Canada’s largest bank, the Royal Bank of Canada (RBC), has quietly become the first major financial institution in the country to refuse to fund any oil and gas development in the Arctic National Wildlife Refuge (ANWR) in Alaska.
“Due to its particular ecological and social significance and vulnerability, RBC will not provide direct financing for any project or transaction that involves exploration or development in the ANWR,” reads RBC’s updated policy guidelines for sensitive sectors and activities posted on Friday.
RBC is “committed to finding ways to balance the transition to a low-carbon economy while supporting efforts to meet global energy needs and our energy clients,” Andrew Block, an RBC spokesperson, said in an email to The Narwhal.
The refuge, the largest of its kind in the United States, is home to myriad sensitive species, including polar bears and the Porcupine caribou, a transboundary herd that undertakes one of the largest land mammal migrations on Earth.
The bank’s pledge comes on the heels of a controversial U.S. decision to open up part of the Arctic National Wildlife Refuge to oil and gas development. The decision prompted swift reaction, with 13 environmental organizations taking the Department of the Interior to court.
Block said RBC has never financed any oil and gas development in the refuge, and noted the policy update is a “proactive decision” to ensure development isn’t funded in the future by the institution.
The bank also placed restrictions on financing the development of coal-fired power plants, thermal coal mines, mountain-top removal coal mines and development in UNESCO World Heritage Sites. RBC also now requires “enhanced due diligence” of any financing of energy exploration in the Arctic. A report by the Rainforest Action Network released earlier this year found RBC to be the biggest funder of fossil fuel development in Canada.
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Vuntut Gwitchin, Gwich’in Tribal Council and the Yukon chapter of the Canadian Parks and Wilderness Society have been putting pressure on major Canadian financial institutions to refuse to finance development — and withdraw any existing financing — in the refuge since last fall.
Dana Tizya-Tramm, Chief of Vuntut Gwitchin First Nation, said RBC’s commitment marks the first time a Canadian bank has taken meaningful strides to consult with affected First Nations and made a decision based on those deliberations.
“This is a wonderful acknowledgement and vindication of our Elders, who spoke to the importance of the caribou. We are looking to all major banks in Canada to come into the sunlight with RBC,” he said, adding that meetings have also occurred with TD Canada Trust, the Bank of Montreal and Scotiabank, among others.
The Porcupine caribou, which migrate into Yukon, are of great cultural importance to the Gwich’in, who have harvested them for thousands of years and exercise subsistence harvesting rights.
“This is what true leadership looks like,” Tizya-Tramm said. “This movement speaks to responsible financing. They’ve really opened up a vacuum and created a whole new discussion.”
RBC joins other U.S. banks that have made similar commitments
Earlier this year, five major U.S. banks, including Goldman Sachs, Wells Fargo and J.P. Morgan Chase, pledged to not finance development in the refuge.
Chris Rider, executive director of the Yukon chapter of the Canadian Parks and Wilderness Society, said RBC’s decision sends a clear message that investment in the Arctic National Wildlife Refuge is risky.
“This is sending a strong message that this is a project that is not going to work and that this is a project that companies aren’t going to be able to get capital for, if they do want to pursue it,” he said.
“It shows that banks like RBC are recognizing both the moral importance of protecting landscapes like the Arctic refuge and also simply that it makes good economic sense.”
When Goldman Sachs committed to not fund development, others followed its lead “almost immediately,” Rider said.
He said this domino effect could occur in Canada, too.
“We hope to see the rest of Canada’s major banks follow suit,” Rider said. “We will be stepping up the campaign in the coming months until they do that.”
How RBC assesses projects that may come with a risk
RBC evaluates all potential transactions through an environmental and social risk management process.
“A client’s environmental and social issues can affect their cash flow, their ability to operate, or the ability to grow their business,” according to a policy summary. “Our experience and knowledge along with our policies and processes help us identify and manage risks associated with a client’s environmental and social issues, minimizing our exposure to credit, reputational, regulatory and legal risk.”
Risk could be foisted onto RBC if a company has a history of spills, costs related to fines and remediation efforts or they default on loans, it says.
The bank assesses risk by visiting sites and conducting third-party environmental assessments, the summary says.
Resource and energy development in the Arctic is deemed as “high risk” in a policy guidelines document.
“RBC recognizes the natural and cultural significance of the Arctic ecosystem that is threatened by a number of factors, including climate change,” it says. “The harsh conditions and fragile ecosystems make it a particularly vulnerable and challenging region for energy and resource development projects.”
Updated at 3:15 p.m. PST to add more detail about RBC’s new policy guidelines and add reference to a report by the Rainforest Action Network.