Royal Bank of Canada (RBC), the country’s largest lender, has abruptly withdrawn its $500 billion sustainable finance commitment, citing regulatory uncertainty and the growing legal risks tied to greenwashing under Canada’s newly amended Competition Act. The shift, confirmed in RBC’s 2024 Sustainability Report, reflects a wider cooling of voluntary climate targets across Canada’s financial sector.
“We are retiring our sustainable finance commitment,” the bank stated, attributing the move to “limited and evolving recognized methodologies” and the need to ensure compliance with updated legal requirements.
RBC had previously committed to mobilizing $500 billion by 2025 for sustainable activities, such as green infrastructure, clean energy, and climate adaptation. By the end of 2023, it had reached $394 billion. However, RBC now acknowledges that its cumulative accounting may have misrepresented progress, raising internal and external concerns over data quality.
Legal Pressure Mounts on ESG Disclosures
The amended Competition Act, passed in mid-2023, requires that all environmental claims must be substantiatedwith robust, recognized methodologies—introducing new legal exposure for firms accused of greenwashing. This has cast a chilling effect over Canada’s ESG disclosure landscape, especially for financial institutions with large climate pledges.
RBC has paused several key metrics in its sustainability reporting, including:
- The energy supply ratio (low- vs. high-carbon financing)
- Progress on low-carbon energy lending
- Certain interim targets set in 2022
While these metrics will still be tracked internally, they will no longer be disclosed externally due to fears of litigation and reputational risk.
Signals of a Broader Industry Retreat
The move follows RBC’s earlier withdrawal from the UN-backed Net-Zero Banking Alliance—an initiative launched by former Bank of Canada Governor Mark Carney—alongside other major Canadian banks. The decision, coupled with delayed climate disclosure mandates by Canadian securities regulators, raises concerns that voluntary ESG commitments may be unraveling under legal and political pressures.
“This shows why the federal government – now led by a climate finance expert in Mr. Carney – should push for required disclosures to replace voluntary measures,” said Richard Brooks, Climate Finance Director at Stand.earth.
Julien Beaulieu, a Canadian competition lawyer, added: “There is a risk of a dangerous new trend—companies citing the Competition Act to justify non-disclosure.”
Still Committed, but More Cautious
Despite the rollback, RBC maintains it is not abandoning the climate transition altogether. The bank pointed to ongoing renewable energy investments, green building strategies, and a continued internal focus on energy financing ratios. However, it now admits that its interim climate targets may no longer be realistic, citing geopolitical volatility, evolving energy demand forecasts, and technological uncertainties.
This recalibration by Canada’s most influential bank could set a precedent for other institutions facing the same legal headwinds—signaling a pivot from aspirational sustainability goals toward legally defensible, regulator-aligned frameworks.
The episode underscores the need for clearer standards, harmonized regulations, and potentially mandatory ESG disclosure frameworks to ensure climate finance progress continues with credibility and legal certainty.
