For the first time since Prime Minister Mark Carney took office, we have something tangible to fight for in our quest to advance climate finance in Canada! We have some legislation on the table at last 🏆
First, a brief history lesson…
On March 24th 2022, Senator Rosa Galvez introduced a groundbreaking bill called the ‘Climate-Aligned Finance Act’ (CAFA) in the Senate. Roughly 18 months later, the Senate Banking Committee began a study on the bill. This study was a lot like pulling teeth; the committee, led by Conservative chair Pamela Wallin, didn’t prioritise this bill. Significant outside pressure was required to unstick CAFA to ensure it received a fair study.
There were many notable finance experts called to testify in front of the Banking Committee, including:
- Peter Routeledge, Head of the federal financial regulator OSFI
- Eric Usher, Head of the United Nations Environment Programme’s Finance Initiative (UNEP FI)
- Mark Carney, then UN Special Envoy for Climate Action and Finance; Former Governor of the Bank of Canada and the Bank of England
- Julie Segal, Environmental Defence’s very own Senior Campaign Manager of Climate Finance
CAFA was extremely ambitious, and was called “one of the most interesting pieces of climate legislation currently in the works” by the Financial Times. Many expert witnesses were broadly supportive of large parts of the bill, but many also remained cautious about more ambitious sections.
The more controversial aspects included: preventing any fossil-fuel related directors from serving on the board of financial institutions; having the bill itself dictate how the federal regulator should attribute risk; and putting climate considerations above all other fiduciary duties (see here for an explanation). These sections were initially important to ensure the bill was rigorous, and responded to the urgency of the moment. However, they were controversial, and may have prevented the bill from advancing further.
On March 24th 2024, we celebrated the second anniversary of CAFA. We worked with financial experts from across the world, along with cross-party MPs, to create a video in support of the bill.
On January 6th 2025, the Governor General prorogued parliament on the advice of former Prime Minister Justin Trudeau. With that, Bill S-243 died on the order paper.
That brings us to Fall 2025 – when Senator Galvez officially introduced CAFA 2.0
CAFA 2.0 maintains the most important sections of 1.0 and lessened the more controversial sections, which could hold up the bill. This means:
- More flexibility for the federal regulators to determine risk ratings for fossil fuel assets
- Transparency about fossil-fuel conflicted directors, not a ban
What’s next? This is a private member’s Senate Bill. It’s a very uphill battle between it being tabled this week, and becoming law. It must undergo two readings in the Senate, a study in Senate committees, a Senate vote, and then the same process in the House of Commons.
Here is your quick guide to what we can expect from CAFA 2.0:
CAFA works by making amendments to existing government legislation to align them with a
rigorous and comprehensive definition of climate commitments. CAFA proposes making changes to the Canada Pension Plan Investment Board Act: to require the Canada Pension Plan and CPPIB to align their investment strategies with climate commitments, potentially redirecting billions of dollars away from high-carbon investments. Among others, it would also alter the Office of the Superintendent of Financial Institutions Act to expand OSFI’s powers to include oversight of financial institutions’ climate plans.
CAFA will also require entities to:
- Develop emission targets aligned with climate commitments.
- Create detailed climate transition plans for how they will achieve these targets.
- Publish annual climate commitments alignment reports within 60 days of their financial year-end.
These reporting requirements are designed to improve accountability and transparency in
the financial sector and go beyond existing, patchwork reporting requirements, which many critics deem to be insufficient.
For a full synopsis of CAFA, watch this video we filmed with Senator Rosa Galvez about CAFA 1.0:
