It took nearly two years, but today Royal Bank of Canada (RBC) finally adopted environmental and social standards on its financing in the tar sands. Great! So what does that mean?
Clearly, it means a significant about-face on tar sands for one of the world’s biggest banks. Before today, RBC trailed its peers on basic issues like Indigenous rights, water quality, and the environment. A review of the Bank’s 2009 annual report shows strong philanthropy and energy-saving initiatives across the bank, but relatively few screens for lending and other core financial services. Despite being one of the world’s biggest financiers of the tar sands, RBC’s business in the sector escaped any systematic environmental or social review. During a speech to shareholders in early 2009, CEO Gord Nixon claimed that concerns about tar sands concerns were “not a bank issue.”
What a difference a year makes. In a post to its website, RBC announced its first ever “Policy on Environmental & Social Risk Management for Capital Markets.” The policy guides the bank in assessing the environmental and social impact of its clients and deciding what to do about them. While the announcement doesn’t go into details, Rainforest Action Network (RAN) got a peek at the language in the new policy last month.
The policy breaks significant new ground on Indigenous rights. For clients with operations within Indigenous territories, the bank will document the status of consultation with those groups. That’s not especially new. In fact many banks have incorporated the World Bank standards of “consultation, leading to broad community support” into their lending policies. Where RBC raises the bar is in documenting whether clients have “policies and processes consistent with the standard of “Free, Prior and Informed Consent.”
That “consent” clause—commonly referred to as FPIC (pronounced “eff pick”)—was taken from the UN Declaration on the Rights of Indigenous Peoples, which was endorsed by the US government just last week and by the Canadian government last month. No other bank has yet issued such an explicit expectation of its clients regarding Indigenous rights. RBC also extends this policy to its entire capital markets business — not just a handful of its biggest loans, as is the standard established by the Equator Principles.
Policies are one thing, but results for communities facing off against RBC’s clients are quite another. The first test of RBC’s new policy will happen in the heart of the Great Bear Rainforest in British Columbia, where Enbridge is proposing a 727 mile long pipeline to carry more than half a million barrels of tar sands oil per day to a tanker port in Kitimat. Along the way, 61 First Nations are (strongly) withholding consent for the project due to failed consultation over its substantial social and environmental impacts to traditional territories.
Enbridge will likely go to the bond market to finance the $5.5 billion project. If RBC steps in to underwrite that bond, the bank’s policy will have meant little to the communities which it purports to honor. If RBC opts out, it will be a new day in the banking world. Rumor has it that the World Bank will be adopting similar “consent” language in its revised IFC Performance Standards expected to be released next year. RBC’s handling of this new commitment will be a bellwether for the private banking sector’s willingness to implement this emerging international standard.
Is RBC up to the challenge?
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