Chartered banks are fourth and fifth to commit to independent assessment after successful shareholder engagement
BURNABY, B.C. | Nov. 14, 2023 – In back-to-back announcements, Royal Bank of Canada (RBC) and Bank of Montreal (BMO) announced commitments to conduct independent racial equity audits, making them the fourth and fifth Canadian chartered banks to do so. These announcements come after nearly a year of negotiations led by bank investors including the B.C. General Employees' Union (BCGEU) and SHARE, and just days after investors re-filed shareholder resolutions at both companies in conjunction with the 2024 annual shareholder meetings.
A racial equity audit is an independent analysis of a company's business practices designed to identify and address potential disparities in a company's policies and practices affecting Indigenous people and communities of colour.
In response to the announcements, BCGEU Treasurer Paul Finch released the following statement:
"Just two years ago, the term 'racial equity audit' was virtually unheard of at Canadian banks. BCGEU and other shareholders have played a vital role in changing that. Both RBC – and now BMO's – commitments today cement racial equity audits as industry best practice. Looking ahead, we hope to see other Canadian companies commit to racial equity audits as they validate a company's commitments and create long term company value".
Sarah Couturier-Tanoh, Associate Director of Corporate Engagement and Advocacy at SHARE which represents the Atkinson Foundation, the Hamilton Community Foundation, the United Church of Canada Pension, and the United Church of Canada Treasury added:
"These new commitments from RBC and BMO are the start of a meaningful process for the banks to address their racial equity risks. We will continue working with Scotiabank to get similar commitments in the near future. This outcome shows the power that long-term shareholders can have through active ownership and constructive engagement."
Tom Powdrill, Director of Stewardship at PIRC which represents the Greater Manchester Pension Fund in the engagement with RBC said:
"Investors in Europe have been increasingly active in support of racial equity audits over the past two years and are now starting to co-file resolutions. We welcome the commitment that RBC has made and look forward to positive outcomes driven by the audit process. We also encourage others to follow the example RBC has set."
In its announcement, RBC committed to a review of both its employment and business practices and will engage a qualified independent auditor quickly with audit work to begin in 2024 and public reporting to be released in 2025. Although BMO has publicly committed to conducting a third-party racial equity audit, the bank's plan and timeline remain unclear.
The proponents stress the need for the audits to address the most significant risks related to racial equity, including Canadian, US, and international businesses, and personal and commercial lending. Further, the full audit results, including the auditor's findings, recommendations and corrective action plan should be publicly available for shareholders to have confidence in the quality and robustness of the audit process.
BCGEU and SHARE first filed racial equity audit shareholder proposals at both companies in 2023. Both earned the support of a plurality of shareholders, with 42% support at RBC and 37% support at BMO. When neither RBC nor BMO initially committed to conducting an audit, investors representing $2 trillion in assets under management wrote to the RBC board in October 2023 requesting RBC conduct a racial equity audit. Similar expectations were conveyed to the Board of Directors at BMO by the BCGEU and SHARE.
For more information contact:
Head of Capital Stewardship and ESG, BC General Employees' Union
The B.C. General Employees' Union represents over 85,000 workers in almost every community and economic sector in British Columbia. Under BCGEU's capital stewardship strategy, the union has submitted shareholder proposals at some of Canada's largest companies on topics like human rights, racial equity, and executive compensation. The union's strategy has succeeded in achieving strong commitments on ESG issues.
SHARE is an award-winning non-profit organization dedicated to mobilizing investor leadership for a sustainable, inclusive and productive economy. We do this by supporting our investor networks and amplifying their voices to improve corporate sustainability practices and implement better rules and regulations that govern capital markets. For more information on SHARE, visit www.share.ca
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