Scotiabank's 2019 annual report recognizes climate change as a critical risk to the bank: "Climate change has the potential to impact the Bank's retail and business banking profitability through credit losses. Severe weather can damage Bank properties and disrupt operations. Emerging policy/regulatory actions on climate can elevate the Bank's reputational, legal and regulatory compliance risks."

Scotiabank has responded by announcing a financing target of C$100 billion in low-carbon initiatives by 2025 and has taken steps to reduce emissions from its operations. Yet these steps do not address the much greater risks arising from exposure to high carbon projects in its lending portfolio and underwriting.

In a recent report that ranked banks on their exposure to carbon intensive industries, Scotiabank ranked 10th globally and third in Canada, just behind TD Bank. Scotiabank ranked 8th globally and third in Canada among companies financing the top 100 companies expanding fossil fuels.

The Intergovernmental Panel on Climate Change recently underscored the harm of climate change, announcing that "rapid, far-reaching" changes are necessary to avoid disastrous levels of global warming; net emissions of carbon dioxide must fall 45 percent by 2030, reaching "net zero" by 2050.

Recently a U.S. government entity, the Commodity Futures Trading Commission, issued a report that concludes: "U.S. financial regulators must recognize that climate change poses serious emerging risks to the U.S. financial system, and they should move urgently and decisively to measure, understand, and address these risks."1

The bank's exposure to high carbon industries and projects, including oil sands development, put it on a collision course with the coming transition to a low carbon economy called for in the Paris Agreement.

Shareholders need transparency from the bank on the carbon footprint of its portfolio. The industry-led Partnership for Carbon Accounting Financials (PCAF), has issued the Global Carbon Accounting Standard2, which measures the carbon emissions arising from loans and underwriting, including Scope 3. PCAF reports that 78 financial institutions with $13.8 trillion USD in financial assets have committed to disclosing the GHG emissions associated with their portfolios.3 Reporting against this standard would enable the Company to establish targets aligned with science, such as those described by the Science Based Targets Initiative. US Peers, including Bank of America, Morgan Stanley, and Citibank, are already taking action, and in Canada, TD Bank recently committed to net zero emissions by 2050 in line with the Paris Agreement.

Proponents believe establishing time-bound, science-based, quantitative targets for reducing GHG emissions, including scope 3, associated with the bank's lending and underwriting activities would serve to align new and existing initiatives, mitigate risk, and enhance shareholder value.