Royal Bank of Canada Chief Executive Officer David McKay said any shift to a more climate-friendly economy still depends on fossil fuels.
“We have a longer-term transition as we change the energy source, we move to a greener economy, but it is a transition,” McKay said Thursday during a Bloomberg Television interview at the World Economic Forum in Davos, Switzerland. “You need fossil-based fuels to make that transition — they’re not going away overnight.”
Making such a shift requires a strong economy with a tax base and cash flows that include contributions from the traditional energy sector, according to McKay. The CEO of Canada’s largest lender by assets said a lot of the anger and calls for an immediate end to fossil-fuel investment stems from a lack of a clear path to reaching global climate-change goals from the Paris agreement and attaining carbon neutrality by 2050.
“What we’re missing is an articulation of a plan to replace your fossil fuels,” McKay said. In the meantime, “we have to invest. Otherwise you’re going to see US$150 oil prices plus and that’s more destabilizing to our global economy and slower on growth than you would expect.”
Royal Bank of Canada had $8.15 billion (US$6.2 billion) in loans to the oil-and-gas sector as of Oct. 31, representing about 1.3 per cent of overall loans for the Toronto-based bank, according to financial statements.
The focus on making the shift to green energy has created angst in the fossil-fuel industry, mostly among smaller companies, according to McKay.
“There’s a lot of mixed signalling from capital markets and investors into the energy sector,” he said. “You’re seeing some mid-size and smaller firms start to hoard cash because they’re not sure they’re going to have access to capital to drill.”
Bloomberg.com
You can read more of the news on source
