Environment Committee on May 9th, 2024

[Jerry V. DeMarco]

It should be 12 of those 17, yes.

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

Okay. Thank you.

How much time and money does it cost a federally regulated financial institution to comply with the annual climate-related financial disclosure expectations of the Office of the Superintendent of Financial Institutions?

[Jerry V. DeMarco]

Climate risks are one of the newer of the many risks that OSFI requires federally regulated institutions to comply with. Have they broken down the cost of compliance for the climate risks specifically among all the other risks? I do not know. I'm not sure if the committee is going to invite OSFI as part of this study, but that would be a question you could pose to them to see if they have parsed it out. There's a whole range of risks that institutions have to manage under OSFI guidelines, climate being one of the newer ones.

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

Were there any assessments conducted on how much money, paperwork and time it would take for a company to meet these disclosure guidelines?

[Jerry V. DeMarco]

At the time of our audit, I don't recall OSFI having provided any estimate that, as I said, parsed out guideline B-15 specifically. I think that's what you're speaking about. I don't think I've seen it. As to whether it exists, you'd have to ask OSFI if they have that.

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

Thank you.

I'll go back to my other question about the companies that received money from the accelerator fund without the commitment to reduce emissions. There were 12 companies you mentioned that did not comply. Is that right?

[Jerry V. DeMarco]

Seventeen received funding; five had commitments for quantifiable emission reductions, and 12 did not.

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

Are we going to get a list of those 12 as well?

[Jerry V. DeMarco]

That's my understanding from the undertaking from the department last week.

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

Okay, thank you very much. Thanks for that clarification.

[The Chair, Liberal, Francis Scarpaleggia]

Time is up.

We'll go to Ms. Taylor Roy.

[Leah Taylor Roy, Liberal, Aurora—Oak Ridges—Richmond Hill, ON]

Thank you very much, Mr. Chair.

Thank you to the commissioner for joining us once again at our committee and talking about the very important issue of sustainable finance.

I want to go back to a question that's been raised about the cost of reporting, the disclosures and guidelines, and what companies would have to do to provide the transparency needed to assure investors that they are not greenwashing and they are in fact part of this sustainable transition.

Do you feel there's any merit to the concern that the reporting requirements would somehow outweigh the benefit that Canada would receive from actually being able to represent that we are confident these companies are indeed not greenwashing and that they meet the requirements of the international board?

[Jerry V. DeMarco]

Well, as I mentioned before, I haven't seen any specific costing related to firms having to undertake the data collection analysis and reporting for climate-related disclosures. They are already doing a lot of disclosures relating to the traditional risks, so this would be on top of that, but I don't know what the incremental amount would be.

There is always some cost to adding a new accountability and transparency mechanism. There's a cost for accountability bodies such as this committee to run. There's a cost for our office, which is an accountability mechanism, to run. There's a cost associated with an accountability measure such as climate-related disclosures, but I don't know whether OSFI has attempted to quantify that in terms of the average cost to each firm.

[Leah Taylor Roy, Liberal, Aurora—Oak Ridges—Richmond Hill, ON]

Given that they haven't quantified that, do you have any major concerns that we should not be moving in this direction because of the possible cost of disclosure versus the benefit that Canada would get from actually having this transparency and this accountability?

[Jerry V. DeMarco]

In the course of our research paper in 2022 and in the course of our audit in 2023, we did not hear of any major concerns that the costs of compliance with climate-related disclosures would outweigh the benefits thereof.

[Leah Taylor Roy, Liberal, Aurora—Oak Ridges—Richmond Hill, ON]

Thank you.

In terms of the emissions report, I think the member said earlier that we're at our highest level now. I was wondering if you could comment on the level that we reached, the 708 megatonnes, which was actually 44 megatonnes less than pre-COVID. Do you see it as concerning that it's gone up slightly from COVID, or do you see this as going in the right direction?

[Jerry V. DeMarco]

Going in the right direction would be year-over-year decreases in total emissions. Recall that for 2026 Canada is just trying to get back to approximately where it started in 1990, when it ostensibly began getting serious about fighting climate change, along with its partners across the world. I would be satisfied if we were seeing year-over-year decreases that roughly match the graph line that would get us to the 2026 objective and the 2030 target of 40% to 45%.

Right now, we're still above 1990 levels. I'd like to see us at least returning to 1990 levels by 2026 and down by 40% to 45% by 2030.

To answer your question, no, we're not quite on a year-over-year steady decrease. We're seeing some major drops associated with two severe economic events, the last one being COVID. It was not just an economic event, but it certainly had an impact on emissions. I would like to see year-over-year decreases from here to 2030, and then thereafter to 2050.

[Leah Taylor Roy, Liberal, Aurora—Oak Ridges—Richmond Hill, ON]

Sure, from here going forward, but the estimates I've seen were that actually the expectations of the increase from the COVID pandemic years and the economic hit we took were greater than what we've seen. If you compare them to the 14.2 megatonnes forecast by the Canadian Climate Institute, we actually did much better. Would you say that those years—2020 and 2021—were aberrations?

[The Chair, Liberal, Francis Scarpaleggia]

Unfortunately, we have to move on to Madame Pauzé.

[Leah Taylor Roy, Liberal, Aurora—Oak Ridges—Richmond Hill, ON]

Thank you.

[The Chair, Liberal, Francis Scarpaleggia]

Ms. Taylor Roy, I think you articulated the point.

Ms. Pauzé, go ahead for five minutes.

[Monique Pauzé, Bloc, Repentigny, QC]

Commissioner, thank you for being with us again. Thanks as well to the members of your team.

We discussed greenwashing at length with the first witness panel in the first hour of this meeting, and we've talked about it again in this second hour. This past January, a group of sustainable finance experts filed a complaint with Ontario and Quebec regulatory agencies regarding more than $10 billion in sustainability-related loans that had been granted to companies in the fossil fuel industry. Despite their commitments, those companies were actively increasing production.

This isn't the first time I've heard you say that there's no transparency or accountability, that there's a lack of information and that we can't rely on current data.

What will we do if we fall short in what we're doing and those companies can simply circumvent the regulations because there's no binding legislative or regulatory framework?

[Jerry V. DeMarco]

We also have concerns about greenwashing among federal financial institutions, such as banks.

That was one of the recommendations we made in our OSFI report a year ago.

Our recommendation 4.63 reads as follows: To strengthen regulated institutions’ accountability for transition to a net zero emission economy and to avoid greenwashing, the Office of the Superintendent of Financial Institutions Canada should set clearer guidance about the information reported in the institutions’ transition plans.

So we discussed federally regulated institutions such as banks, but the provinces also need to take action to prevent greenwashing within the limits of their areas of jurisdiction.

[Monique Pauzé, Bloc, Repentigny, QC]

It gets complicated if we don't have any reliable data. If the company provides us with its own data, we know we definitely can't rely on it.

The European directive on corporate sustainability reports requires that businesses report both climate-related risks and impacts on environmental and social factors. This is what the European Union calls double materiality.

Wouldn't that also help Canada achieve its climate goals and financial resilience?

I'm talking about investments that promote activities targeting both the environment and social commitments. I'm thinking of health and everything related thereto, which ultimately means environmental and climate change issues.

[Jerry V. DeMarco]

Yes, that would definitely help.

As commissioner of the environment and sustainable development—and sustainable development includes the environment, the economy and the social aspect—I entirely agree that we have to examine all factors as a whole. You don't just consider aspects related to the environment or climate. We have to examine the three factors in an integrated manner. That's the vision associated with the concept of sustainable development.