Updated: RBC, BMO commit to racial equity audits following engagement from investors

By Melissa Shin | November 10, 2023 | Last updated on November 10, 2023
3 min read

Royal Bank of Canada and Bank of Montreal will conduct racial equity audits after shareholder groups refiled proposals this week.

RBC committed Friday to two racial equity audits, and BMO later confirmed that it, too, would conduct an audit.

The announcements come days after the Vancouver-based Shareholder Association for Research and Education (SHARE) and the B.C. General Employees’ Union (BCGEU) refiled shareholder proposals with RBC and BMO seeking racial equity audits from the banks in 2024.

RBC has committed to conducting a third-party racial equity audit of employment practices next year, with plans to complete it by the end of December 2024. Also by the end of 2024, the bank said it will scope out a third-party racial equity audit of its business practices, with the audit taking place in 2025.

In December of this year, RBC said it will publish a scorecard to report on progress of the systemic racism action plan it committed to in 2020.

“We are pleased to see RBC joining CIBC and National Bank in committing to a comprehensive racial equity audit that covers the broad scope of its business and related risks of racial bias,” Anthony Schein, SHARE’s director of shareholder advocacy, told Advisor.ca.

Following BMO’s announcement, Schein said, “We are pleased to see BMO joining other Canadian banks in committing to a racial equity audit. We look forward to seeing a similar commitment from Scotiabank in the near future. Scotia is now the only Canadian bank not to have made a commitment of this nature.”

BCGEU treasurer Paul Finch called RBC’s commitment “a huge step forward” that would help create long-term value for investors.

“People of colour and Indigenous people are more likely to face barriers to banking and discriminatory practices at their banks,” Finch said in a statement. “Racial equity audits have emerged as the best practice for banks to ensure that enacted anti-racism initiatives will be meaningful and impactful.”

Jeff Lanthier, director of media relations with RBC, said the firm values its ongoing engagement with stakeholders. “We remain focused on identifying and helping to address barriers that can impede the success of Black, Indigenous and other racialized groups,” he said.

BMO spokeswoman Kate Simandl said in a statement to The Canadian Press that the bank “will be conducting a third-party racial equity audit” and would update shareholders on progress in 2024.

SHARE and the BCGEU first called on RBC and BMO to commit to independent audits to assess the racial impacts of their operations and policies through shareholder proposals made in 2023. The RBC proposal received support from 42% of shareholders, while the BMO proposal received 37% support.

The groups also sent letters to RBC and BMO last month reiterating their calls for racial equity audits.

BMO’s Friday announcement “is a pleasant surprise,” Emma Pullman, head of shareholder engagement and ESG with the BCGEU, told Advisor.ca. “It’s the result of a year of ongoing dialogue with the company and we look forward to ironing out the details with BMO in the coming days and weeks.”

As for Bank of Nova Scotia, Schein said SHARE and its partner organizations will continue to engage with the bank, adding that he was optimistic it would follow suit.

The BCGEU does not hold shares in Scotiabank, but the fact that five of the Big Six have committed to these audits “validates the importance of these third-party reviews,” Pullman said. “We challenge other other Canadian companies to rise to this challenge.”

In 2022, Toronto-Dominion Bank became the first of the Big Six to commit to a racial equity audit following a shareholder proposal from the BCGEU. Its audit focuses on employment practices in Canada and the U.S., but not its products and services. In July, TD said it expected the audit to be completed during fiscal 2023, which ended on Oct. 31.

“TD has received the racial equity assessment report and plans to publish the report online at some point this year,” spokesperson Vandana Kattar said in a statement. “We are currently considering the findings and making plans to implement the recommendations.”

Other shareholders that engaged on this issue with RBC and BMO were the Atkinson Foundation, the Hamilton Community Foundation, the United Church of Canada, the Pension Fund of the United Church of Canada and the Greater Manchester Pension Fund.

Pullman emphasized that banks are not the only firms that can benefit from racial equity audits. “I hope it becomes standard practice at more Canadian issuers,” she said.

With files from The Canadian Press

Melissa Shin headshot

Melissa Shin

Melissa is the editorial director of Advisor.ca and leads Newcom Media Inc.’s group of financial publications. She has been with the team since 2011 and been recognized by PMAC and CFA Society Toronto for her reporting. Reach her at mshin@newcom.ca. You may also call or text 416-847-8038 to provide a confidential tip.