RBC (RY-T) will be working with CT REIT to reduce carbon emissions and waste from the Canadian retail branch spaces it leases from the Toronto-based retail property owner.

The two companies will collaborate on sustainability lease clauses and sharing data about environmental metrics, as laid out in a memorandum of understanding. The agreement will also focus on transitioning RBC-leased spaces away from fossil fuel-powered heating equipment to those that run on electricity.

The agreement will apply to locations in small buildings or open-air retail malls.

The bank undertook similar initiatives to decarbonize its real estate footprint with other large retail land owners such as First Capital and Choice Properties. On the office side, RBC and Cadillac Fairview have partnered on making the RBC Centre in Toronto a net-zero emissions building by 2040.

“When we started this landlord engagement program, it was really about understanding where each of our landlords are on their climate journey and seeing where we have areas of opportunities,” Jon Douglas, RBC’s director of global climate and sustainability operations, said in an interview with Sustainable Biz Canada.

He could not disclose how much space RBC leases from CT REIT, a company with Canadian Tire Corporation as its majority unit holder, but said CT REIT is one of its biggest retail property owners.

The bank has a global real estate footprint totalling 22 million square feet in 30 countries, most of which are leased. CT REIT’s portfolio is made up of approximately 30 million square feet of gross leasable area, according to its website.

RBC-CT REIT decarbonization partnership

The collaboration with its property owners is part of RBC’s goal of reducing its operational greenhouse gas emissions by 70 per cent by 2025 against a 2018 baseline. It managed a 63 per cent reduction by the end of 2024.

As it does not expect to meet the 2025 target, RBC retired it and will set a new target, according to its 2024 sustainability report. Working with its land owners is vital to the updated strategy, it said.

The “agreements are really about both partners understanding what RBC’s expectations are for decarbonization and climate, and those can apply to buildings today we have in Canada with CT REIT," or ones that will be added in future expansions, Douglas said.

“It really means that those landlords are already understanding, ‘Oh, we already know what RBC wants in this space.’”

RBC and CT REIT are sharing climate and sustainability data with each other, covering categories such as carbon emissions, waste, recycling and water management. The information, Douglas said, can be used to improve on performance.

The bank and REIT will also endeavour to reduce greenhouse gas emissions from heating the buildings. RBC is establishing that when renewals with CT REIT come up, it expects equipment conversions at the leased spaces, Douglas explained.

Heating equipment operating on the likes of natural gas, propane or heating oil will be gradually switched to electrical HVAC systems such as heat pumps. RBC announced last year it would retrofit the Canadian retail banking branches it controls with heat pumps by 2035, impacting 62 per cent of its approximately 1,200 branches.

Douglas could not provide an estimate of the anticipated environmental impact of the agreement with CT REIT, but said it will primarily reduce its direct operational emissions known as Scope 1.

Another announcement expected

When asked how the memorandum of understanding with CT REIT squares with RBC’s retreat on climate issues, Douglas said RBC's operations are a space where it can demonstrate “that climate is priority for our operations” and “hopefully, using our size and scale, that will encourage others to do the same in the market as well.”

RBC will be announcing an additional sustainability agreement with another property owner in the coming weeks, he added. The ultimate goal, Douglas said, is for RBC to work with all of its retail building owners on creating decarbonization agreements.