Some of Canada’s largest banks are facing shareholder pressure to ease up on environmental targets and pledge support for the oil and gas sector, a counter to the broader push for financial institutions to improve their climate records. 

Shareholder proposals filed at CIBC, TD and BMO—on which investors are voting at the banks’ shareholder meetings this month—urge each bank to “make clear its commitment to continue to invest in and finance the Canadian oil and gas sector.” The proposals also call for the banks to scrap net-zero targets or temporarily suspend them. 

Gina Pappano, the shareholder who filed the proposals under the banner InvestNow, a not-for-profit corporation she started to oppose the fossil-fuel divestment movement, told The Logic she was concerned the recent raft of divestment policies at university endowments and pension funds could spread to Canada’s banks and erode financing for the country’s oil and gas sector and harm the broader economy. 

“The world is going to need oil and gas for a long time to come,” said Pappano, who used to lead market intelligence at TMX Group. “Our argument is if demand is not going down, Canada should be there to supply the demand.” 

A swell of shareholder activism in recent years has pushed corporations to bolster their environmental, social and governance (ESG) practices.

Every year, investors in publicly listed companies get to file non-binding resolutions and vote on changes they want to see at the firms in which they hold assets. The period of annual meetings at which the voting takes place is broadly known as proxy season. 

The number of ESG-related proposals, and in particular those specific to climate, has spiked in recent years. In the U.S. last year, shareholders filed a record 630 resolutions, 316 of which went to a vote and garnered average support of around 30 per cent. 

Pappano said she felt compelled to express “an alternative message” to what she saw as an attack on the oil and gas sector. “The other side of the argument has never been voiced,” she said. “The banks said they’ve never received anything like this in the past.” 

While proposals like the ones Pappano filed are unusual in Canada, they reflect a growing anti-ESG movement percolating in the U.S. among critics who say it’s an ideological movement that threatens economic freedom. 

Vocal antagonists to ESG investing, like Tesla founder Elon Musk and Social Capital founder Chamath Palihapitiya, have fuelled the backlash. The biotech entrepreneur Vivek Ramaswamy, who recently announced his run for U.S. president in 2024 launched a “post-ESG” ETF last year focused on oil and gas stocks with backing from PayPal founder Peter Thiel and billionaire hedge-fund manager Bill Ackman. Last month, Florida Governor Ron DeSantis launched a coalition of 18 other Republican governors challenging ESG policies, which have become the norm among large companies and investment funds.

Jackie Cook, director of stewardship with Morningstar’s Sustainalytics team, said shareholders are now using the proxy-voting process to advance the anti-ESG agenda. There’s been a surge in this type of shareholder activism in the U.S. recently. As You Sow, a shareholder-advocacy group, found that, as of mid-February, there were at least 40 such anti-ESG resolutions up for a vote at U.S. public companies, compared to just 27 by the same time last year. 

But Cook said the InvestNow proposals are the first she’s seen in Canada. 

Matt Price, executive director of corporate engagement at Investors for Paris Compliance, contended that the proposals are motivated more by ideology than market demand. The As You Sow report calculated just 3.5 per cent average support for anti-ESG proposals last year, which doesn’t meet the threshold in the U.S. for shareholders to resubmit the resolution for a vote the following year. 

Despite low shareholder support, anti-ESG proponents have had some success in the U.S.. In December, Pennsylvania-based Vanguard, which manages more than US$7 trillion in assets, quit the Net Zero Asset Managers (NZAM) global alliance following political pressure. The alliance’s umbrella organization—the Glasgow Financial Alliance for Net Zero, launched by former central banker and Brookfield Asset Management chair Mark Carney—has also faced pushback  over criteria some members deemed too stringent.

In Canada, the banks have advised shareholders to vote against Pappano’s anti-divestment proposals. They’ve argued that while they’re committed to addressing climate change and reaching net-zero emissions by 2050, divestment is not part of their transition plans. Rather, their approach is to continue financing oil and gas companies to help them decarbonize. 

Certainly, Canada’s banks aren’t showing signs of exiting the fossil-fuel business. RBC was the sector’s largest financier last year, providing over US$42 billion, up from about US$40.4 billion the year before, according to the annual Banking on Climate Chaos report. Both Scotiabank and TD cracked the top 10 for their fossil fuel financing, contributing US$29.5 billion and US$29 billion, respectively. 

The bulk of investors don’t seem to share Pappano’s concerns about divestment. Shareholders at CIBC have already voted on the InvestNow proposal. It garnered just over 3.3 million votes, representing less than one per cent support. 

“The proof is in the pudding,” said Price. “It shows that there’s really no appetite for these in Canada.” 

Still, he said anti-ESG rhetoric does have some influence in this country. “During our engagements with Canadian companies, we do hear that they are scared about the U.S. stuff,” he said. 

Price said banks may keep their climate plans and practices under wraps in response to ESG critics, what he calls “green hushing.” That can limit transparency, making it harder for shareholders, the public and regulators to hold companies accountable for their environmental records. 

Those concerns are also on display at Canada’s banks this season. Price’s organization, Investors for Paris Compliance, filed a resolution at TD seeking more details from the bank on its emissions-reduction plans. It’s among 12 other climate proposals at Canada’s six largest banks, like giving shareholders a say on companies’ climate plans and disclosing more information on funded emissions in sectors like oil and gas. 

Support for most environmental proposals so far has ranged from about 17 per cent to 26 per cent. One proposal at RBC on phasing out financing for fossil fuels received just under 6.8 per cent support. 

Price said proposals with support in the 20 per cent to 30 per cent range send a strong message to the institutions. “It shows that there’s a quarter of the investor base that’s basically not buying management’s line that they’re on top of this stuff,” he said. 

Cook, meanwhile, said the vote count on anti-ESG proposals are also instructive, and that the low support for InvestNow’s proposal so far is a useful gauge of investor sentiment. “It reflects a lot of investor consensus that banks have an important role to play in the global energy transition,” she said, “and we’re moving in the wrong direction if we ask banks to continue to finance Canada’s oil and gas sector.”