The existence of concrete carbon emissions regulations in Europe is one of the big reasons Canadian banks lagged behind other global financial institutions in a new report on banks and climate change, according to Sandra Odendahl, director of corporate environmental affairs at the Royal Bank of Canada.

RBC ranked at the top of three Canadian banks for its policies and practices on board oversight, management performance, public disclosure, greenhouse gas emissions management and strategic planning in Corporate Governance and Climate Change: The Banking Sector, which was released on Jan. 10 by Ceres, a Boston, Mass.-based investors coalition firm that analyzes sustainability issues.

But RBC’s mark was only 49 out of 100, well behind the global leader, HSBC, which got a top mark of 70. In 2004, HSBC decided to become the world’s first “carbon neutral” bank.

TD Bank Financial Group and Bank of Nova Scotia were listed toward the bottom of the rankings, with respective scores of 25 and 26.

The report looked at a total of 40 financial institutions, including 16 in the U.S., 15 in Europe, five in Asia, and one in Brazil. Information was gathered over the past six months from securities filings, company reports and Web sites and third-party questionnaires.

A bank’s practices on risk management and climate change could include how effectively a bank analyzes a counterparty’s preparedness for new environmental regulations on carbon emissions that could affect the bottom line.

“It becomes a balance sheet problem for them if they haven’t planned ahead,” says Odendahl, “and that becomes a credit risk problem for us.”

RBC has had an environmental risk-management group since 1992, says Odendahl, who also chairs a group of 13 North American banks involved with the United Nations Environment Programme Finance Initiative.

Overall, more banks realize that climate change is a big business issue, says Mindy S. Lubber, president of Ceres, in a statement: “As a key provider of capital and financing worldwide, banks must do more to move the economy away from fossil fuels.”

Here’s how the Canadian banks stacked up against each other:

> Board Oversight (out of 16): RBC, 8; TD, 5; Scotiabank, 3;

> Management Execution (out of 22): RBC, 18; TD, 11; Scotiabank, 9;

> Public Disclosure (out of 18): RBC, 8; TD, 7; Scotiabank, 9;

> Emissions Accounting (out of 14): RBC, 6; TD, 0; Scotiabank, 0;

> Strategic Planning (out of 30): RBC, 9; TD, 2; Scotiabank, 5. IE