After exceeding its $100-billion sustainable finance target ahead of schedule, TD Bank Group is setting a new goal of investing $500 billion on environmental, decarbonization and social actions by 2030.
The bank announced its Sustainable & Decarbonization Finance Target that covers lending, financing, underwriting, advisory services, insurance and investments toward green activities, as well as two new categories of decarbonization and social activities.
The update is accompanied by the publication of its methodology encompassing TD Bank's financial activities, activities eligible for the target and a governance process to quantify, validate, monitor and report progress.
The update follows TD Bank surpassing its 2017 pledge to deploy $100-billion by 2030 for low-carbon lending, financing, asset management and internal corporate programs. That was achieved in 2022.
Nicole Vadori, head of environment at TD Bank, told SustainableBiz the new target ". . . provided a North Star for the bank, something that everyone and every business can rally behind and have a role to play in contributing to the overall target."
Why TD Bank set a new goal
Vadori said the original funding target was ambitious but achievable, and a novel concept for the time. TD Bank's criteria for the $100-billion goal was more focused on supporting low-carbon actions, she added, while its Canadian banking peers had wider criteria covering social activities in their sustainable finance targets.
The $500-billion target, Vadori said, opens up the criteria for sustainability to more than low-carbon investments by accounting for decarbonization and social impact.
Vadori said there is a separation between environmental activities and decarbonization activities; decarbonization encompasses actions such as investments in sustainable fuels that have a lower carbon content but still emit greenhouse gases, so may not be considered entirely environmental by certain stakeholders.
But TD Bank "felt that these types of aspects are important, because they're important for the decarbonization of our economy, and they are incorporated into a pathway for net-zero by 2050," explained Vadori. "We need them and we need to direct capital flows towards them."
TD’s Sustainable & Decarbonization Finance Target Methodology
TD Bank identified eligible business activities that will contribute to the $500-billion target by 2030.
Activities ranging from advisory services to principal investments to insurance were ascribed a measurement basis for green investment – such as total investment amount for principal investments. Relevant guidelines, principles and methodologies were also set for the activities, including the ICMA Green Bond Principles or the TD Sustainable & Decarbonization Finance Target Methodology.
Next, eligible environmental, decarbonization and social activities were established under categories set by the United Nations’ Sustainable Development Goals.
The categories cover environmental activities like renewable energy, green buildings and clean transportation; decarbonization activities like carbon capture and nuclear energy; and social activities like affordable and community housing.
An example of an environmental activity is for green buildings that meet or intend to meet regional, national or internationally recognized standards like LEED Gold or Platinum, or the Toronto Green Standard (v4) Tier 2 or higher.
To “provide accountability and assign responsibility for quantifying, validating, monitoring and reporting progress toward the Sustainable & Decarbonization Finance Target,” TD established a governance process.
It will review transactions against the eligibility criteria in the methodology, which includes the collection, review and approval of the transactions from the relevant lines of business.
The bank intends to annually report its progress in future ESG-related reports.
Activities eligible for inclusion toward the Sustainable & Decarbonization Finance Target may change due to shifting market guidelines, frameworks, standards and principles.
“Any such changes could result in TD amending or revising its target, its inclusion criteria or its progress toward its target,” it concludes.
Vadori said TD Bank did not set specific investment targets between the three categories, as growth in the spaces is "quite unpredictable."
"The momentum in the space is just incredible," she said about the clean energy industry. "We can’t really predict how the market is going to move."
The Big Five’s green finance goals
TD Bank joins its peers among the five largest Canadian banks (dubbed the Big Five) that have committed hundreds of billions for sustainable financing.
- Royal Bank of Canada has committed to provide $500 billion in sustainable finance by 2025.
- Bank of Montreal set out to mobilize $300 billion in sustainable finance by 2025.
- Scotiabank has targeted mobilizing $350 billion by 2030.
- Canadian Imperial Bank of Commerce says it is on track to meeting its goal of $300 billion in sustainable finance from 2018 to 2030.