RBC drops sustainable finance goal citing changing methodology and greenwashing laws

Royal Bank of Canada (RBC) has dropped its goal to provide C$500 billion (US$361 billion) in sustainable finance by the end of 2025, citing changing measurement methodologies and anti-greenwashing regulations.

In its latest sustainability report, the bank cites Canada’s 2024 Competition Act revision – which prohibits unbacked environmental claims – as one of the reasons why it is “retiring” its sustainable finance commitment.

“We have reviewed our methodology and have concluded that it may not have appropriately measured certain of our sustainable finance activities as presented on a cumulative basis,” RBC says.

Revising the bank’s sustainable finance framework

Last year, the bank had reported C$29 billion (US$21 billion) in facilitated green finance, and C$393.9 billion (US$284 billion) in cumulative sustainable finance since it first announced its target in 2019. 

To calculate this number, RBC used its own sustainable finance framework, which considered capital provided to “low-carbon energy sources” such as nuclear energy, as well as financing and other services provided to clients in hard-to-abate sectors with climate transition plans meeting certain criteria, as eligible to contribute to the goal.

Now, RBC says regulatory changes like the Competition Act revision, and the evolution of industry practices for measuring and reporting on sustainable finance, have led it to “considering potential changes to our overall approach to sustainable finance, including our Sustainable Finance Framework” – which has been removed from its website.

Those wanting to know how the framework will be adjusted will have to wait at least a year, with RBC set to disclose material changes “in a future sustainability report”. 

“We remain committed to sustainable finance and to reporting on our sustainable finance activities in a clear and transparent manner in compliance with applicable laws,” the bank added.

Read also: Growth pains ahead for sustainable finance

Towards a common definition of sustainable finance

RBC’s move may be perceived as a backtracking from climate action – particularly after the bank also left the Net Zero Banking Alliance this January as part of a North American exodus from the initiative.

But it is mostly reflective of a difficult but necessary evolution of the sustainable finance landscape, whose lack of clear and common definition has led to controversies and distrust. 

As the Head of Sustainable Finance and Data Analytics at the London Stock Exchange Group put it at a recent event: “We’ve now reached the level of maturity where some questions are being asked, and probably rightly so.”

As regulators and public scrutiny help clarify which financing can be called “sustainable”, some banks, like RBC, are choosing to take a step back, while others like BBVA are doubling down.