The U.S.-based research group says RBC's pledge to achieve net-zero emissions from its lending by 2050 is insufficient, because loans must be secured long before projects to lower emissions can be completed.
The findings come as rising borrowing costs challenge capital-intensive green investments. In 2021, RBC estimated that Canada will need about $2 trillion to reach the federal government's net-zero by 2050 target. Governments, businesses and communities would need to spend at least $60 billion annually, the bank says, up from roughly $15 billion per year when the report was published.
"RBC has a sustainable finance credibility problem," IEEFA energy finance analysts led by Mark Kalegha wrote in research published on Tuesday. "Even the [bank's] 2050 target is hedged with a series of qualifications that suggest a future lacklustre commitment driven by commercial interests and not climate solutions."
Jennifer Livingstone, RBC's vice-president of enterprise climate strategy, says the bank is becoming more climate-focused. Earlier this month, it announced plans to hire for a new executive job titled Head of Climate Transition.
"We firmly believe there is a need for more concerted action at a faster pace to address climate change. In addition to expanding our capabilities to support our clients in the transition to a low-carbon economy, we are seeking to grow our leadership team that is focused on climate," Livingstone told Yahoo Finance Canada in an email.
"Our climate plan is consistent with helping Canada meet its climate commitments and aligned to our commitments under the Net-Zero Banking Alliance," she added.
Canada's largest lender has faced sustained pressure from activists over its financial ties to the fossil fuel industry, as well as allegations of "greenwashing" in its advertising.
A report released in April found the bank overtook JPMorgan Chase (JPM) as the top lender and financial service provider to the oil and gas sector in 2022. At the same time, RBC is under investigation by the Competition Bureau of Canada over allegedly deceptive advertising related to its climate action.
IEEFA says RBC's climate and sustainable finance program also fails to address ending fossil fuel expansion, and excludes significant segments of its business from climate targets.
"RBC states approximately 14 per cent of assets under management in its Global Asset Management unit are invested in companies with Paris-aligned targets, which indicates a weak commitment," Kalegha wrote in the report.
Richard Brooks, climate finance director at the environmental organization Stand.earth, calls the report "a clear synopsis of how RBC talks a big talk on climate publicly while still funding the fossil fuel machine."
"There's no place for fossil fuels in a real sustainable investing approach," Brooks added in a press release on Wednesday.
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.