Enacting Climate Commitments Bill

Moved second reading of Bill S-238, An Act to enact the Climate-Aligned Finance Act and to make related amendments to other Acts.

She said: Honourable senators, I rise today to speak to Bill S-238, An Act to enact the Climate-Aligned Finance Act and to make related amendments to other Acts. I will call it CAFA for short.

Before addressing the bill, I would like to share the personal and professional motivations that led me to develop it. As many of you know, I worked for over 40 years as a civil engineer and environmental researcher, designing water treatment plants, remediating contaminated sites, closing mines and assessing climate risks to urban infrastructure. I have witnessed, first-hand, the tremendous financial, social and ecological cost of failing to care for our environment.

However, science and technology are not my only reasons. I grew up in Peru, as you know, between the Pacific Coast and the Andes Mountains, very close to the jungle. Some of my most cherished memories are of trekking through the jungle with my grandmother, a wise woman who lived close to the rainforest on the edge of the Amazon. I assisted her during the miracle moments of childbirth. This morning somebody asked me at what age I witnessed childbirth for the first time with my grandmother. I was 13 years old. This deepened my profound respect and awe for life and for the natural processes that sustain it.

Today, when I trek through Canada’s boreal forest or greatly admire the mighty rivers of northern Quebec, I feel the same reverence for the natural beauty of my adopted country. I have worked in and visited every province and territory, including making multiple journeys above the Arctic Circle. I know deeply that humans are inseparable from nature. We need clean water and soil, not only for our physical survival but also for peace, dignity and long-term prosperity, as my dear friend Senator Burey just explained to you.

It is an honour to sponsor this bill in the Senate. We, as Canadians, are extraordinarily fortunate to benefit from an immense wealth of natural resources. With this privilege comes heavy responsibility. Canada’s long-term economic stability, prosperity and competitiveness depend upon our ability to protect and steward these resources through a robust, coherent nature- and climate-aligned financial framework. We have the tools. We have the capacity. Through this bill, we could have a clear legislative pathway.

Many of you will recall that, in the Forty-fourth Parliament, I introduced a similar bill after identifying serious gaps in Canada’s climate strategy and sustainable financial architecture. These gaps were documented in a white paper entitled Aligning Canadian Finance with Climate Commitments, developed in collaboration with researchers from the John Molson School of Business at Concordia University and informed by dozens of consultations with more than one hundred worldwide experts in sustainable finance, climate risk, Indigenous governance and public policy.

Bill S-238 retains the core intent of its predecessor but incorporates three key amendments reflecting the testimony and feedback received at committee. I will return and explain those three amendments.

However, I will start by briefly outlining the purpose and urgency of CAFA.

The bill enables the alignment of federal financial institutions and federally regulated entities with Canada’s legally binding climate commitments. It also provides practical implementation mechanisms for several acts already adopted by Parliament, including the Canadian Net-Zero Emissions Accountability Act, the Canadian Sustainable Jobs Act — sponsored by our colleague Senator Yussuff — the United Nations Declaration on the Rights of Indigenous Peoples Act and the Environmental Justice and Environmental Racism Act. These are in addition to our international commitments to the United Nations Framework Convention on Climate Change and the Paris Agreement.

In essence, CAFA is an accountability and implementation framework that gives real economic effect to laws that we have passed and that have already received Royal Assent. CAFA offers a framework that sustainable finance experts and regular citizens have been asking for for over a decade. It should not be a surprise, therefore, that the House of Commons Committee on Environment and Sustainable Development released its report on sustainable finances a few days ago and its first recommendation is to adopt this bill.

So if you are wondering about the support I have in the other place, I think this report and the press release are proof of their interest in this bill. We also have an open letter from the Citizens’ Climate Lobby, which we received just a few days ago, and it already has more than 1,000 signatures.

Globally, leading financial institutions and international bodies now recognize that climate risk is financial risk. This is acknowledged by the Financial Stability Board, the Network for Greening the Financial System, the Bank for International Settlements, the International Monetary Fund, the World Bank Group, the Coalition of Finance Ministers for Climate Action, the Investor Network on Climate Risk and an organization that we all respect, the Organisation for Economic Co-operation and Development, of which Canada was a founding member at its inception in 1960.

Here in Canada, both the Office of the Superintendent of Financial Institutions and the Bank of Canada have explicitly recognized the existence of both physical and transitional risks associated with climate change.

Physical risks include damage from floods, wildfires, extreme heat, storms and sea-level rise. These are events that impair assets, disrupt supply chains, increase insurance losses and undermine creditworthiness. In recent years, we have seen communities devastated, families displaced, homes destroyed, businesses closing for good and crops and cattle tragically lost.

In that sense, I really want to thank other committees of the Senate that have started several studies on the impacts of climate change, the Transport and Communications Committee, the Agriculture and Forestry Committee —

Transition risks arise from the economic, technological and policy shifts required for moving to a low-carbon economy. These include stranded assets, sudden devaluation of carbon-intensive investments and financial market instability.

Because these risks are global and interconnected, they do not remain confined to individual companies. They propagate through banks, insurers, pension funds, capital markets, government budgets and households. Unchecked, they threaten the stability of our entire financial system.

Multiple credible sources have made clear that if Canada fails to align its energy and financial policies with the global low-carbon transition, the risks of stranded assets, massive economic losses, fiscal collapse in fossil fuel-dependent regions and financial-sector instability will become, unfortunately, a tragic reality.

While I speak often of technical and economic risk, we must not forget the human dimension: health, social rupture and eco-anxiety. These are real. Please do not take my word for it — ask your children and grandchildren. I consider myself a very strong person, yet I am affected when I am asked by young people, “What is the point of getting married or having children?” These are not hypothetical questions; these are questions posed to me in my role as a university professor here in Canada by Canadian students. “What is the point of building roads or pipelines if the future collapses?” This is real eco-anxiety, and I am shaken to my core.

We have been fortunate to live in a relatively stable climate with predictable weather and within a relatively stable economic system. I believe that every one of us in this chamber hopes that our legacy will be a world in which future generations breathe clean air, drink fresh water and live with hope rather than fear. We do not want them to worry about their homes flooding, their retirement savings vanishing or their health deteriorating.

This bill addresses important gaps in the financial sector and offers solutions based on accountability, transparency and the promotion of innovation and competitiveness.

The climate-aligned finance act, or CAFA, establishes a clear framework for guiding the financial sector to mitigate this climate risk. We have several other risks, and the financial system responds to these other threats — cybersecurity, safety, inflation — and they react. Yet, climate risk is not yet on the radar of some of our financial institutions. However, it should be because of some of the information I’m going to give to you today. We need to redirect capital toward adaptation and increase resilience. We need diversification toward a low-carbon economy, and we have to report transparently on progress.

Under CAFA, to be considered aligned with climate commitments, federally regulated financial institutions must ensure their activities are consistent with the legally binding Paris 2015 treaty to combat climate change, aiming to keep global warming well below two degrees centigrade. I’m sure you know that we have passed one and a half degrees, and we are just getting a taste of what may happen.

Last year, we spent $9.1 billion on insured losses. So this requires accounting for financed emissions, reducing exposure to activities that degrade carbon sinks and planning for an orderly phasedown of fossil fuels. At the same time, it encourages increased capital flows toward biodiversity protection, ecosystem restoration, clean energy and climate-resilient infrastructure — all grounded in the best available science, existing technology, respect for Indigenous rights and the protection of present and future generations.

To operationalize this alignment, CAFA introduces seven essential measures.

First, it establishes a clear duty for directors, officers and administrators to act in alignment with climate commitments. It introduces harmonized disclosure requirements, standardized transition plans and annual reporting — replacing fragmented, voluntary practices with a cohesive, enforceable framework.

Second, it aligns the mandates of federal financial entities and strengthens the oversight role of the Office of the Superintendent of Financial Institutions, or OSFI, to reflect climate-related financial risk.

Third, it requires federally regulated institutions, Crown corporations and federally governed sectors — such as railways and airlines — to develop climate-aligned transition plans, emissions targets and annual progress reports covering emissions across their value chains.

Fourth, it strengthens governance by requiring climate expertise on certain boards and mandating the disclosure of conflicts of interest. This brings climate competence into corporate decision making and modernizes the fiduciary duty for a climate-constrained world.

Fifth, it requires OSFI to consider capital adequacy requirements that reflect climate-related microprudential and macroprudential risks. This is essential. When financial actors continue to fund non-transition-ready activities, unfortunately, they generate systemic risk that is currently externalized and paid by us, all taxpayers, public funds. CAFA introduces the conditions for those risks to be properly internalized.

Sixth, it mandates a government action plan to align financial products — not just individual institutions — with climate commitments, recognizing that real alignment requires federal coordination.

Finally, seventh, it establishes recurring public review processes to ensure transparency, accountability and continuous improvement.

CAFA mandates accountability and transparency. These are the principles essential to any democracy. Politicians are elected based on platforms, and they are expected to keep their legally binding engagements. It is our role as senators to hold the highest standards for both transparency and accountability.

CAFA is prudent, forward-looking risk management. Just as the Net-Zero Emissions Accountability Act applies to the government, CAFA extends accountability to the financial system regulated by the federal government.

CAFA reflects Indigenous Peoples’ rights in relation to economic and financial institutions, making, in effect, a promise to Indigenous Peoples for a stronger nation-to-nation relationship and meaningful Indigenous equity and participation. This is our promise to them. The preamble of this bill recognizes the disproportionate impacts of climate change on Indigenous People. It defines climate expertise to include Indigenous ways of knowing, being and doing. It requires respect for rights that are affirmed in the UN Declaration on the Rights of Indigenous Peoples and ensures that Indigenous perspectives directly inform national financial policy.

Honourable colleagues, today we need CAFA more than ever. My decision to resubmit CAFA was influenced by the fact that there is always a conversation with the executive branch of the government of the day, and they know the clock is ticking. I recognize that some things move slowly and we need to accelerate the pace. But after new consultations, I realized that I had to submit it again and that I had to listen to the testimony and some of the concerns of my colleagues.

Traditional financial models are backward-looking. Somebody asked me recently how we explain this issue with climate change and its impacts. And I said that it’s like we are going down a tortuous road at 150 kilometres, very fast, and we are looking into the rearview mirror instead of looking out the front. The reason we do this is because it’s so tortuous, it’s difficult, and we think that historical data is going to help us predict the future. We cannot do that.

So traditional financial models are backward-looking. They fail to incorporate abrupt and irreversible shocks. As a result, markets systematically underestimate climate risk. The bill corrects this failure. It enables an orderly transition rather than a chaotic collapse — because without urgent action, make no mistake, dear colleagues, collapse is the trajectory we are on now. We can separate and we can say that affordability is this, and climate change is this, and safety is this, but, in reality, we all know they have the same source, that the routes are the same.

The climate crisis threatens financial systems, and a misaligned financial system accelerates the climate crisis. This is the reality of what financial experts call double materiality.

When financial institutions assess both how climate change affects them — outside in — and how their activities impact planet warming and the environment — inside out — they realize both present real-world financial risks. This is double materiality. For example, a bank’s mortgage portfolio faces physical risks from more frequent floods — outside in — affecting real estate values and loan performance. The same bank’s lending to coal expansion creates transition and environmental impacts — inside out — contributing to emissions that increase systemic climate risks. It is a vicious circle. Consideration of this double materiality ensures decisions reflect both financial resilience and responsibility toward our climate outcomes and commitments.

Every additional degree of warming has devastating economic consequences. Research suggests that even one additional degree Celsius of warming may reduce global GDP by more than 20% in the long term.

Canada continues to experience a sharp rise in catastrophic weather events. The number is increasing and the cost is increasing. The Canadian Climate Institute estimates that disasters already consume the equivalent of 5 to 6% of our annual GDP growth. Insured losses have doubled in five years, from $10 billion to $20 billion. In 2024 alone, insured losses reached $9.2 billion.

Those are only the insured losses. What about uninsured losses? They are three to four times higher, and they are borne by governments, businesses and us — Canadian families. These are not abstract numbers. These are Canadians’ homes, livelihoods, schools and communities.

These catastrophes are also straining government finances. One of my typical questions in the National Finance Committee is, “Have you put money aside for next year’s extreme weather event costs?” And the answer is “no.” I don’t know how we’re doing this.

The Parliamentary Budget Officer now warns us that disaster assistance alone averages $1.8 billion annually, and it’s rising.

And yet Canada continues to fall behind. Since 2019, we have produced nine climate strategies, yet we remain the only G7 country that has failed to meet a single climate commitment or to decouple economic growth from emissions. The Climate Action Tracker notes that Canada’s progress is stalling even as we endured one of the worst wildfire periods in our history in 2025.

This afternoon I met with a lady from Lytton. She said, “I’m living in the warmest place in Canada, and my whole environment has changed because the land has burnt so much. Nothing that is coming back looks the same as it was before.”

Several studies, including peer-reviewed publications and nature and energy publications, tell us that half of fossil fuel assets may become stranded by 2036 in a net-zero scenario. Those who fail to pivot will face collapse. Those who lead will seize the opportunity.

In the meantime, seven of the nine planetary boundaries have now been breached, indicating that the earth’s systems, which support our life — I will add a parenthetical here: If we let biodiversity loss, climate change, acidification of the ocean and plastic pollution go on unchecked — well, the planet will survive. I hope you are sure of that. The planet will survive. It’s us. It’s humans that will have to adapt or do something. I don’t know exactly what.

So seven of the nine planetary boundaries that have now been breached are destabilizing economies and life. I’m sure you go to the Caribbean in the wintertime. Well, I suggest you ask about erosion. Island nations are very much impacted by global warming.

The recent advisory opinion of the International Court of Justice confirms that states have binding legal obligations to protect the climate system. Climate leadership is no longer optional.

The risks are catastrophic, but the solutions — and this is the positive part of all of this — are within reach. We are seeing other jurisdictions in the world that are moving ahead. Nobody is going to stop that transition. Not even our neighbour in the south.

Financing the transition can help Canada manage risk and regain leadership. Every dollar invested in adaptations or mitigation returns between $2 and $10 in avoided losses per decade. Ensuring that our financial institutions fully understand and address climate risks will allow Canada to transition in an orderly, just and economically beneficial manner. This transition is not a burden. It is an extraordinary opportunity, but we need to open our eyes.

This brings me to the three principal amendments made to Bill S-238, or CAFA.

First, the capital-weighting provisions were refined. Rather than telling the Office of the Superintendent of Financial Institutions, or OSFI — as I heard in committee — what to do, I will let OSFI study, evaluate and incorporate the climate risk while preserving its independence in determining technical calibration.

Second, the board governance rules were revised. Instead of barring certain individuals, the bill now requires full disclosure of conflicts of interest and the publication of mitigation measures if needed, ensuring transparency without imposing unusual statutory prohibitions.

Third, the fiduciary duty of directors was clarified. Actions taken to align with climate commitments are now explicitly deemed consistent with existing statutory duties. This reduces legal uncertainty and reinforces that climate alignment is fully compatible with fiduciary responsibility.

These amendments make the CAFA more precise, more implementable and more resilient.

Honourable colleagues, CAFA is also a nation-building instrument. It strengthens unity by directing capital toward shared national priorities, such as a modern clean electricity grid, interprovincial cooperation and resilient infrastructure.

It boosts competitiveness by preparing Canada for carbon border adjustments. I’m sure you know our Prime Minister is going around the world trying to look for new partners. Well, these new partners in Europe, Asia and China have stricter climate rules and carbon border adjustments. We don’t have those, so how are we going to compete? How are we going to get these markets?

Clean technology races and international investment flows increasingly favour low-carbon economies.

CAFA advances reconciliation by protecting lands, health and communities while encouraging Indigenous-led energy, conservation and restoration projects. It replaces empty targets with measurable outcomes by aligning money with real-world emissions reductions. It supports affordability. Renewable energy, once built, offers stable, predictable and low operating costs. Of course, we need storage of this electricity, but we need to develop these innovations — these new batteries.

Around the world, we talk about resource curse economies. They come with relentless global price volatility that perpetuates boom-and-bust cycles. A transition to clean energy is inherently stabilizing and disinflationary.

In 2025, global energy investment is projected to reach $3.3 trillion, $2.2 trillion of which will go to clean energy. China alone represents more than a quarter of that investment. The world is moving. Last year, $1.2 trillion in new investment went to clean technology and energy. You must ask this question: How much of that did Canada receive? Don’t ask me because it makes me cry.

Young people, scientists, Indigenous nations, workers seeking a just transition, health professionals, women and vulnerable communities are demanding decisive action. They are not asking for rhetoric; they are asking for structural change.

In this chamber, we carry the hope that our grandchildren will know good health for our planet, which will determine the fate of humanity, and that we did a good job and were on the right side of history. My work remains clear: to work tirelessly for a world in which pristine environments are recognized as rights and protected for generations to come. Bill S-238 is a balanced, technically sound transparency and accountability response to that call. It is very cheap, because it’s a Senate bill. We cannot move money, so we have to be creative and innovative, legislatively speaking.

I look forward to a robust debate and thoughtful study of this bill in committee. I more than welcome expert testimony; I want to hear and learn. I want to improve the bill. We need critical analysis, constructive criticism and improvement, because the stakes — our stability and prosperity and that of future generations — could not be higher.

Thank you, meegwetch.