Enacting Climate Commitments Bill
Bill to Amend--Second Reading--Debate Continued
May 5, 2022
Honourable senators, I rise today to speak in support of Bill S-243, as introduced by my colleague Senator Rosa Galvez. The climate-aligned finance act is a courageous and coherent bill.
I spent most of my career working as a reporter. I was a Washington correspondent. One of the most famous mantras in journalism is “follow the money.” What this means, of course, is that by following financial transactions, one can get to the source of the problem.
The phrase was coined at the time of the Watergate scandal. Of course, the bill before us seeks to address very different problems. In some ways, they are less spectacular. They get less media attention, but the problem of climate change is much more serious, and it threatens the entire planet.
Bill S-243 aims to connect our financial system and our climate commitments to get to the source of the problem and start fixing it. It will not be easy. Nobody said it would be. We should not expect to change the rules of our financial systems, as we must, while preserving the status quo of business as usual. We have to choose.
I am not a scientist so I will not spend a lot of time presenting climate scenarios and energy trajectories. In any event, that is not our role as legislators. Our job is to consider the science and pass laws accordingly — in this case, for the good of the planet and future generations of Canadians.
What are the scientists saying?
The latest IPCC report, published just a few weeks ago, concluded that:
The cumulative scientific evidence is unequivocal: Climate change is a threat to human well-being and planetary health. Any further delay in concerted anticipatory global action on adaptation and mitigation will miss a brief and rapidly closing window of opportunity to secure a liveable and sustainable future for all.
What are we to do? The IPCC report does not offer detailed solutions, but it clearly identifies “insufficient and misaligned finance” as a problem and highlights the need to adopt a model where “investment [is] aligned with climate resilient development.”
Others are also pointing the way. In February of last year, the U.K. government published a major study called The Economics of Biodiversity: The Dasgupta Review, led by Professor Dasgupta, of Cambridge University, and it does not mince words:
Collectively, however, we have failed to manage our global portfolio of assets sustainably. Estimates show that between 1992 and 2014, produced capital per person doubled, and human capital per person increased by about 13% globally; but the stock of natural capital per person declined by nearly 40%. . . . In other words, while humanity has prospered immensely in recent decades, the ways in which we have achieved such prosperity means that it has come at a devastating cost to Nature.
But this is not simply a market failure: it is a broader institutional failure too. . . . Governments almost everywhere exacerbate the problem by paying people more to exploit Nature than to protect it, and to prioritise unsustainable economic activities.
We need a financial system that channels financial investments – public and private – towards economic activities that enhance our stock of natural assets and encourage sustainable consumption and production activities. . . .
In May of last year, the International Energy Agency published a pathway to net-zero emissions by 2050 — a goal that Canada has publicly committed to achieve. The report was very direct and precise in saying that no new oil and gas fields should be approved for development beyond those already approved in 2021, and that, going forward, the only focus of oil and gas producers should be to manage and reduce emissions from existing assets.
There are many more reports and studies, of course, but at this point the message is clear: If we are to reach net zero by 2050, we need transformational change at a systemic level, quickly. But that is not what we have done in Canada. So far, we have supported a few climate policies and initiatives, as long as they do not affect our economy in any meaningful way. We vow to protect the climate in the long term, but short-term considerations of competitiveness take precedence. We advocate for bold change, but the status quo prevails most of the time.
As we pledge to reduce our national emissions, we are planning to increase our oil and gas exports. We celebrate our carbon tax, but our biggest polluters only pay a fraction of it. And the most significant measure we are contemplating for the financial industry is a disclosure scheme.
I strongly believe in transparency, of course. It is often an essential first step. In fact, we just passed Bill S-211, which is a transparency bill focused on forced labour and child labour in supply chains. But there are situations where transparency alone is not sufficient, especially when economic incentives are not aligned. In the case of the financial sector, climate disclosure schemes have not had much impact.
A recent report by NGOs shows that in 2021, the world’s top banks provided $752 billion in financing to the fossil fuel industry. One quarter of that amount went to companies that are expanding production. In Canada, financing for oil sands operations increased by 51%. Of course, this is not because we didn’t know about climate change last year or because we had insufficient disclosures to know that increasing oil and gas production contradicts our climate commitments. It’s because disclosures are basically worthless if they are not associated with cost.
In fact, a 2020 survey by HSBC found that just 10% of investors viewed the climate disclosures as a relevant source of information. When discussing that survey, the Financial Times quoted a former Bank of England economist as saying that:
Just discussing risks, and assessing risks, does not mean we are actually transitioning to net zero. Many firms may discuss risks — and do exactly nothing to advance the transition.
And why is that? Because climate disclosures provide information, but they do not align financial incentives. And that’s what matters: alignment.
Today, we are studying Bill S-243.
For the first time, we have a bill that is proposing to do what the IPCC and others are calling for: align finance with our climate commitments. The act would require public and private financial institutions to explain how they align their loans and investments with our climate commitments. It would require Crown corporations to integrate climate expertise at the highest level. It would support financial transactions that accelerate the transition and discourage those that slow it down. The act also addresses the conflicts of interest that have held us back for so many years.
It is a bold and necessary bill that challenges the paradigm under which we have operated until now, which holds that the financial system is untouchable.
This initiative will no doubt spark opposition, but I believe that the criticism should be met with a simple question: If you do not agree with this bill, how do you propose that Canada align its financial system with our climate commitments? If the reply is merely that we need more disclosure and carbon capture, or that we must wait for other countries to act, or that the market itself will ensure that there is a transition, we will know that there is no real will to change anything.
As I mentioned at the outset, Bill S-243 proposes to follow the money. That is certainly the right approach. But there is another thing that Bill S-243 would allow us to do, and that is putting our money where our mouth is. Senator Galvez is giving us an opportunity not only to align our financial system with our climate commitments, but to align our deeds with our words. We want to be climate leaders, but we are the only G7 country where emissions increased between 2015 and 2019. We point to other countries with bigger carbon footprints, but Canada is the worst country in the world for cumulative emissions per population. We can and should be doing much better. As senators, we often say that one of our duties is to provide representation to under-represented groups. Today, I suggest to you that one such group is made up of future generations. This bill is for them.
As appointed legislators, we are protected from electoral pressures. In politics, this is a rare and invaluable privilege. It should give us the courage and the independence to make hard decisions that are in the public interest. Today I suggest that we should take the time to understand and reflect on this bill. To quote The Dasgupta Review one more time:
. . . the same ingenuity that has led us to make demands on Nature that are so large, so damaging and over such a short period, can be redeployed to bring about transformative change, perhaps even in just as short a time. We and our descendants deserve nothing less.
In 15 or 20 years, most of us won’t be here anymore. Today, I suggest that this bill gives us a chance to do something that will matter when we are gone. So I urge you, colleagues, to send this bill to committee for an in-depth study without delay. We owe this to our children and grandchildren. Thank you.
Would Senator Miville-Dechêne take a question?
You say you are not a scientist, but I congratulate you for the resume you have and the IPCC reports that are huge like that. Thank you very much for the support for this bill. I know you are very much interested in transparency.
I learned a lot today from a report that focused on conflicts of interest regarding decisions made by fossil fuel company directors who also serve on the boards of banks or financial institutions. Have you thought about the impact that apparent or actual conflicts of interest could have on the media, our lives and so on?
As a former ombudsman of Radio-Canada, I’ve thought a lot about conflicts of interest. There are very specific codes. We could not be on a board of directors, and our activities outside of our work had to be very limited to avoid any apparent or actual conflict of interest, since that would destroy all of our credibility. A journalist colleague of mine who was assigned to cover police operations was secretly being paid to provide information to police officers. We obviously need to prevent such obvious conflicts of interest.
I am less familiar with the banking and financial sector, but certainly, if directors of banks or financial institutions hold shares in fossil fuel companies or are otherwise involved in an economy that does not respect our financial commitments, that is a problem since we don’t actually know what happens on these boards. We don’t know whether that will influence the individual’s vote.
There needs to be a lot more transparency and information on board activities if we want to change things. Your bill is rather innovative in that sense. It prohibits directors from being shareholders or having ties to companies that do not comply with our climate commitments, and it states that lobbyists who have worked for companies that do not comply with our climate commitments cannot serve as directors for a period of five years. It is a rather unique way of looking at things, but it is essential.