Canadian financial institutions three times more likely than global peers to invest in climate solutions

New analysis from the World Benchmarking Alliance (WBA) finds that Canada’s major financial institutions are three times more likely to invest in climate solutions, leading among global peers in the transition to a low-carbon economy. Yet, these same institutions fail to restrict fossil fuel financing. This reflects a mismatch where financial institutions are supporting the growth of climate solutions, but not yet systematically shifting capital away from fossil fuels. Aligning financing with a 1.5°C pathway requires both: scaling investment in solutions while taking decisive steps to phase out fossil fuels.

Published at the start of the Sustainable Finance Summit in Montreal, WBA's assessment covers 22 Canadian financial institutions – including Royal Bank of Canada, La Caisse and Desjardins Group – on transition planning, low carbon disclosure and fossil fuel commitments. Together, these 22 companies account for an estimated 61% of Canada's financial system by total assets. This research is part of WBA’s global assessment of the world’s 2,000 most influential companies to show how the private sector is shaping outcomes for people and the planet.

The findings show: 

• Some Canadian institutions are ahead of global peers, with leadership concentrated in banks and pension funds.
  Canadians lead on disclosure: over 50% of the assessed Canadian financial institutions (12 out of 22 companies) disclose the share of their financing for low carbon activities, doubling the world’s average (26%, 103 out of 400 companies).
  
  They are also three times more likely than global peers to invest in climate solutions, with 41% doing so compared to 14% globally. This leadership, however, is concentrated among banks and pension funds.
  Five of six Canadian banks (83%) meet the climate solutions investment criterion, well above the global average of 21%. Canada is also home to three of the four pension funds worldwide that meet this benchmark: Healthcare of Ontario Pension Plan, La Caisse and the Ontario Municipal Employees Retirement System.
   

• No Canadian institution demonstrates key decarbonisation actions
  
  Critical gaps remain in the more demanding areas of climate transition planning. No Canadian institution meets the benchmark’s standard for key decarbonisation actions, which include measures such as phasing out high-carbon assets and setting 1.5°C-aligned emissions targets across portfolios.In addition, all 22 institutions maintain fossil fuel policies that include exceptions, thresholds, or limited sector coverage, leaving the door open for continued financing of high-carbon activities.
  
  This mirrors global performance, where only two out of 400 financial institutions have robust commitments to phase out fossil fuels – a step companies must take to demonstrate credible transition strategies and address escalating energy risks.

  Pauliina Murphy, Engagement & Communications Director of the World Benchmarking Alliance, said:

“Given Canada’s position as one of the world’s largest oil and gas producers and the concentration of its financial system, a relatively small group of institutions plays an outsized role in shaping how capital flows to some of the hardest-to-abate sectors. The progress of financial institutions is critical to how fast the country can mitigate the risks brought by the unstable energy supply and fossil fuel crisis.

Financial institutions in Canada are clearly moving in the right direction, with more firms setting transition plans and strengthening their climate disclosures. The next step is to build on this momentum by linking transition plans to capital allocation decisions and develop robust commitment to phase out fossil fuels.”

The report also draws on WBA’s assessments of real economy companies and analyses 27 of Canada’s most influential ones – businesses that produce goods and services, reflecting a similar pattern of progress but missed opportunities in the transition to a low-carbon future. Notably, while Canadian-headquartered companies are ahead of global peers in having emissions reduction targets, 75% fail to disclose sufficient data to track emissions, highlighting a significant gap in transparency and execution.

The opportunity is immense with Canada’s resource wealth, strong financial sector, and innovative companies. Canada can position itself as a leader in the sustainable transition if its most influential actors move with the urgency and effort that the complexity of global risks and opportunities across sustainability themes demands.