“Aligning Canada’s Financial System with Climate Action: A Necessary Step for the Future”
Canada’s effectiveness in cutting greenhouse gas emissions this decade is dependent on the alignment of our financial system with climate action. As the government’s climate auditor deems Canada’s current efforts inadequate, urgent action is needed to address the issue.
Financial System Misalignment
Currently, Canadian financial institutions continue to fund polluting energy and infrastructure, exposing Canadians to greater environmental and economic risks. With over $100 billion in investments at risk of becoming obsolete due to their support of climate-polluting industries, it is evident that a change is necessary. Canada’s position as the largest fossil fuel financiers globally makes climate finance policy crucial for achieving net zero.
The United Kingdom and the United States have taken significant steps to align their financial systems with climate action. The commitment to become a “net-zero aligned financial centre” and the implementation of guidance for credible climate transition plans are examples of effective policies that Canada should consider.
The Call for Action
Leaders in the federal government, along with members of Parliament from various political parties, have urged the government to use all legislative and regulatory tools to align Canada’s financial system with the Paris Agreement. The upcoming discussions on the Climate-Aligned Finance Act also show momentum for a climate-aligned financial system. However, decisive action from policymakers is required to ensure its implementation.
Committing to a climate-aligned financial system and requiring transition plans from financial institutions to reduce emissions from their activities and investments are crucial policy steps. This alignment is not just a symbolic gesture, but a way to encourage positive action and investment in the best interests of Canadians.
A climate-aligned financial system is imperative for Canada’s success in cutting greenhouse gas emissions and achieving a safe climate and stable economy. It is time for Finance Minister Chrystia Freeland to lead the way in aligning our financial system with climate targets, setting the tone for financial institutions to invest in the best interests of the country. The urgency of the situation requires immediate and decisive action to ensure a sustainable and resilient future for Canada and its citizens.