Big Bank Adopts Groundbreaking Oil Sands Lending Policy, but Will It Have Teeth?

A leading oil sands lender adopts policy language considered the gold standard for protecting rights of indigenous peoples, but is it just rhetoric?

The Royal Bank of Canada (RBC) — one of the world's biggest financiers of Canadian oil sands — has expanded its environmental policy to give more say to indigenous peoples when considering underwriting mining projects and pipelines blamed for polluting their lands.

The decision to consult First Nations on "high-impact" investments, such as Alberta's oil sands, was hailed by environmental and indigenous groups as a sign of how far financial institutions have come in acknowledging the risks of fossil fuel development to Native Americans — and to their own bottom lines.

"This is certainly one of the strongest commitments we have seen from a bank of RBC's size in terms of indigenous rights," said Brant Olson, campaign director for advocacy group Rainforest Action Network (RAN). "The bank has made real progress."

The decision was disclosed by RBC on its website on December 22, in a 282-word message from President and CEO Gordon M. Nixon.

Details are thin on the so-called "Policy on Environmental and Social Risk Management for Capital Markets." But Geoff Owen, a spokesperson for RBC, confirmed that it "formalizes consultation with First Nations" for the first time.

First Nations say oil sands extraction and pipelines have polluted waterways and indigenous villages.

"It is a policy that governs when, where and how we lend, particularly in heavy manufacturing and natural resources," Owen told SolveClimate News.

More Than Meets the Eye?

RAN and indigenous groups that lobbied RBC for two years to change its policy insist there is far more to the standards than was disclosed publicly.

They say groundbreaking language was approved in official internal policy that they reviewed, which directs RBC's oil and gas clients to have "policies and processes consistent with the standard of free, prior and informed consent" in community relations with First Nations.

That well-known clause, known as FPIC (pronounced eff-pick), is considered the international gold standard for protecting the rights of indigenous peoples.

It comes from the UN Declaration on the Rights of Indigenous People that Canada and the U.S. endorsed in recent months after vetoing it in 2007, along with Australia and New Zealand.

According to Olson: "The Harper administration making that decision opened up space for the bank to take stronger position on the issue."

Of course, what constitutes "consent" is still a matter of interpretation.

"In the ideal world, we would see a very clear commitment to drop business with clients that are not clearly able to demonstrate that they have consent for their activities where they impact indigenous communities," Olson said.

For RBC, that is far from likely.

Owen of RBC said the internal policy mentions FPIC, but that such consent has "no force of law in Canada yet" and won't be required by the bank as a precondition for financing — at least for now.

"When FPIC is incorporated into a domestic legal framework — which isn't the case in Canada or the U.S. yet — we will look to clients to follow the principles of FPIC," Owen said. The only countries where FPIC holds legal weight is in Australia, Venezuela, Philippines, Malaysia and Peru, he added.

'Proof Is In the Pudding'

Olson of RAN agreed that ultimately "the proof is in the pudding," adding that time will tell whether the bank prefers action to rhetoric on indigenous rights.

In any case, he suggested, the move is a sign that RBC is growing increasingly concerned about the reputational and financial damage that could be inflicted on it from supporting energy development in the Alberta oil sands and elsewhere.

During a shareholders meeting in early 2009, Nixon stated that oil sands concerns were "not a bank issue." Similarly, in a letter to RAN dated Dec. 19, 2009, Nixon said FPIC was "impractical" and is not on the table.

Owen of RBC said the recent policy shift is not a sign the bank is stepping away from oil sands investments but rather a natural evolution of longtime environmental risk management practices.

"We don't see a tradeoff between being a leading lender and a leader at risk management," he said.

According to numbers from Bloomberg and crunched by RAN, RBC is the No. 1 financier of oil sands, raising $16.9 billion for companies operating in the Alberta oil sands patch from 2007 to 2009, a figure the bank hotly disputes.  

True Test Will Be Enbridge Pipeline

As one of the world's biggest banks and backers of oil and gas, RBC has long been the target of progressive groups.

At its annual shareholder meeting last year, First Nations representatives pressed Nixon to adopt an FPIC standard. Trillium Asset Management Corporation and Vancity Investment Management Ltd filed shareholder resolutions.

In the last two years, dozens of protests were held at bank branches. RAN and others met with officials, including Barbara Stymiest, RBC's chief operating officer, who visited the group's San Francisco headquarters.

The real test of RBC's commitment will come in the coming months when energy firm Enbridge issues bonds to finance its $5.5 billion Northern Gateway Pipelines Project, which is still awaiting federal approval. 

Terry Teegee, vice tribal chief of the eight-nation Carrier Sekani Tribal Council of British Columbia, said that if RBC finances Enbridge or others involved, its "promises will ring hollow."

The 730-mile twin pipelines would carry 525,000 barrels of crude per day from Alberta to a proposed supertanker terminal in the British Columbia port town of Kitimat. It would crisscross territories claimed by 50 First Nations, 1,000 streams, rivers and some important salmon-breeding streams.

More than 60 First Nations, the Union of British Columbia Municipalities, a group representing local governments, and others have signed resolutions against the pipelines.

"Without First Nation consent, it is safe to say this project is dead in the water," irrespective of what RBC does, Teegee said.

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