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Shareholder Asks Canadian Banks to Invest More in Fossil Fuels

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Of the close to 16 shareholder proposals that are up for a vote at five of the top six Canadian banks’ annual general meetings (AGMs) this year, most were around the environment, or climate change, including some on greenhouse gas emissions. Two of the issues were related to increased investment in fossil fuels.

At the time of this writing, the Toronto Dominion Bank (TD) has not yet made its proxy circular available.

InvestNow Inc. submitted a shareholder proposal to the Bank of Montreal (BMO) and Canadian Imperial Bank of Commerce (CM), asking that the banks make clear their commitment to continue to invest in, and finance, the Canadian oil and gas sector. And further that the banks conduct a review of any and all of their policies to ensure that there are none that have the effect of encouraging divestment from the sector.

InvestNow Inc. is a not-for-profit organization that challenges the divestment movement and advocates for investment in Canada’s oil and gas sector. The proposals were submitted by Gina Pappano, Executive Director of InvestNow.

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Pappano said her proposal is also on the ballot at TD, and she has spoken to all three banks, and had good engagement with all. “My proposal was left off at RBC and Scotia on a technicality. But I will file with them next year. I chose to file because I felt that the engagement I had wasn’t enough, and I wanted an alternative view presented at the AGMs,” she said, adding that she will be presenting at all three AGMs.

“Last proxy season, asset managers rejected many proposals that they saw as not financially material, highly prescriptive or both. This proposal seems to tick both those boxes,” said Lindsey Stewart, director of investment stewardship research at Morningstar Research Services.

“[The proposal] doesn’t request any kind of reporting aimed at advancing shareholders’ understanding of the banks’ climate financing policies. It does, however, request that management make a somewhat vague statement of “commitment” to a fossil fuel sector that the banks already finance,” he added.

What’s the Argument for Increasing Investment in Fossil Fuels?

In its supporting statements, InvestNow points out that public policy framework and public conversation are both directed against investment in the oil and gas sector: “The result is chronic underinvestment in that sector,” InvestNow says, “It asks that BMO and CIBC explicitly state their commitment to Canada’s oil and gas sector, and end or temporarily suspend support for policies like net-zero targets. The embrace of such policies – which have the effect of suggesting that oil and gas extraction, development, and use are not of essential value – sends a negative signal about investment in the sector,” it notes.

It also says that the banks should “Focus on investment in, lending to, and financing of the oil and gas industry to create more supply and reduce energy costs for Canadians and the world.” InvestNow says support for the sector is important because:

  • Its wellbeing is essential to the wellbeing of Canadians, ensuring energy affordability and with it the affordability of everything else necessary to a reasonable standard of living for all in Canada.
  • Its environmental performance is world-leading and steadily improving.
  • Its expansion is increasingly important to address global concerns such as energy security and energy poverty; and
  • The lack of investment in Canada means more investment in oil and gas sector development in other parts of the world with poorer environmental performance, poorer corporate governance, and serious human rights infringements.

BMO Says the Proposal is ‘Unnecessary’

BMO asked shareholders to vote ‘Against’ this proposal because “It is unnecessary in light of BMO’s commitment to be our clients’ lead partner in the context of our Climate Ambition, which supports the net zero strategy of the Canadian oil and gas sector, and the role of the board and management in setting the strategy of the Bank.”

The bank adds that climate strategy is an integral part of its overall strategy that is approved by the board and cannot be delegated to shareholders.

“Our approach has been to support our clients in their own decarbonization journey towards net zero, not to divest. Divestment strategies do not support real-world emissions reductions and could result in a disorderly net-zero transition that does not address the economic and social needs of the communities affected. We support our clients in their efforts to reduce emissions and anticipate that our clients will, over time, transition their businesses in support of a low-carbon economy,” it said.

CIBC Points to Its Work Towards Net Zero

CIBC also asks shareholders to vote ‘Against’ the proposal, pointing out that it has set a net-zero ambition for its operational and financing activities by 2050, and has released 2030 financed emissions targets for its high carbon-intensive portfolios: oil and gas and power generation.

The bank acknowledges that there are factors outside of CIBC’s control that will influence decarbonization globally across sectors and economies, such as the development of new technologies, industry-specific solutions, shifts in consumer behaviour, and the impact of geopolitical events.

It points out that in 2022, CIBC, “Provided industry-leading advice and capital markets solutions through our global Energy, Infrastructure, and Transition group within CIBC Capital Markets, to support clients, including those in the oil and gas sector, impacted by the shift in how the world produces and consumes energy, and develops infrastructure.” It also made significant progress towards its goal of mobilizing $300 billion in sustainable finance by 2030, and its commitment to invest $100 million towards climate tech and energy transition funds through Limited Partnerships.

What Does All This Mean?

To Pappano, success for the proposal would mean that the banks abandon Net Zero targets. “The banks have said that Net-Zero targets are not divestment, but I see them as a commitment to wipe out a profitable sector by 2050. To me, that is divestment. Divestment does not help reduce overall emissions. So why should the banks do it in Canada?” she said.

“It’s unsurprising that the banks’ boards feel such a statement is not necessary; shareholders are likely to feel the same way,” said Stewart. He noted that proxy voting has become a complex and contentious area, and shareholder proposals that appear to pull in different directions are becoming a recurring feature at shareholder meetings.

He adds that these proposals are a good example of that, and it shows how much attention is needed on the part of governance and stewardship professionals to weigh the benefits and drawbacks of each proposal and vote in line with the end-investors financial and sustainability objectives.

“It’s a delicate balancing act and it certainly isn’t getting any easier,” he said.

From the banks’ standpoint, though, as for any company, sustainability is one of many risks to consider. At Morningstar, we analyze all risks the same, with any risk that could affect our future cash flows and therefore our valuations all up for equal consideration.

Could this proposal be considered a sustainability risk? “In my view, it depends on how you define ‘ESG risk’. There are many ways people interpret this. If you are thinking about pure regulatory or political blowback, you create risks by investing in or not investing in fossil fuels, it all depends on who has political power at that point in time, and that can change,” said Eric Compton, Morningstar equity analysts covering the Canadian banks.

“If you’re thinking about credit risks, for example, some may say it is risky to lend to industries that face structurally lower demand in the distant future; this is what I would call basic lending 101. All banks think about credit risks whenever they make loans, and there are no risk-free loans, and they account for this in how they price and structure the loan. Does lending to a cyclical industry like fossil fuels increase credit risk? Yes, as does all lending in some sense, and every industry has its own unique risk profile. What’s more important is that the bank is pricing and structuring its loans correctly, and if they are, they actually create value for shareholders as it increases profitability,” he said.

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Lenders Rally After India’s Central Bank Eases Investment Curbs – BNN Bloomberg

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(Bloomberg) — Indian banks and shadow lenders rose Thursday after the country’s central bank eased capital requirements for a unique type of investment, a move that may free up more funds for loans.

The gains came after the Reserve Bank of India issued Wednesday modified rules on lenders’ required provisions for exposure to alternative investment funds, or AIFs, that invest in the lenders’ borrowers. Under the new policy, a lender needs to set aside capital only for the amount the AIF invested in the debtor company, and not the entire investment of the lender in the AIF.

Shares of Piramal Enterprises Ltd., which reported among the biggest provisions for such investments, closed 1% higher after rising as much as 6% during the day. A gauge of financial services firms climbed 1%, the most since March 1.

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Lenders led the rally in the broader market, with the NSE Nifty 50 Index registering its best day since beginning of the month.

The RBI’s softening stance came after industry players raised concerns over clarity and uniformity after it announced in December restrictions on lenders’ exposure to AIFs that hold stakes in their borrowers. The latest move will likely help firms including Piramal, HDFC Bank Ltd. and IIFL Finance Ltd. reverse some of their relevant provisions made previously, according to analysts at Citigroup Inc. and Jefferies Financial Group Inc.

Read more: India’s Crackdown on Financial Risks Puts Industry on Watch

“Select private banks and NBFCs like Piramal had provided for their entire AIF exposure during 3Q and could see some write-backs in 4Q if they decide to reverse the excess provision,” Jefferies analyst Bhaskar Basu wrote in a note.

Regulators introduced a flurry of new rules last year to prevent a buildup of financial stress at a time when India’s economy remained resilient in the face of rising interest rates, slowing global growth and unabated geopolitical tensions.

©2024 Bloomberg L.P.

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What is Islamic halal investment and why is it on the rise?

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The global Islamic halal economy is set to reach a market value of $7.7 trillion by 2025, more than double the $3.2 trillion it reached in 2015 and significantly higher than the $5.7 trillion it was valued at less than three years ago in 2021, according to industry experts.

A report by the General Council for Islamic Banks and Financial Institutions revealed last year that the global Islamic funds market has grown by more than 300 percent over the past decade, with nearly $200bn now under management globally.

The statistics depict a rise in both demand for halal – or “sharia compliant” – investments and opportunities.

Investing is permitted under Islam, but certain aspects of investment practice – such as charging or paying interest – are not. This has traditionally meant a lack of opportunities for Muslim savers and investors in the past.

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What is halal investment?

Halal is an Arabic term meaning “permitted” and stipulating that:

  • Transactions cannot involve “riba” (interest).
  • Investments must not be made in “haram” (unlawful) assets or commodities such as pork products, alcohol or military equipment, among others.
  • Investments cannot be made based on “gharar”, which has been described as “highly uncertain transactions or transactions that run contrary to the idea of certainty and transparency in business”.

“Halal investment is basically managing your money and finances in line with your faith,” Omar Shaikh, director of Islamic Finance Council UK (UKIFC), told Al Jazeera. “Muslims believe that earning money in a way which is halal is better than earning money (even if that is more) in a way that is harmful to society and against the morals of the religion.”

Umar Munshi, co-founder and managing director of Islamic finance group Ethis, said sharia compliance is key, but institutions and investors looking for ethical investments need to go even further to ensure a business is completely ethical.

“The actions of a business must not have a negative impact on society or the environment,” Munshi told Al Jazeera. “So it’s not only compliant, but refraining from having a negative impact. Investing in a tobacco company, for example, may be sharia compliant, but it’s not good for society.”

How does halal investment work?

One example of halal investment is Islamic business financing, which works using new models of profit-sharing, sharia-compliant insurance and sukuk, an Islamic financial certificate that represents a share of ownership.

Unlike with conventional bonds – a form of IOU that investors can buy in order to receive interest payments – sukuk investors receive partial ownership of a business and then receive profit payments, which are generated over time. These payments are made instead of interest in order to ensure sharia compliancy.

“Islamic finance as a sector is barely 30 years old, with the past 15 years seeing the most development,” Shaikh from UKIFC said. “It takes time to educate and create awareness and as this has happened, more banks have focused on servicing the demand for halal investing. This in turn helps to create more products, which then creates more demand.”

Stock markets used to be the traditional modes of investment for many [Marcin Nowak/Anadolu via Getty Images]

A Goldman Sachs report published in December 2022 estimated that by 2075, five of the world’s 10 largest economies – India, Indonesia, Nigeria, Pakistan and Egypt – will have Muslim populations amounting to more than 850 million people.

As the population rises, so does its demand for financial products. According to the State of the Global Islamic Economy Report 2023, published by research group DinarStandard, some $25.9bn was invested into sharia-compliant investments in the financial year 2022-23, marking a 128 percent year-on-year growth.

“In general, it [halal investment] is on the rise. People are a lot more educated and more aware of how their dollar impacts the socioeconomic landscape globally,” said Siddiq Farid, co-founder of SmartCrowd, a real estate investment platform based in Dubai.

“They are a lot more cautious, too, hence leading to more ethical investing, which halal investing is a big component of. It’s on the rise, particularly around the younger generation. The millennials, they are a lot more aware socially. People realise exactly where their money is going and how it’s being used.”

An increase in opportunities for halal investing and their ease of access are also cited as reasons driving the rise in demand.

Israel’s war on Gaza and its impact

More recently, the rise in demand for halal investments has received an additional boost as consumers boycott brands seen as supporting Israel and its war on Gaza.

The war, which has seen more than 32,000 Palestinians killed by Israeli attacks in Gaza, has “adjusted” the mindset of these investors, Farid said.

“Halal investment has been increasing steadily and it has accelerated further in the past six months, mostly among millennials and people under 40,” he said.

“But in the past, it’s more of these people just looking for something halal. As long as it’s not haram, it’s fine. Now, there’s more awareness of not only halal, but halal aligned with values and faith. All these boycott movements have got people much more aware that something may be halal, but you might not necessarily want to use it, be associated with it or invest in it.”

bds
The Boycott, Divestment and Sanctions (BDS) movement has made many people consider where their money goes before they spend or invest it, say experts [Martin Pope/SOPA Images/LightRocket via Getty Images]

How has technology contributed to the rise of halal investing?

FinTech Magazine reported in December last year that while Muslims make up nearly a quarter of the world’s population, barely one percent of financial assets qualify as sharia compliant. This is set to change, say experts, with the arrival of “fintech” – financial technology that can make investing much more accessible for ordinary consumers and individual investors.

“Muslims are generally not as well educated when it comes to investing, and this is partly due to a lack of available options for them as Muslims. Even basic information pertaining to sharia-compliant investments is often not available to most of the Muslim population,” said Ibrahim Khan, co-founder of the online financial platform Islamic Finance Guru, in an interview with FinTech Magazine.

However, the rise of social media has contributed to an increased awareness and significant growth in sharia-compliant finance. In addition, fintech has made halal investment options, which are often much more convenient and easy to use with a smartphone or laptop, more accessible.

Consultancy group McKinsey & Company published research in January this year showing that “revenues in the fintech industry are expected to grow almost three times faster than those in the traditional banking sector between 2023 and 2028”.

“Your phone is often physically the closest thing to you. Fintechs are able to start from this paradigm and build solutions that are efficient and enhance transparency and choice for retail customers. This is where a lot of the action is at. Many banks are now creating fintech-based solutions or acquiring fintech players,” said UKIFC’s Shaikh.

Munshi added the selling point for fintechs is the age of the target audience.

“The younger generation is more open to investing online,” said Munshi, whose company operates an online platform and community for alternative finance and investment opportunities.

The same research by McKinsey & Company showed that the fintech industry raised record capital in the second half of the 2010s. Venture capital funding grew from $19.4bn in 2015 to $33.3bn in 2020, a 17 percent year-over-year increase.

As of July 2023, publicly traded fintech companies had a combined market capitalisation of $550bn, double that of 2019, the research said.

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Amazon completes $4B Anthropic investment to advance generative AI – About Amazon

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Amazon concludes $4 billion investment in Anthropic.

Customers of all sizes and industries are using Claude on Amazon Bedrock to reimagine user experiences, reinvent their businesses, and accelerate their generative AI journeys.

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The work Amazon and Anthropic are doing together to bring the most advanced generative artificial intelligence (generative AI) technologies to customers worldwide is only beginning. As part of a strategic collaborative agreement, we and Anthropic announced that Anthropic is using Amazon Web Services (AWS) as its primary cloud provider for mission critical workloads, including safety research and future foundation model development. Anthropic will use AWS Trainium and Inferentia chips to build, train, and deploy its future models and has made a long-term commitment to provide AWS customers around the world with access to future generations of its foundation models on Amazon Bedrock, AWS’s fully managed service that provides secure, easy access to the industry’s widest choice of high-performing, fully managed foundation models (FMs), along with the most compelling set of features (including best-in-class retrieval augmented generation, guardrails, model evaluation, and AI-powered agents) that help customers build highly-capable, cost-effective, low latency generative AI applications.

Earlier this month, we announced access to the most powerful Anthropic AI models on Amazon Bedrock. The Claude 3 family of models demonstrate advanced intelligence, near-human levels of responsiveness, improved steerability and accuracy, and new vision capabilities. Industry benchmarks show that Claude 3 Opus, the most intelligent of the model family, has set a new standard, outperforming other models available today—including OpenAI’s GPT-4—in the areas of reasoning, math, and coding.

“We have a notable history with Anthropic, together helping organizations of all sizes around the world to deploy advanced generative artificial intelligence applications across their organizations,” said Dr. Swami Sivasubramanian, vice president of Data and AI at AWS. “Anthropic’s visionary work with generative AI, most recently the introduction of its state-of-the art Claude 3 family of models, combined with Amazon’s best-in-class infrastructure like AWS Tranium and managed services like Amazon Bedrock further unlocks exciting opportunities for customers to quickly, securely, and responsibly innovate with generative AI. Generative AI is poised to be the most transformational technology of our time, and we believe our strategic collaboration with Anthropic will further improve our customers’ experiences, and look forward to what’s next.”

Global organizations of all sizes, across virtually every industry, are already using Amazon Bedrock to build their generative AI applications with Anthropic’s Claude AI. They include ADP, Amdocs, Bridgewater Associates, Broadridge, CelcomDigi, Clariant, Cloudera, Dana-Farber Cancer Institute, Degas Ltd., Delta Air Lines, Druva, Enverus, Genesys, Genomics England, GoDaddy, Happy Fox, Intuit, KT, LivTech, Lonely Planet, LexisNexis Legal & Professional, M1 Finance, Netsmart, Nexxiot, Parsyl, Perplexity AI, Pfizer, the PGA TOUR, Proto Hologram, Ricoh USA, Rocket Companies, and Siemens.

To further help speed the adoption of advanced generative AI technologies, AWS, Anthropic, and Accenture recently announced that they are coming together to help organizations—especially those in highly-regulated industries including healthcare, public sector, banking, and insurance—responsibly adopt and scale generative AI solutions. Through this collaboration, organizations will gain access to best-in-class models from Anthropic, a broad set of capabilities only available on Amazon Bedrock, and industry expertise from Accenture, Anthropic, and AWS to help them build and scale generative AI applications that are customized for their specific use cases.

Deepening our commitment to advancing generative AI, today we have an update on the announcement we made to invest up to $4 billion in Anthropic for a minority ownership position in the company. Last September, we made an initial investment of $1.25 billion. Today, we made our additional $2.75 billion investment, bringing our total investment in Anthropic to $4 billion. To learn more about the broader strategic collaboration between Amazon and Anthropic, of which this investment is one part, check out the stories below:

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