Whitby MP on board with legislation to force banks to align with Canada’s climate committments

Legislators from four of the five parties represented in the House of Commons came together Friday to raise the “urgent need” to align Canada’s financial system with climate commitments.

The MPs, who came from the Liberal, NDP, BLOC and Green benches, were hosted by Quebec Senator Rosa Galvez for a breakfast and panel discussion on Bill S-243 (the Climate-Aligned Finance Act) and how it will create greater climate resilience across Canada’s financial system.

The event was followed by a press conference with Galvez, the Environmental Defence organization and many of the MPS in attendance, with Whitby MP Ryan Turnbull calling on his government to use “all legislative and regulatory tools at its disposal” to align Canada’s financial system with the Paris Agreement.

Turnbull’s motion, jointly seconded by a dozen MPs, declares climate change “a clear and present danger, putting Canadian lives and livelihoods at risk.” Turnbull believes Canadian financial institutions and regulators are taking some steps in the right direction, but need to do more to ensure Canada meets its climate commitments.

Senator Rosa Galvez

“We all know the climate crisis demands urgency and ambition. Momentum around a climate-aligned financial system in Canada has been building and we must take the next steps to create the enabling conditions for capital to flow into the needed investments,” Turnbull said. “Canada must marshal the resources necessary to fill the $120 billion per year investment gap to finance the transition to net-zero. There is a widespread acknowledgement that we can only meet our climate targets if we leverage the transformative power of our financial markets.”

Galvez said the Climate-Aligned Finance Act (CAFA) is a “clarion call for the courageous legislation we need” to confront climate risk facing Canada’s financial institutions. “This is what world leading climate finance legislation looks like.”

Turnbull noted time is of the essence to get banks and other lenders on board. “Right now we’re facing a rapidly closing window of action to tackle the existential threat of climate change. I’m thrilled that there is growing momentum for this action, and we are beginning to shoulder that burden together.

Ajax MP Ryan Turnbull

CAFA was developed with dozens of experts and introduced by Galvez in March 2022. It is endorsed by 120 organizations from coast to coast and 56 leading academics have called for the bill to proceed to committee review in Senate.

The legislation, if approved, would require major banks, crown corporations, and other federally regulated financial institutions to align their own work with Canada’s climate commitments, which has a target to reach net-zero-emissions in Canada by 2050.

The legislation drew praise across the House and from environmental groups:

• “Canadian banks are among the worst in the planet in fossil investments. In fact, RBC is the largest investor in fossil fuels of any bank on earth. Climate financing may sound dull as dish-water but in it lies the systemic change the climate needs.” – Green Party leader Elizabeth May.
• “The government must now establish instructions for banks and pension funds to protect workers’ savings and our climate by shifting money away from polluting activities. Rules are needed now, including defining a set of truly clean activities so Canadians can trust their hard-earned money is helping build the new economy. We’re in a race against time and we need the power of Canada’s financial system serving as a tailwind, not a headwind.” – NDP MP Taylor Bachrach (Skeena-Bulkley Valley).
• “Climate change is the greatest threat of our time. If we don’t respond to the crisis before us, it will cost our economy between $2.7 and $5.5 trillion in GDP. Canada’s financial institutions must therefore do their part and not increase climate risk. I invite all colleagues to rise to the occasion: the economy and the environment must go hand in hand. ” – Jean-Denis Garon, Bloc Quebecois MP (Mirabel).
• “Canada’s financial system has the power to be a driving force in our fight against climate change. By redirecting investments towards clean and sustainable initiatives, we can unleash the full potential of our economy while safeguarding our planet. Let us seize this opportunity to work with our financial institutions to protect Canadians hard-earned savings and pave the way for a more sustainable future for all.” – Julie Dzerowicz, Liberal MP (Davenport).
• “Canada finally has an all-star team of firefighters ready to tackle the biggest gap in Canada’s climate plan: private finance. We must shift private finance into green opportunities and away from climate pollution.” – Julie Segal, Senior Manager Climate Finance, Environmental Defence.

The event featured a panel discussion with several experts in the financial sector, with panelists discussing the role of policymakers in climate finance and Canada’s competitiveness in the net-zero transition. Former Environment Minister Catherine McKenna provided the keynote address.

According to the U.N., Canada’s sustainable finance regulation lags behind its international peers when compared to 11 other jurisdictions because of a “lack of legal clarity about investors’ duties and insufficient action by policy” makers to encourage and enable responsible investment. Amr Addas, an Adjunct Professor with Concordia University in Montreal (and the master of ceremonies for the panel discussion) said clearer regulation would create “certainty” and ensure Canada’s financial institutions are “full participants” in the transition.

“Failing to act on this critical gap in climate policy would lead us to lose out on the flow of capital necessary to achieve our just transition to a net-zero economy.”

There are still significant obstacles to Bill S-243. which now sits at Second Reading in the Senate,  to becoming law.