Environment Committee on May 9th, 2024

[Andrew Chisholm]

First of all, banks are doing a lot. Second of all, banks need to do a lot more. The third thing is that the Canadian banks signed on, largely, to the net-zero banking alliance, which was concentric with the Glasgow COP at the end of 2021. It was at that point, at the end of 2021, that they were making their commitments to align, so we are relatively early in that journey of dealing with clients and changing processes, systems and orientation.

[The Chair, Liberal, Francis Scarpaleggia]

Thank you.

This ends the testimony from this panel, which was very interesting. I thank the witnesses for helping us break the ice in our study of the financial system.

We are going to take a short break. In fact, we are going to hear from the Commissioner of the Environment and Sustainable Development again in the second hour.

Thanks again to the witnesses. You have made us exercise our brains a bit.

[The Chair, Liberal, Francis Scarpaleggia]

We will resume.

Since we're running a bit late, we have no time to waste.

We now welcome Mr. DeMarco, commissioner of the environment and sustainable development. He is joined by Mathieu Lequain, whom we know well, and Jean‑François Nadeau.

We have to wrap up at 5:45 p.m. at the latest. I will need 5 to 10 minutes at the end to hear feedback from committee members regarding the meeting with the oil company CEOs.

Without further ado, I turn the floor over to the commissioner for 10 minutes.

[Jerry V. DeMarco, Commissioner of the Environment and Sustainable Development, Office of the Auditor General]

Mr. Chair, I'm pleased to be here today to contribute to the committee's study on environment and climate impacts related to the Canadian financial system.

I acknowledge that this hearing is taking place on the traditional unceded territory of the Algonquin Anishinabe people.

Joining me today are Mathieu Lequain and Jean-François Nadeau, who are, respectively, principal and director in our office.

My remarks today are based on three reports we published in recent years on this matter. These are our 2021 “Lessons Learned from Canada's Record on Climate Change”; our 2022 “Research Paper on Climate-related Financial Disclosures”; and our 2023 report “Supervision of Climate-Related Financial Risks—Office of the Superintendent of Financial Institutions Canada”, also known as OSFI.

First, our 2021 “Lessons Learned from Canada's Record on Climate Change” clearly illustrated the cost associated with weather-related events in Canada, which were equivalent to 5% to 6% of annual gross domestic product growth. These costs have real consequences for households and business owners. For example, a major lender recently announced that it would no longer accept new mortgages for homes in high-risk flood zones. The consequences of such decisions on the value of residential housing, which for many households is the main asset, could prove quite dire.

Our “Lessons Learned” report indicated that financial decisions in Canada must take climate change into account if climate risks are to be mitigated. To do so, it is important for households, companies and governments to be able to understand their exposure to such risks and develop plans to manage them.

Climate-related financial disclosures are necessary stepping stones toward that goal. Our 2022 Research Paper on Climate-related Financial Disclosures looked at the state of various initiatives that were under way in Canada to improve the disclosure of climate-related financial information.

We mentioned that despite the decentralized nature of the regulatory frameworks for financial disclosures more generally—with the provinces and territories responsible for securities regulations within their own jurisdictions—Canada must address the lack of transparency, inconsistencies, and the quality of climate-related financial disclosures.

Finally, financial regulators must ensure that financial institutions, as stewards of the savings of Canadians, are managing climate-related financial risks appropriately. Our 2023 report on OSFI’s Supervision of Climate-related Financial Risks examined whether the office incorporated climate-related financial risks into its risk management systems and frameworks for federally regulated financial institutions and pension plans.

In our audit, we found that OSFI made meaningful progress towards integrating climate risks into its supervisory framework, but that full implementation was still years away. We also highlighted an opportunity for OSFI to consider how to adapt its role to further Canada's whole-of-government approach to climate change and sustainable development.

Since we released that audit, we have noted some positive developments. For example, OSFI has created an information page entirely dedicated to climate risks and expanded its outreach to stakeholders by creating the climate risk forum. The development of the forum is in line with one of our audit recommendations. It also launched a public consultation on the standardized collection of climate-related emissions and exposure data. Finally, OSFI tabled its first departmental sustainable development strategy.

Mr. Chair, this concludes my opening remarks. We would be pleased to answer any questions the committee may have.

Thank you.

[The Chair, Liberal, Francis Scarpaleggia]

Thank you, Commissioner.

As I mentioned to the committee before, I need a good five to 10 minutes at the end, so I'm going to make the first round a five-minute round and the second round a four-minute round, and then we should land on time.

Mr. Mazier.

[Dan Mazier, Conservative, Dauphin—Swan River—Neepawa, MB]

Thank you, Chair.

It's nice to see you again, Commissioner.

Commissioner, you work in the Office of the Auditor General. Is that correct?

[Jerry V. DeMarco]

That's an easy one: yes.

Are they all going to be that easy today?

[Dan Mazier, Conservative, Dauphin—Swan River—Neepawa, MB]

We'll see.

You have the powers to audit and investigate government programs. Is that correct?

[Jerry V. DeMarco]

Yes.

[Dan Mazier, Conservative, Dauphin—Swan River—Neepawa, MB]

Last week, you confirmed that you've never seen the government's entire carbon tax emissions model.

I sent you a letter this week. Did you receive it?

[Jerry V. DeMarco]

Yes, I received it, and our team is in the process of drafting a response today.

[Dan Mazier, Conservative, Dauphin—Swan River—Neepawa, MB]

Perfect. Thank you. I look forward to seeing that response.

Now that Canada's emissions have gone up again, will you launch an audit and compel the government to hand over the entire carbon tax emission model?

[Sophie Chatel, Liberal, Pontiac, QC]

On a point of order, Mr. Chair.

[The Chair, Liberal, Francis Scarpaleggia]

I'll stop the clock.

Go ahead, Ms. Chatel.

[Sophie Chatel, Liberal, Pontiac, QC]

We've just learned that we urgently need to take action on green finance. Consequently, I find it hard to understand how the questions that Mr. Mazier is asking are relevant.

[The Chair, Liberal, Francis Scarpaleggia]

It seems we're going off on a bit of a tangent, Mr. Mazier.

I don't know if you can relate it to this study.

[Dan Mazier, Conservative, Dauphin—Swan River—Neepawa, MB]

They talked about transparency and being able to have credible data. This has to be based on something, and we need a model, so—

[The Chair, Liberal, Francis Scarpaleggia]

Keep in mind that we're on the edge there.

[Dan Mazier, Conservative, Dauphin—Swan River—Neepawa, MB]

Yes, but they need data.

[The Chair, Liberal, Francis Scarpaleggia]

Go ahead. Let's go.

[Dan Mazier, Conservative, Dauphin—Swan River—Neepawa, MB]

Thank you.

Here's the question. Now that Canada's emissions have gone up again, will you launch an audit and compel the government to hand over the entire carbon tax emissions model?

[Jerry V. DeMarco]

I have committed to do more than the bare minimum under the newish net-zero act, which required a report on Canada's performance in mitigating climate change at least every five years. We issued our first one last year, and we will issue another one this fall. In the course of that audit, if we determine that we need all of that information, we will request it. We're still halfway through that audit, so I can't commit yet as to exactly what the nature of our information requests will be, but we do have an audit ongoing regarding Canada's mitigation measures and the effectiveness thereof.

[Dan Mazier, Conservative, Dauphin—Swan River—Neepawa, MB]

Thank you.

This study is examining private and public funding mechanisms to achieve emissions reductions. Last week, you exposed the Liberal government's $8-billion net-zero accelerator fund. You revealed that the government signed off on the majority of funding agreements without any commitments to reducing emissions. What companies have received money through the net-zero accelerator without a commitment to reduce emissions?

[Jerry V. DeMarco]

I don't have those reports with me this week, because I was here last week speaking about them, but if memory serves correctly, 12 of the 17 did not have commitments to emissions reduction. I believe the department committed to giving this committee a list of the 17 last week, if I recall correctly. I don't have that information available, but I do believe the department is going to forward that, based on my recollection of the proceedings last week.

[Dan Mazier, Conservative, Dauphin—Swan River—Neepawa, MB]

That would include the ones without a commitment to reduce emissions.