Canadian banks are increasingly focused on financed emissions—the greenhouse gases linked to the companies and projects they lend to—because these emissions represent the largest share of their climate impact. The core shift is that banks are no longer looking only at their own operational footprint; they’re embedding climate considerations directly into lending decisions.
Banks are setting net-zero targets for their loan portfolios, often aiming for 2050, and publishing interim goals for high-emitting sectors like oil and gas, real estate, and transportation. They’re also adopting the PCAF framework to measure financed emissions more consistently across institutions. This gives them a clearer view of where emissions are concentrated and where transition risks lie.
A major development is the rise of sustainability-linked lending. Borrowers can receive better loan terms if they meet emissions reduction targets, pushing climate performance into the heart of credit decisions. Banks are also expanding transition finance — funding that helps carbon-intensive companies shift toward cleaner operations rather than cutting them off entirely.
Internally, banks are building climate-risk teams, integrating emissions data into risk models, and stress-testing portfolios against different climate scenarios. This helps them understand how policy changes, carbon pricing, or shifting market demand could affect loan performance.
While progress varies across institutions, the direction is clear: financed emissions are becoming a central factor in how Canadian banks assess risk, structure loans, and support the country’s broader transition to a low-carbon economy.
