Is Canada's financial system ready for climate change? Parliament knows its not

After a two-year investigation, dozens of expert witnesses, and testimony from Canada's biggest banks, a new report from the House of Commons Environment and Sustainable Development Committee has reached a conclusion: Canada's financial system is not prepared for climate change, and our voluntary measures are insufficient. This is the topic of a recent article for the EnergyMix, centering on the strong support of the Committee in their findings, behind Senator Rosa Galvez's proposed Climate Aligned Finance Act (CAFA). 

According to the study, Canada is lagging behind international peers on basics of sustainable finance, lacking clear climate disclosures, credible net-zero transition plans, and common definitions for “transition” and “green” finance. Prime Minister Mark Carney even declared Canada's climate disclosure system “a patchwork, delivered late, and falling short of international standard,” in 2024. 

In its lead recommendation, the Committee explicitly endorsed the CAFA, calling it a science-based regulatory framework that would be used as a tool to require financial institutions to publish transition plans and track their progress over time. The framework would also help to address greenwashing – when institutions falsely market themselves as climate-friendly. As one UN finance official told the committee, disclosure alone doesn’t require action. It only forces companies to describe what they’re already doing. By contrast, transition plans would lay out how institutions intend to change, and most importantly, hold them accountable to follow through. 

Senator Galvez says the committee's report confirms what experts have long warned us of  – that if Canada is serious about managing climate risk and protecting a sustainable long-term economy, the financial system must align with our climate reality. This article makes it clear that Canada's climate governance needs to shift climate action from voluntary promises to mandatory, system-wide rules. Disclosure alone isn’t action. And voluntary climate action isn't enough. We have the tools and frameworks, such as the CAFA, to help protect our economic security by forcing the financial sector to move from promises to action and take climate risks more seriously. The question then becomes whether Parliament is willing to act. 

Written by Sabrina Careri

Image credit: Tobias Rademacher | Unsplash