The Royal Bank of Canada and City National Bank must stop the harm and start investing in economic prosperity.
By Jamie Buell,
Research Analyst
Redlining, housing discrimination, and environmental racism are deeply interconnected, both globally and here in California.
If you want to uncover a hidden driver of these ills and understand why Black, Indigenous and People Of Color (BIPOC) neighborhoods have been relegated to pollution hotspots and subjected to economic disenfranchisement, look no further than the banking industry’s support for oil and gas. Globally, we frequently hear about the violations of indigenous sovereignty and rights due to the construction of either toxic fracking sites, gas power plants or gas pipelines. A clear example is the expansion of the Coastal Gaslink pipe in British Columbia which cuts through Wet’suwet’en territory, the construction of which violates free, prior and informed consent of indigenous people as defined by the United Nations Declaration on the Rights of Indigenous People.
This pipeline was financed by the Royal Bank of Canada (RBC), a bank that, along with its subsidiary City National Bank (CNB), has perpetuated harm in BIPOC and frontline communities through its redlining practices, prioritization of the interests of the wealthy and funding oil and gas companies that pollute and harm BIPOC communities and neighborhoods.
Here in the U.S., the connection between housing and financial discrimination and environmental racism is exemplified by the concentration of oil and gas wells in formerly redlined neighborhoods. Formerly redlined neighborhoods – those graded by the federal government’s Home Owners Loan Corporation in the 1930’s as “hazardous” or “undesirable” – were found to have nearly twice the amount of oil and gas wells in their neighborhoods than those graded “A” or “Best”. This concentration of oil and gas wells results in disparate health outcomes, as outlined in our recently published fact sheet. To make matters worse, climate change resulting from our collective dependence on the fossil fuel industry has resulted in increased flood risk in certain areas – the same redlined areas where the fossil fuel industry has polluted and that financial institutions have left behind. In 2021, real estate website Redfin found that Sacramento had the worst disparity of homes in formerly redlined neighborhoods being more at risk of flooding than favorably graded neighborhoods. This is particularly worrying in light of the rapidly emerging insurance crisis wherein insurance companies are abandoning states like California due to increased “natural disaster” risks, like wildfires and flooding, resulting in the phenomenon of bluelining – again regenerating the cycle of structural racism and economic exclusion.
According to my analysis using the Rainforest Action Network’s yearly “Banking on Climate Chaos” reports, RBC supplied $560.2 billion to California Resources Corporation, which owns 11.7% of all oil wells in California. RBC’s funding of California Resources Corporation represents 27% of the company’s total equity financing since the Paris Agreement. California Resources Corporation owns 24,742 oil and gas wells in our state – the majority of which (16,205) are in the Bakersfield area. Of California Resource Corporation’s oil wells, 64% are in BIPOC neighborhoods. Twenty-four percent are in low to moderate- income neighborhoods. Sixty-eight percent, or 8,598, of wells in Bakersfield are active or idle, and the majority of these active or idle wells (72%) are in Bakersfield’s BIPOC neighborhoods. Of particular concern is that 89% of RBC-funded California Resource Corporation’s new wells in Bakersfield are located in BIPOC neighborhoods. Seventy percent of all new wells in the state, for comparison, were in BIPOC neighborhoods.
Our recently released fact sheet also discusses the health risks of living near drilling sites, and the pollution and negative health outcomes created by active, idle, abandoned, and even plugged wells. Over three thousand wells funded by RBC and owned by California Resources Corporation are also located in Wilmington, and the bank has also financed refineries like the Los Angeles Refinery, owned by Phillips 66 and Valero which surround the Wilmington community. Wilmington is a community within LA city in which 85-99% of residents identifying as people of color, and has the sixth-lowest life expectancy out of 35 of the city’s community plan areas thanks to the health impacts and pollution generated by the concentration of oil and gas wells and refineries.
Aside from direct emissions from wells and refineries, oil and gas companies are no strangers to corporate misconduct and treating the BIPOC communities they operate in as literal dumping grounds. The Department of Justice just found Phillips 66 in violation of the Clean Water Act by dumping hundreds of thousands of wastewater from its LA Refineries into the sewer system, and our fact sheet also outlines similar corporate misconduct at refinery sites in the Bay Area. We can only begin to think of the health impacts that this misconduct perpetuates for LA communities. Is the financing of companies engaged in such behavior not a direct endorsement of their misconduct and abuses?
If you’ve read this far, you might be asking why we’re dragging CNB into this? In fact, CNB might raise this defense itself. But here’s the reality: as a financial institution serving communities directly, City National Bank cannot hide behind its parent company’s global footprint. The Department of Justice (DOJ) charged CNB with a redlining complaint, citing that at the time of investigation, only three of 37 total branches in Los Angeles County were in majority-Black and Hispanic tracts, despite “well over 50 percent of census tracts in Los Angeles County are majority-Black and Hispanic”. The DOJ found a lack of marketing and advertising in majority-Black and Hispanic areas, a failure to address internal reports indicating fair lending and redlining risk, and a failure to did not develop or offer any affordable mortgage loan products. The bank’s policy and conduct had the intent and effect of discouraging Black and Hispanic residents from applying for mortgage loans, according to the DOJ complaint. This disparate lending concerningly might not be isolated to the LA area. According to 2022 data from the Home Mortgage Disclosure Act, CNB performed worse than most of its peers when measured by its lending in Black and Latino neighborhoods. In the Oxnard-Ventura metropolitan area, for example, City National’s lending was only 12% of market average lending in these neighborhoods. Instead of equitably serving communities of color, City National Bank has been found to be an aide in a Ponzi scheme facilitated by its wealthy Hollywood clientele. Furthermore, as its parent company, RBC has bailed out CNB with a nearly $3 billion capital infusion in 2023.
Aside from their corporate structure, the two banks are intrinsically responsible for each others’ failings of California communities, and RBC has an obligation to right the wrongs of CNB.
These two institutions are failing BIPOC communities across the globe and in our backyard. That is why we are calling on RBC and CNB to come to the table and sign a Community Benefits Agreement focused on building climate resiliency and ending their financing of harmful industries and companies like California Resources Corporation and other oil and gas companies. To do right by California communities and repair the harm caused by fossil fuel financing, these banks should be investing resources into supporting the transition of small businesses and workforces to greener technologies and operations. Also crucial to a just transition to a green economy is investing in municipalities’ community development activities, where cities rely on revenue from fossil fuel companies to fund community development. Finally, we’re urging CNB to expand homeownership and wealth-building opportunities across the state and ensure that its discriminatory lending practices come to an end.
In a nutshell, CNB banks on redlining. RBC banks on climate change. And both must change address their destructive practices and bank on economic prosperity for California Communities.