On the eve of a landmark Senate committee hearing on Sen. Rosa Galvez’ Climate-Aligned Finance Act, Bill S-243, one of Canada’s leading climate finance experts says it’s time for federal politicians and regulators to pick up the pace on a crucial piece of the climate transition puzzle.
Bringing banks, insurance companies, and other federally-regulated financial institutions onboard with the country’s legislated net-zero targets would also be a timely move for a government in turmoil over federal-provincial relations, said Julie Segal, senior manager, climate finance at Environmental Defence Canada.
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“Climate-aligned finance is an exciting federal policy lever at a time when the government is concerned about provincial relations,” Segal told The Energy Mix last week. It’s an area where Ottawa has clear jurisdiction, so “it’s not something you’re going to get sued over”. Yet it’s also an instance where action by federal regulators can be a catalyst for their provincial counterparts to make their own moves.
And it’s “next area that the federal government should be picking up,” she said, with Auditor General Karen Hogan warning that Canada won’t likely meet its 2030 emission reduction targets.
“Policy-makers should be looking for every tool to meet that gap, reduce emissions, and build resilience, and climate finance policy is a clear one,” Segal said. “The links are clear. The government is looking for things to do, they’re not doing enough,” and “here’s something they can do that would make a big impact.”
Segal was speaking just days before the Senate Banking, Commerce, and Economy Committee scheduled its hearing for this Wednesday afternoon, nearly 20 months after Galvez (ISG-QC) first introduced her bill. Galvez is expected to lead off the two hours of testimony along with her Parliamentary and Legal Affairs Advisor Karine Péloffy and Prof. Amr Addas, strategic sustainability advisor at Concordia University’s John Molson School of Business. They’ll be followed by Darren Hannah and Bryan Radeczy of the Canadian Bankers Association.
Future-Proofing Canada’s Economy
“The beginning of the study of Bill S-243 is an important step toward future-proofing our economy,” Galvez told The Mix in a statement Monday morning. “Canada has the opportunity to play a leadership role in the net-zero era through the Climate-Aligned Finance Act (CAFA), so I hope the committee will be fair, open, and rigorous in undertaking this study.”
This week’s hearing has been a long time coming. Galvez first introduced Bill S-243 in March, 2022, as a prompt for federal financial institutions and federally-regulated entities to line up their investment activities with Canada’s climate commitments.
The legislation would make fulfillment of Canada’s climate commitments a matter of “superseding economic and public interest” for the financial sector, Galvez said at the time. It would:
• Hold corporate directors, officers, and administrators accountable for meeting the country’s climate commitments;
• Require the federal Office of the Superintendent of Financial Institutions (OSFI) to roll climate targets into its supervisory role, a shift that Segal said “would be a lot easier if the federal finance minister committed to aligning the financial system” with the targets in the 2015 Paris climate agreement;
• Mandate corporate climate action plans and targets with annual progress reports;
• Ensure that boards have the climate expertise they need and no conflicts of interest; and
• Base financial institutions’ capital adequacy requirements on the climate risk produced by their business activities.
“We know it’s bold. It’s complex. But we need to have this conversation,” Galvez said at the time. “We have to go far, far beyond voluntary disclosure of climate risk. We know the transition is here. We know it’s inevitable. We know that the window for action is closing. So we must act.”
The Industry Is Ready
Since then, as the months ticked by, there have been some concerns in Ottawa that banking interests were working to delay or scuttle the bill. But when she introduced Bill S-243, Galvez said some other senators were giving it serious consideration—and the industry itself was ready for change.
“I’ve talked to some of my colleagues who are bankers, or who work in the investment field, and to be honest they’ve all said, ‘you’re right. These are the gaps. We have to solve these issues’,” Galvez said. “Nobody has told me the banks aren’t ready for this.” And insurance companies “are very much aligned with what we’re saying” after facing the financial costs of climate disasters.
But since then, Canada “has at best adopted a wait and see attitude” to developing the detailed approach, or taxonomy, that would give financial institutions the mandate and the roadmap to align their activities with the country’s legislated emissions reduction targets, said a white paper released three weeks ago by Galvez’ office.
“Where 40 countries and regions have adopted or developed taxonomies, the federal government has still not responded to the Sustainable Finance Action Council’s taxonomy report, more than a year after receiving it,” the white paper stated.
‘Droves of Requests’ to Senate Committee
Now that S-243 is finally before the Senate Banking Committee, it remains to be seen how serious a hearing it will receive, Segal said.
“Yes, the CAFA is finally going to get its due consideration,” Segal said. “The open question is how thoroughly the Banking Committee will review this very important policy. When examining the CAFA, the committee should be calling on climate experts. On a variety of people who are familiar with the intricacies of the bill, and more importantly, are familiar with what needs to happen for Canada to lead on climate action.”
The CBA will be at Wednesday’s hearing, but “just calling banks to talk about the CAFA is way less than half the story,” Segal added. After receiving “droves of submissions and witness requests,” including a letter from more than 100 academics calling for a deep, unbiased study of the bill, she said committee leadership have some decisions to make about “who they call and how many sessions they devote” to “one of the largest bills that have ever gone through the Senate.”
Senate Banking Committee Chair Pamela Wallin (CSG-SK) declined to comment for this story.