It’s clear that we will not achieve climate targets without the full and proactive participation of the financial sector. In Canada, this sector massively supports high-emitting industries with billions of dollars in direct funds. For example, Export Development Canada supported the fossil fuel industry with between 8 to 12 billion dollars per year from 2015 to 2020. A direct contradiction of the Canadian government’s stated objective of reducing subsidies and greenhouse gas emissions.

On top of that, the six biggest Canadian banks have provided with almost 700 billion dollars in financing and invested 125 billion in fossil fuels companies since 2015. What can that money do with renewables? Not surprisingly, Canada has the highest emission of its G7 peers since the Paris Agreement was signed. Coming from COP26, many international initiatives were created to address these issues, but despite the good intentions of these collaborations, there is an evident disconnect between pledges and actions from financial actors. The financial sector is on the front line of climate risk, whether physical, transition or because they are investing private and public funds in soon to become stranded assets. Despite a majority of ramping up of net zero pledges from the sector, there is no clear standard or enforcement measures to bring the much-needed transparency to these pledges, leaving room for over-representation of the efforts and green washing.

We parliamentarians have an essential role in unlocking the full potential of climate finance through bold legislative solutions. Legislation that will align the financial sector with our national and international climate commitments, update the fiduciary duty of directors, require target setting, planning and reporting, include climate expertise during financial decisions of ground corporations, prevent conflict of interest and increase capital adequacy requirements to reflect the risk generated by financial institutions.

In short, aligning finance with climate commitments by bringing structure, coherence, accountability and efficiency to our transition towards a clean, low-carbon, circular economy, while also protecting the financial system from increasing climate risk.