This article was published by The Energy Mix on March 26, 2024.
By Mitchell Beer
A Canadian Senate committee is making no visible moves to bring the proposed Climate-Aligned Finance Act forward for study, two years after the bill was introduced and just days after Canada’s big banks admitted their sustainable finance promises won’t be enough to rein in their climate pollution.
Bill S-243 was introduced March 24, 2022 by Sen. Rosa Galvez (ISG-Quebec), endorsed by 89 investment firms, academic organizations, and environmental groups just weeks later, referred to the Senate Committee on Banking, Commerce and the Economy in June, 2023, and finally received a brief hearing last November. But this week, as supporters marked the bill’s second anniversary with social media posts, a Senate source reported no immediate plans on the part of committee chair Pamela Wallin (CSG-Saskatchewan) to bring the legislation forward for detailed study.
“The priority of Senate Standing Committees is to study government legislation,” the official said in an email. “A committee’s schedule is determined by the Steering Committee made up of Senators of each recognized group in the Senate who are also members of the full committee. The Steering Committee for [the Banking Committee] has not yet identified a future date to resume the study of this bill.”
Galvez said she’s encouraged to see climate finance “gaining momentum in public debate, in Canada and globally,” but contends that “the bill has been held up” by the committee.
“The committee’s leadership is failing in its responsibility to undertake a comprehensive study of a bill that was referred to it by the Senate,” she told The Energy Mix in an email. “The committee has only heard from two witnesses, and experts in finance and climate are still waiting to be invited to testify on this important subject.”
With Canada “experiencing extreme weather events like never before,” Galvez added, Canada’s “main economic partners”—the European Union, the United States, and China—“have already enacted sustainable finance measures to help propel their transition to a low-carbon economy. We must also move forward on aligning our financial sector with our climate commitments to ensure a resilient Canadian economy as the world transitions to a low-carbon future.”
Particularly as Canada’s major banks, cited by Reuters as “one of the biggest fossil fuel financiers globally,” acknowledge they aren’t getting decarbonization done on their own.
The institutions “have drawn criticism from climate activists and investors for years claiming they are using sustainability-linked financing (SLF) merely for pretence of a lower carbon footprint rather than take meaningful steps in that direction,” the news agency writes. Now, “some of Canada’s biggest banks have admitted for the first time that their climate-related finance efforts may not necessarily curtail emissions growth.”
The revelations showed up in a review of the banks’ latest annual reports, many of which “pledged billions of dollars in sustainable financing to decarbonize high-emitting sectors, while highlighting major challenges to meeting their goals.”
The Bank of Nova Scotia “noted that their sustainable finance targets may not necessarily curtail the growth of emissions,” Reuters writes.
The Royal Bank of Canada, the world’s leading financier of fossil fuels and fracked gas based on 2022 data, said only 2 per cent of its clients have aligned their business plans with a 1.5°C limit on average global warming.
TD Bank said the climate impact of its business activities cannot be “reliably measured at this time.”
Reuters cites a recent InfluenceMap report that showed Canada’s five biggest banks increasing their fossil fuel financing exposure from an average of 15.5 per cent to 18.4 per cent between 2020 and 2022. Leading U.S. banks averaged 6.1 per cent, European banks 8.7 per cent, over the same period.
“The question for regulators will be whether it’s enough for the banks to insert these brief disclaimers deep in their ESG reporting or whether they need to do a better job telling their investors and the public that these huge financial numbers they promote as green aren’t necessarily adding up to emissions reductions at all,” said Matt Price, executive director of Investors for Paris Compliance.
The Climate-Aligned Finance Act 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;
• 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 when she introduced the bill two years ago. “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.”
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