Climate-related issues have always dominated sustainable finance, so it may raise a few eyebrows that Euromoney has named as North America’s best bank for sustainable finance a firm that saw its fossil-fuel investments jump by 87% in 2021. Indeed, until very recently, this year’s winner still boasted a long-running membership of the Canadian Association of Petroleum Producers, which it has now let lapse.
But at its core, sustainable finance reflects both environmental and social impact at every level of the banking industry. Like its Canadian peers, Scotiabank cannot avoid its responsibility in financing the energy transition. The resource-rich country, whose fossil-fuel industry generated over 7% of its GDP in 2020, needs to catch up to global net-zero targets. But its commitment to delivering sizeable environmental, social and governance transition products to its most polluting clients, while doubling down on social impact projects, justifies its position as the winner in this category.
This year, Scotiabank has invested capital in transition-driven projects and technologies as it heads towards its new interim target of 100% non-emitting electricity for its Canadian operations by 2025 and 100% for its global footprint by 2030.
Scotiabank was instrumental in key deals that worked towards that transition in Canada last year. It was co-sustainability structuring agent and co-lead arranger for Whitecap Resources’ C$1.6 billion ($1.24 billion) sustainability-linked loan, with pricing tied to key performance indicators of a 15% reduction of Scope 1 and 2 greenhouse-gas intensity by 2025 and a 30% reduction in methane emissions intensity by 2025.
The bank also acted as joint bookrunner and sole structuring adviser for Canadian natural gas distribution company Enbridge on its C$1.1 billion sustainability-linked bond, a first for the Canadian energy sector.
“It is amazing how fast the world moves,” admits Jake Lawrence, chief executive and group head of global banking and markets at the Toronto-based bank, looking back at the wave of interconnected socio-economic issues that followed Covid-19.
Scotiabank emerged from the pandemic with a healthy balance sheet and the ability to address its Canadian clients’ immediate capital needs. The bank made a $10 billion decade-long commitment alongside the Canada Mortgage and Housing Corporation to tackle Canada’s affordable housing crisis. Chief economist Jean-François Perrault contributed to the success of the initiative by shifting the conversation from the buy side to the supply side.
Beyond housing, social impact has proved to be a driving force for Scotiabank’s corporate lending activities. The bank issued Canada’s largest sustainable bond last summer, a $1 billion deal. Adhering to its own sustainable bond framework, the bank expanded its use of proceeds to include women-owned business lending and loans originated by the indigenous financial services division.
We want to work with clients to tackle stranded assets, help them decommission sooner and operate with certainty
The key to success has been investing resources in building in-house subject matter expertise, while driving connectivity inside the bank to cement a sustainable ethos. Instead of taking bankers from other sectors and retraining them, the firm chose to bring in academic expertise in sustainable finance and green engineering.
“We wanted to keep the organizational structure flat and nimble,” says James Neate, president and group head of corporate and investment banking at Scotiabank. “With our combined 50 years at Scotiabank, we’ve spent formative parts of our careers in other parts of the bank. That has helped us drive connectivity from inside out.
“We’re committed to a just transition, which is a really challenging task,” he adds. “We want to work with clients to tackle stranded assets, help them decommission sooner and operate with certainty.”
