Canadian MPs back proposal to align finance with Paris goals

A cross-party group of Canadian federal legislators is supporting a proposal to establish climate-focused regulations to cover the investment practices of banks, insurers, and pension funds.

The press conference, led by Liberal member of parliament Ryan Turnbull, emphasised the need for more decisive action to align the country’s financial system with Canada’s commitment to reducing carbon emissions and limiting global warming to below 1.5ºC. Earlier this month, Turnbull introduced a private member’s motion urging the government to utilise all available legislative and regulatory tools to align Canada’s financial system with the Paris Agreement.

Turnbull said: “Canada must marshal the resources necessary to fill the C$120bn per year investment gap to finance the transition to net-zero. There is a widespread acknowledgment that we can only meet our climate targets if we leverage the transformative power of our financial markets and, therefore, we must use every regulatory and legislative tool at our disposal. We need an all-of-economy approach to win the battle against climate change.”

The government has increased its spending to promote investment in green initiatives and technology, such as the allocation of approximately C$80bn in refundable tax credits over the next decade and the commitment of up to C$13bn in subsidies for Volkswagen’s electric-vehicle battery factory. However, there are also growing demands for regulations targeting the country’s financial system.

Prominent financial institutions have come under mounting pressure. In April, climate activists joined protesters across Canada for what they called “Fossil Fools Day”. These actions were in response to the release of the Banking on Climate Chaos report which identified the Royal Bank of Canada as the largest financier of the fossil fuel industry in 2022. Environmental groups have also criticised the recently proposed climate investment guidelines, arguing that including oil sands in the taxonomy discredits the role of Canadian sustainable finance.

Since last year, the climate-aligned finance act has been passing through Canada’s upper house. The act seeks to establish new climate disclosure requirements and mandates that banks and other federally regulated institutions develop transparent plans to meet federal emissions targets, among other provisions.

Debates surrounding the recognition of climate change’s impact on financial stability and the role of central banks have grown more intense in both Canada and its neighbour, the US.

Canada’s central bank ranks 10th in the Green Central Banking Scorecard and recently released its first climate-related risk disclosures, revealing a portfolio with associated carbon emissions “significantly higher than the G7 average”.