Banks and credit unions: what sets them apart?

Back in the mid-1990s, there was a very public battle between the Canadian Bankers Association and one of B.C.’s biggest credit unions.

It erupted after Richmond Savings (which later become part of Coast Capital) launched an advertising campaign lampooning a fictitious “Humungous Bank”. It was led by greedy, uncaring executives eager to fatten profits at the expense of customers.

The CBA was particularly vexed over the credit union’s tag line, “We’re not a bank. We’re better.”

That’s because the Bank Act prohibited nonbanks, such as credit unions, from holding themselves out as banks at that time.

In an affidavit filed with the federal trademarks branch, a CBA lawyer acknowledged that the average bank was 54 times larger than Richmond Savings. Therefore, he claimed, the credit union was misleading the public by claiming it was superior when it was “relatively less sound and secure”.

Nowadays, bankers and credit union executives no longer engage in public spats like this. But they are still often competing for the same retail customers and residential-mortgage business. As a result, they’re not shy about touting their attributes.

Only this time they are also dealing with growing customer anxiety over the climate and cybersecurity.

In early January, the province’s largest credit union, Vancity, made a declaration on climate that caught the attention of its much bigger rivals based in Toronto.

The Vancouver-based credit union declared that it planned to make its entire lending portfolio a net-zero carbon emitter by 2040.

Vancity’s chief external-relations officer, Jonathan Fowlie, told the Straight by phone that he recalls sitting with staff in front of a whiteboard discussing changes coming as a result of the climate emergency. They considered providing bridge loans to help someone who is displaced from one industry to transition into another.

It felt academic at the time, Fowlie said, but only a few weeks later the credit union was thrust into a real economic emergency with the pandemic.

“It really crystallized for us the connection between climate action and the need for financial institutions not just to think about reducing emissions but also how we look at equality and people through the transition,” he stated.

That led to five commitments, including financing an equitable climate transition.

“Vancity has been acting on the environment and climate change for decades, and we do not lend to the fossil-fuel sector,” Fowlie said. “And so for us, that means that the pathway to net zero, as I said, is around working with our members to create large-scale change through an aggregation of supporting and enabling individual actions.”

Banks tout climate initiatives

Coincidentally, less than six weeks later, CIBC announced that it had joined four large U.S. banks as a strategic partner in the nonprofit RMI’s Center for Climate-Aligned Finance. It’s helping the financial sector try to steer the global economy toward a transition to net-zero greenhouse-gas emissions by the middle of the century.

A week after the CIBC declaration, Canada’s largest bank, RBC, announced that it would achieve net-zero emissions on its lending by 2050. In addition, it promised to mobilize $500 million toward “sustainable finance” by 2025.

Meanwhile, another of Canada’s large banks, TD, has also expressed a desire to achieve net-zero emissions by 2050. BMO unveiled a new climate institute in March and Scotiabank established a climate change centre of excellence.

The CBA website outlines other actions that banks are doing in this area. That includes working on implementing climate-related disclosures advanced by the Michael Bloomberg–chaired Task Force on Climate-Related Financial Disclosures.

According to CBA director of media strategy…