Canadian banks and pension plans are still putting money into polluting investments. This is holding Canada back from a climate safe future. For Canada to meet its climate goals, dollars from the private sector (investors and businesses) and public sector (government) must shift out of polluting investments and into green solutions.
Are we there yet? No, we still have a long way to go before Canada’s financial system aligns with climate commitments.
What Can Canada Do?
- Set Regulations – Establish new rules to align finance with a safe climate
Canada has regulated our financial system since the early 1900s to keep it stable and somewhat aligned with the public’s best interest. Given the urgency of the climate crisis, federal leaders must implement new standards and enforcement mechanisms to align the financial sector with limiting warming to 1.5C.
- Move beyond reporting – Cut emissions, don’t just count them
To align the financial sector with 1.5C, Canada’s banks and pensions must reduce the emissions caused by their business or investment practices. An institution should report on the emissions caused by their investments as a first step, but this is not enough to keep investments stable or to advance climate action. Financial institutions must make sure they invest in projects that cause fewer emissions. In a sinking boat you have to plug the leaking holes, not just acknowledge them.
- Ensure promises are followed by action
Despite financial institutions’ voluntary promises to reduce emissions, many banks and pension funds don’t have action plans to match. Regulators must hold them accountable to deliver on their promises. Financial institutions must follow the guidance of scientific experts to inform their emission reduction plans, and most importantly, the plans must be put into action.
The Work Has Started
Environmental Defence, in partnership with EcoJustice and Shift, published a report outlining a Roadmap to a Sustainable Finance System, which lays out how financial institutions and governments can develop plans that ensure investments contribute to climate action. The Roadmap outlines rules that can be implemented easily and quickly if the government chooses to step up.
According to a United Nations responsible investment group, Canada is a “low-regulation jurisdiction”. Although Canada’s main financial regulator, the Office of the Superintendent of Financial Institutions (OSFI), released new rules for financial institutions to report on their emissions, it is only a first step and more action is needed.
Certain leaders within the government have stepped forward, like Senator Rosa Galvez with her bill called the Climate Aligned Finance Act (CAFA). CAFA would establish policies to ensure the private sector cuts emissions to better protect people’s savings and our shared climate. Over 150 academics and organizations have endorsed the bill and called for policymakers to advance it – but the bill has not yet been brought to the next stages of the process.
Under the Paris Agreement, Canada committed to make sure all investments help reduce harmful emissions and build climate resilience. By setting new rules to align the financial system with climate action, Canada can deliver a worthwhile return on investment: a safer climate alongside a more stable financial system.
Join us as we work to get new rules that bring Canada’s banks and pensions in line with climate action and our shared best interest.