Environment Committee on May 30th, 2024

[Adam van Koeverden, Liberal, Milton, ON]

I'll relinquish that time to the chair.

Thank you, Mr. Chair.

[The Chair, Liberal, Francis Scarpaleggia]

Thank you.

Ms. Pauzé, you have the floor.

[Monique Pauzé, Bloc, Repentigny, QC]

Thank you, Mr. Chair.

I want to thank all the witnesses.

Before I ask a question, I'm going to go back to what you said in your opening remarks, Mr. Pardy. I've never heard so much climate denial. Above all, I was almost insulted when you said that the subject of our study was a threat to the country's economic prosperity. I'm here in a professional setting and, on the contrary, I want the constituents my riding and my nation to have a healthy environment and not see their health affected by climate change, even though that's already happening.

That said, my question is for you, Ms. Quigley.

Canadians are increasingly concerned about greenwashing, and rightly so. In a November 2023 poll, 78% of Canadians polled—I repeat, 78%—said they were in favour of greenwashing regulations in the financial sector, 76% said they supported their bank's sustainable finance efforts and 65% said they were in favour of their pension fund doing the same thing.

In your opinion, Ms. Quigley, are Canadians right not to trust voluntary climate disclosure initiatives?

[Dr. Ellen Quigley]

I'm afraid I switched the interpretation on partway because of a term I didn't understand in French, so I hope I have the right question.

I think what the public is saying is that they want something that the evidence actually lines up with. I've reviewed 118 years' worth of studies looking at the cost of divestment to investment portfolios and found basically no effect. You can time it poorly or well. Certainly, if that percentage of the population is in favour of this, I would personally not be concerned about the effects on financial returns, depending on the timing of the divestment.

I'm sorry. Was that your question?

[Monique Pauzé, Bloc, Repentigny, QC]

My question was more about whether Canadians are right to be wary of greenwashing by oil and gas companies, banks and all businesses. Are they not right to mistrust voluntary disclosure initiatives?

Currently, some are advocating a voluntary disclosure framework. Wouldn't it be better to have a more regulatory framework?

[Dr. Ellen Quigley]

That is an extremely important question.

Yes, we see systematic under-reporting when we have voluntary disclosure. In fact, academics I know even looked at disclosures from the CDP, the carbon disclosure project —they are some of the best ones we have—and found that there were basic addition errors and so on. We can't trust the information we get from voluntary disclosures.

Frankly, referring back to the comments about costs earlier, because there's no world in which we don't have disclosure, we're increasingly required to do that because of interactions with other parts of the world that already have it. It is actually, in my view, likely to be less costly if we have mandatory disclosure that aligns with what other countries are doing.

Voluntary disclosure regimes that don't agree with one another are a really good way to run up costs and make sure that you get information you can't trust, act on or use as a basis for investment.

[Monique Pauzé, Bloc, Repentigny, QC]

Thank you for that.

I would now like to turn to you, hon. Senator.

It is well known that a number of boards of directors, banks, pension funds and insurance companies have board members from the oil and gas industry. You mentioned it in your opening remarks.

Do you think this reality has the effect of slowing down or even preventing the effective implementation of the regulatory mechanisms that countries should establish?

[Rosa Galvez]

It certainly doesn't help the cause. When management wears two or three hats at once, it becomes very difficult to be loyal to all of them.

Several reports describe this situation. In fact, during a confidential meeting, I was informed that members from the oil and gas companies, banks, pension funds and insurance companies could fill a 500-seat room on their own. It's very common to see these same people rotate.

[The Chair, Liberal, Francis Scarpaleggia]

Thank you.

Ms. Collins, you have the floor.

[Monique Pauzé, Bloc, Repentigny, QC]

My time is not up, Mr. Chair.

[The Chair, Liberal, Francis Scarpaleggia]

You're right. I apologize.

[Monique Pauzé, Bloc, Repentigny, QC]

I have to keep an eye on you, Mr. Chair.

[The Chair, Liberal, Francis Scarpaleggia]

I got ahead of myself. My apologies.

Please continue, Ms. Pauzé.

[Monique Pauzé, Bloc, Repentigny, QC]

Thank you.

Senator Galvez, you didn't have time to finish your remarks. I'd like to give you a chance to do that. You were talking about what's happening elsewhere.

[Rosa Galvez]

I wanted to say that we're lagging behind Europe, the United States and even China. Each country has its own approach: China issues orders, Europe is using a lot of regulations and the U.S. is injecting a lot of money. Those are three different approaches, but they achieve the same result, which is that those countries are beginning the transition to a low-carbon economy. We, as Canadians, are waiting to see what happens, and that really hurts our competitiveness.

[The Chair, Liberal, Francis Scarpaleggia]

You have just enough time for a brief comment, Ms. Pauzé.

[Monique Pauzé, Bloc, Repentigny, QC]

In that case, I'll ask you my next question right away, and you can answer it later.

What mechanisms are in place elsewhere in the world to remove conflicts of interest from the boardroom table?

We can come back to this the next time I have two minutes of speaking time.

[The Chair, Liberal, Francis Scarpaleggia]

That's fine, thank you.

Ms. Collins, you have the floor.

[Laurel Collins, NDP, Victoria, BC]

Thank you, Mr. Chair.

This is the second week in a row that Conservatives have brought witnesses to committee who argue against ambitious climate action.

Mr. Pardy published an article criticizing the Supreme Court for stating that climate change is an existential threat to Canada. He posted on the platform X that, “Even if you believe in anthropogenic climate change, there is no rationale for this country to have emission reduction targets of any kind.” The fact that my Conservative colleague Mr. Leslie spent his entire questioning time giving this person space to add their testimony into our report is I think appalling, to be honest.

I'll focus my questions on Senator Galvez.

First of all, I want to say thank you. Thank you for putting forward the climate-aligned finance act. It is an important piece of legislation.

We have OSFI here with us. They brought in their guideline, B-15, that requires financial institutions to improve their governance and risk management practices, but it falls short of requiring them to align with Canada's climate commitments. Can you talk a little bit about why it doesn't go far enough?

[Rosa Galvez]

I recognize and I thank OSFI for putting out this guideline, but unfortunately, it's the minimum. It doesn't make us move. Transparency is equivalent to a diagnostic. It's like telling a patient, “You have cancer. Bye-bye. See you later.” They have to mitigate, they have to manage and they have to reduce the emissions.

This is the way we manage risk. We have to control it, we have to mitigate it and at the end we really have to stop it. To stop it, we have to reduce emissions. To reduce emissions, we need the financial sector. The financial sector needs to be aligned with our climate commitments—maximum 1.5° and net zero 2050.

[Laurel Collins, NDP, Victoria, BC]

Thank you.

Turning to our colleague at OSFI, can you talk a little bit about or explain why you didn't go further to meet this important benchmark?

[Peter Routledge]

Thank you for the question.

Parliament, as I mentioned in my opening statement, assigns a specific mandate. It basically says to ensure and contribute to public confidence in the Canadian financial system. It does not tell us to advance a climate-related agenda.

As a GIC appointee, I'm duty bound to implement the instructions from Parliament, and that's it. However, our mandate does require us to ensure that financial institutions remain in sound financial conditions. We put in B-15. It does do risk management and governance, but it also will oblige climate risk disclosures and scenario testing, among other features.

Because of the long-term threat of climate change to the sound financial conditions of financial institutions, we put in place B-15. We intend to continue to move the progress of financial institutions forward in managing climate risk as a financial risk and a threat to their sound financial conditions.

[Laurel Collins, NDP, Victoria, BC]

Turning to Senator Galvez, on hearing that, can you talk about your response and about why the climate-aligned finance act is so important?

[Rosa Galvez]

OSFI is right. He does what his mandate tells them to do.

That's why we need government. We need the act telling him that he has to take care more deeply in the questions of climate-related risk.

Also, we need climate expertise in the modelling. Climate-related stress in modelling is good, but it doesn't make us attain the goal of reducing emissions. For that, we need transition plans and a progress report telling us that the emissions are being reduced.

[Laurel Collins, NDP, Victoria, BC]

Thanks so much.

We heard from another witness here today that this kind of action would be detrimental to the Canadian economy and that other countries aren't doing this, but actually, Canada is behind 40 other countries when it comes to aligning our financial institutions with our climate commitments.

Can you talk a bit about how this actually could be a benefit to the Canadian economy?