Royal Bank of Canada and Scotiabank, the two largest banks in Canada, have both retired their 2030 financed emissions targets, while diverging on their long term net zero ambitions. RBC has retained its 2050 net zero commitment, but Scotiabank has withdrawn both its interim targets and its long term goal entirely. The decisions, disclosed in the banks' 2025 sustainability reports, mark one of the most significant climate strategy resets among major North American financial institutions and reflect mounting policy uncertainty, regulatory pressure and the changing political environment for sustainable finance.

 

The Specifics of the Two Decisions

 

The 2030 financed emissions targets that both banks have now retired covered key sectors including oil, gas, power generation and automotive manufacturing. The targets were first introduced in 2022 as part of broader net zero commitments and were viewed at the time as a meaningful step toward integrating climate considerations into the core lending activities of major Canadian banks. The decision to withdraw these targets represents a significant departure from the trajectory set just three years ago.

Scotiabank has gone further than RBC by also withdrawing its long term net zero goal. In its sustainability report, Scotiabank stated that it has evaluated its interim targets and the fundamental assumptions on which they were initially established in 2022, and has decided that as of fiscal 2026 it is withdrawing both its interim targets and its goal to achieve net zero by 2050 for financed emissions. RBC reached a different conclusion, retiring its interim targets while reaffirming its 2050 net zero ambition. The bank cited the changing and uncertain operating environment as making some interim targets not reasonably achievable and the outlook for others unclear.

 

The Policy and Regulatory Drivers Behind the Reset

 

Both lenders point to shifting political and regulatory conditions as a core driver of the strategy reset. The evolving stance of the United States on climate policy has had significant ripple effects across global finance, affecting how institutions assess the practical achievability of climate commitments made during earlier periods of stronger policy momentum.

RBC's Climate Action Institute framed the shift in particularly direct terms, suggesting that the retreat on several climate policies in 2025, led by the United States, may signal a transition from a Paris spring for climate action to an American autumn. The institute noted that the pullback was not solely an American phenomenon. Leading investors and financial institutions in Asia and Europe also retreated from collective efforts and commitments, partly due to regulatory pressures in certain markets and partly because of competing demands from shareholders.

Scotiabank pointed to specific North American policy reversals as drivers of its decision, citing the curbing of major parts of the United States Inflation Reduction Act and Canadian decisions including the elimination of the federal fuel charge, the decision not to implement the oil and gas emissions cap, and the postponement and elimination of other climate targets and policies. The bank also flagged declining data quality from clients, citing United States executive orders that limit the availability of climate disclosure data.

 

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Transition Finance Continues to Grow Despite Target Retreat

 

A notable feature of the strategy reset is that both banks continue to expand their funding for energy transition activities even as they scale back their emissions targets. RBC reported that its lending to low carbon energy and enabling sectors has grown by 43 per cent since 2023, reaching approximately 21 billion dollars. The bank expects this to rise to 25.5 billion dollars by 2030.

Scotiabank has retained a large scale climate finance commitment, aiming to deliver 255 billion dollars in climate related financing by 2030. As of 2025, the bank had already deployed approximately 154 billion dollars across lending, capital markets and advisory services. These figures indicate that the strategy reset is not a wholesale retreat from sustainable finance but rather a recalibration that places greater emphasis on capital deployment and less emphasis on quantifiable emissions targets.

 

The Strategic Logic Behind the Recalibration

 

For executives and investors, the recalibration reflects the difficulty of maintaining credible interim emissions targets in an environment where the underlying policy assumptions have changed materially. Scotiabank Chief Executive Officer Scott Thomson stressed the limits of unilateral action by individual banks, noting that no single bank can deliver the transition alone. He added that the bank is advancing sectoral targets by enhancing its understanding of clients' transition planning activities, particularly in industries where 2030 interim targets had been set, including oil and gas.

RBC Chief Executive Officer David McKay framed the transition as gradual and complex, pointing to the energy intensive nature of the Canadian economy as a reason why the transition will take time. He emphasised that the bank's focus is on transition financing and emissions, supported by commitments on absolute reduction and on financing volumes. The framing reflects how the largest Canadian banks are increasingly emphasising the practical complexity of decarbonisation in resource intensive economies and the limits of what individual financial institutions can achieve through their own commitments.

 

The Civil Society Critique

 

The strategy reset has attracted significant criticism from civil society organisations. Richard Brooks of Stand.Earth described the move as an abdication of responsibility, arguing that neither bank properly recognises the role it has played in influencing government climate policies and in underfinancing renewables. He criticised what he described as the absence of self reflection in the decisions and the failure to acknowledge the banks' own influence on the policy environment that they now cite as a reason for retreating from their commitments.

These critiques highlight the tension between the banks' own framing of the recalibration as a response to changing external conditions and the alternative view that the banks themselves bear some responsibility for shaping the policy environment in which their commitments now appear difficult to achieve. The credibility of future climate commitments by major financial institutions will depend in part on how they navigate this tension and how they communicate the relationship between their lending activities and the broader policy frameworks within which they operate.

 

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The Wider Context for Global Climate Finance

 

The Canadian banking sector now reflects a wider global tension that is reshaping climate finance. Institutions across multiple jurisdictions are recalibrating commitments made during periods of stronger policy momentum, balancing climate ambition with regulatory uncertainty and shareholder demands. The decisions by RBC and Scotiabank are among the more visible examples of this recalibration, but they are not isolated. Major banks in other major economies have also adjusted their climate commitments over the past year, reflecting similar pressures.

For institutional investors evaluating bank climate strategies, the divergence between RBC and Scotiabank provides a useful illustration of the different approaches that major financial institutions are taking. RBC's decision to retain its 2050 net zero ambition while withdrawing interim targets represents a moderate recalibration, while Scotiabank's withdrawal of both interim and long term commitments represents a more substantial departure. The market will assess each approach on its merits over the coming years, with the credibility of remaining commitments tested against actual lending and capital deployment patterns.

 

What the Reset Signals for Net Zero Banking Commitments

 

The wider significance of the Canadian bank decisions lies in what they indicate about the current state of net zero banking commitments globally. The targets set during the period of strong policy momentum from 2020 to 2022 are now being tested against political shifts, economic pressures and the practical complexity of decarbonising resource intensive economies. The credibility of net zero commitments worldwide will depend in part on how the major financial institutions navigate this period of recalibration.

For sustainable finance practitioners, the lesson from the Canadian experience is that interim emissions targets need to be designed with sufficient flexibility to accommodate changes in the broader policy environment, while remaining credible enough to deliver meaningful accountability. Transition finance volumes provide an alternative metric that may prove more durable through periods of policy volatility, although they do not directly capture emissions outcomes in the way that financed emissions targets are intended to. The performance of major banks against their remaining commitments over the coming years will determine whether the current recalibration represents a temporary adjustment or a more lasting shift in the structure of net zero banking.