Four years ago, on March 24th 2022, a bill aimed to align Canada’s financial system with climate action was introduced in the Senate. The Climate-Aligned Finance Act (CAFA) aims to prepare the Canadian economy for climate change, reducing the risks to Canadian’s savings and deposits, while ensuring our economy no longer contributes to making climate change worse. Senator Rosa Galvez introduced the bill to address a missing piece of Canada’s climate policy and financial sector policy.

The draft legislation has also drawn global praise for its creative and thorough approach. It is supported by Canadian climate experts. The original bill was studied by the Senate, however following the federal election in spring 2025, the Climate-Aligned Finance Act needed to be reintroduced. While re-introducing the bill, Senator Galvez highlighted how it is important to strengthen Canada’s economy and modernize our financial system.

The purpose of CAFA has been to align Canada’s financial system with the Paris Agreement  and domestic legal commitments to reduce carbon emissions. In the reintroduced version, CAFA includes a few amendments based on input that was received when the first bill was being studied in the Senate. First, instead of requiring corporate directors to have a “superseding duty” to consider climate change above all other issues, CAFA 2.0 simply clarifies that climate change is already part of the duties of business leaders. Second, while it previously stipulated an amount which banks would have to hold in reserve for any loans to oil or gas, CAFA 2.0 would have the federal regulator further examine the issue to ensure risks are accounted for. Further, while the initial bill would not permit an oil or gas executive to sit on a board of directors of a financial institution, CAFA 2.0 merely requires a disclosure of any such appointments as a potential “conflict of interest”. 

Important comments were made in the Senate when CAFA was first studied. For example, before he became Prime Minister, Mark Carney testified a concern that Canada was “falling short of international standards” on sustainable finance policy. Climate finance experts have highlighted how Canada remains behind global peers on aligning our financial system with climate action, and have noted the CAFA as a solution to address this.

Environmental Defence hosted Senator Galvez and other climate finance experts to explain CAFA, its progress towards being adopted, and what is expected next. Watch the discussion below about how CAFA can advance a stable and climate-resilient economy in Canada, what is new, and what you can expect next.