big buckets. You look at it from that perspective, figuring out your baseline and then how are you calculating your interim targets and your incorporating your business strategy in that perspective?

Dominique Barker: Mm-hmm. I mean, that just sounds like such a massive challenge. And, and I know I’ve been working with you, been doing I know the challenges that we’re facing as a bank. There’s data challenges, how our own clients are transitioning and trying to help them assist and what path they’re taking, how quickly they’re moving. It must be very challenging.

Bindu Dhaliwal: Yeah. You know, I find It really interesting too. I find it just such an interesting and evolving space, and there’s a lot of work being done and thought leadership. I mean, our involvement in the Rocky Mountain Institute in the Centre for Climate Aligned Finance, like they are a great partner and sort of leading a lot of the discussions and a form of bringing a lot of North American MFIs together to sort of learn from each other. Mm hmm.

Dominique Barker: And from my perspective, I have seen anything related to non-financial factors, or ESG tends to work really well as coalitions. And you mentioned the Rocky Mountain Institute Centre for Climate Aligned Finance. You know, really learning from some of what the other North American banks are doing and similar to the PCAF, just the accounting. We all want to get to the same spot. And so that’s interesting, but there’s still a great deal of heavy lifting in a lot of challenges. I think you would agree. So Bindu, there was an additional element that was interesting to me and in the earnings release a few weeks ago, and that was the formation of the Climate Ambition Hub. What can you tell me about this?

Bindu Dhaliwal: So in addition to our net zero pledge, our Climate transition plan and strategy is really focussed on four areas. So the first is about leading our clients, which we spoke about helping them through their transition plans. The second is encouraging consumer behaviour. The third is really about looking at our own operations again. We’ve talked a little bit about that in terms of carbon neutrality and becoming carbon neutral by a certain year. And then the fourth one is about sharing our progress and our commitment to share what we’re doing along the way. So going back to encouraging consumer behaviour, that’s really the concept about as the world’s transitioning to a low carbon economy. What has to also happen is demand at a sort of individual level also has to shift. And so we have a number of clients, particularly on the retail side, who have a real interest on the issue of climate change, but are really trying to figure it out and tackle it from an individual perspective. And so we are committed to providing resources and tools that really support and enable individuals to make informed and impactful choices in behavioural decisions. And so as a starting point, the Climate Ambition Hub is going to provide education and resources and advice to help clients meet these climate ambition goals in terms of how they want to move forward and how will they want to have an impact?

Dominique Barker: Well, that’s fantastic. That sounds very promising, and I think one thing that I’m always surprised about is how much we all need to learn about climate. And maybe I’ll just educate our audience here just a little bit. So we produce about forty two billion metric tons per year of carbon emissions, and so that needs to go to zero. And in fact, we need to even reverse that and take even more out. So it is a massive challenge. And I think some of the initiatives that we’ve announced, particularly on the education front, are going to be very important. And there’s always financial decisions related to reducing your emissions because generally it means better efficiency. So for example, if you’re going to make an investment in better windows, there’s a large upfront cost which will then reduce your emissions over time. And so that’s how the financial institutions can play a role and can help educate in that element that over that long period of time, you’re likely to save money. And in addition, have a positive impact or less negative, I suppose, on climate.

Bindu Dhaliwal: Dominique, I couldn’t agree with you more. It’s such a massive challenge. It’s really 42 billion tons 

Dominique Barker: Metric tons. Yeah

Bindu Dhaliwal: Metric tons of global emissions annually, right? It’s a big number, but you have to look at it. It’s an annual number. And that’s why this is such an important issue that we need to tackle.

Dominique Barker: Yeah, and that needs to go to zero. Ben, do you thank you so much for your time today and joining us and thank you to our listeners for tuning in.

Bindu Dhaliwal: Thank you for having me.

Dominique Barker: Please join us next time as we tackle some of sustainability biggest questions providing different perspectives to help you move forward. I’m your host, Dominique Barker, and this is the sustainability agenda.

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