Canadian bank stocks have been working to dial back their involvement with fossil fuels for some time now. The pace isn’t exactly what climate hawks would prefer, but it’s certainly getting somewhere. Meanwhile, investors aren’t exactly displeased with the more moderate pace, as Bank of Nova Scotia (TSE:BNS), Canadian Bank of Imperial Commerce (TSE:CM), Royal Bank of Canada (TSE:RY), and Bank of Montreal (TSE:BMO) were all up fractionally in the session.
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A recent look at bank financing to fossil fuels in 2023 staged by a slate of environmental groups notes that, indeed, Canadian financing to such operations was down. However, the Rainforest Action Network coalition found that the Canadian banks did more business with such operations than their major American counterparts.
For those concerned about where power and heat will come from without fossil fuels, take heart: since 2016, the collection of 60 banks have funneled around $6.9 trillion U.S. to the fossil fuel industry. In 2023, the banks put up $349 billion, all told, reaching 874 companies.
The Vagaries of Sustainable Finance
One such operation, Barclays, reportedly pulled in “tens of billions” of dollars for fossil fuel companies but declared it “sustainable finance.” Naturally, some did not take this well and declared Barclays “totally dishonest” for the effort. Yet, the question becomes one of degrees; what investments are considered “sustainable”? Who decides? Is it the bank making the lending happen, biased in favor of return on investment, and accountable to shareholders? Or is it biased watchdog groups like Rainforest Action Network?
Noting that financing to fossil fuel operations is going down among major banks while increasing among smaller regional players makes one wonder what the point of the whole exercise is, to begin with.
Which Canadian Bank Stocks Are a Good Buy Right Now?
Turning to Wall Street, the leader in the banking sector is CM stock, a Moderate Buy that offers 4.77% upside potential against its average price target of $51.81. Meanwhile, BNS stock is the laggard in the field as this Hold-rated stock with an average price target of $49.22 can only offer 2.22% upside potential.
