Canada’s Banks Face Shareholder Pressure to Ease Up on ESG

Proposals call for banks to scrap net-zero targets or temporarily suspend them

The Logic

Catherine McIntyre

Bank buildings in Toronto’s financial district. PHOTO BY TIJANA MARTIN/THE CANADIAN PRESS FILES

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