If the scent of elections perfumes the House of Commons this fall, the resumption of work in the Senate promises to be more constructive. Under the radar, the study of Bill S-243 on climate-aligned finance, crucial for sustainable finance, has been making progress since its introduction more than two years ago.
The movement to close Canada’s gap in sustainable finance is gaining speed. Currently, a House of Commons committee is studying the climate and environmental consequences of the Canadian financial system. At the same time, Bill S-243 must be the subject of a recommendation from a Senate committee and pass a vote in the Senate. Its main objective is to ensure that investments by large financial institutions reinforce Canada’s climate objectives rather than thwarting them.
The bill has the support of more than 120 organizations across the country and MPs from the Liberal Party of Canada, the Bloc Québécois, the New Democratic Party and the Green Party. Several internationally renowned experts testified in his favor.
It introduces innovative measures for the climate alignment of finance, such as the obligation for financial institutions to develop credible climate transition plans, consistent with Canada’s commitments, and to report on them annually. Other provisions to ensure climate expertise and transparency within boards of directors and to increase the responsibility of managers in climate matters are key elements of the bill.
Senators now have the opportunity to address a blind spot in Canadian climate policy: the role of the financial sector.
When it comes to sustainable finance, Canada is lagging behind. According to the most recent report from Green Central Banking, between 2022 and 2024, the country’s performance fell by 10e at 14e place within the G20. This is also the observation of several renowned experts who testified as part of the Senate study of Bill S-243 on financial alignment this spring.
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In his speech, Mark Carney, former governor of the Bank of Canada, affirmed that Canada’s laxity endangers its competition in international financial centers.
Nathan Fabian, from the UN Principles for Responsible Investment network, argues that pioneering regulatory jurisdictions will set the tone for climate alignment. The others will have to adjust. Canada is missing the train.
Thierry Philipponnat, from Finance Watch, recalled that Canadian investments in fossil fuels do not sufficiently take into account climate risk, thus endangering the stability of the financial system.
Convened in an unprecedented manner by a Committee of the House of Commons in June, the leaders of the five major Canadian banks touted their “plans” to reduce the carbon footprint of their investments. Yet the country’s big banks remain among the world’s largest financiers of fossil fuels by vigorously supporting the tar sands industry.
We can better understand why 65% of Canadians support the adoption of new federal regulations on sustainable finance in the financial sector.
Intrinsically, Canadian banks seek to serve their customers and satisfy their shareholders with the greatest possible autonomy. Without intervention from the federal government, they will continue to favor dividends to climate ambition. The solution to the problem of lack of consistency will not come from the market, but from the courage of Canadian elected officials.
The Canadian population deserves guarantees on the commitments of banking institutions. The financial sector must be part of the solution and stop financing the problem.
Senators, it is time to adopt Bill S-243.