Evidence of meeting #110 for Environment and Sustainable Development in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was risk.
A recording is available from Parliament.
5:30 p.m.
Liberal
Sophie Chatel Liberal Pontiac, QC
Thank you very much.
Many are looking at OSFI as a possible oversight authority for the proposed green and transition finance taxonomy and disclosure.
What are your thoughts on this?
5:30 p.m.
Superintendent, Office of the Superintendent of Financial Institutions
It's very preliminary. We're not close to the idea. I think the idea needs to find its way to OSFI formally. Then we need to digest and understand whether we're the appropriate centre for that. Naturally, we would defer to the Minister of Finance, who is the head of the office, with superintendent being the deputy head.
5:30 p.m.
Liberal
Sophie Chatel Liberal Pontiac, QC
Thank you.
What is OSFI's view on the most effective and timely way to ensure we have both taxonomy and disclosure in place, in order to be competitive in the new economy?
5:30 p.m.
Superintendent, Office of the Superintendent of Financial Institutions
On the disclosure side, we're moving forward with our disclosure ask of financial institutions. Later this fall, they'll start. They'll progress throughout the course of the next fiscal year.
We'll do larger institutions that have the capacity first. Smaller institutions will have longer to do it. We need the CSSB to finish their disclosure standards in order to drive that forward. That is on a pretty good pathway.
The taxonomy is very important for helping us—
5:30 p.m.
Superintendent, Office of the Superintendent of Financial Institutions
—define and uncover the opportunity.
5:30 p.m.
Liberal
The Chair Liberal Francis Scarpaleggia
I hate to interrupt, Mr. Routledge. I'm very sorry.
Ms. Pauzé, you have the floor for a little over a minute. It will have to be fairly quick.
5:30 p.m.
Bloc
Monique Pauzé Bloc Repentigny, QC
Okay.
Senator, is there any way to avoid conflicts of interest at the boardroom table?
5:30 p.m.
Senator, Quebec (Bedford), ISG
Yes, it's a governance issue. There needs to be better governance and transparency. Investors need transparency, predictability and clear and accurate signals.
5:30 p.m.
Bloc
Monique Pauzé Bloc Repentigny, QC
Thank you for that very direct answer.
I have one last question for Ms. Quigley.
We hear a lot of talk about analyzing the issue from the perspective of double materiality. We're very sensitive to anything that's harmful to the environment, biodiversity and human health.
Can you tell us about the links between these materialities and the opportunities and risks that come with them?
5:30 p.m.
Research Professor, University of Cambridge, As an Individual
I think this is the most exciting part of this bill, arguably, not least because it actually captures the impacts on our real lives and economies, and so on and so forth.
Frankly—referring with all due respect to Professor Pardy's points—we get perverse outcomes sometimes when each bank is making its own decisions about risk, because they are looking at the risk to the bank. The impacts from the banks in aggregate are what we really need to worry about, and that's what banking regulation is for: It's for addressing systemic risks that arise when each institution is making individually rational decisions. The double materiality element here is the way in which we capture that systemic element.
5:30 p.m.
Liberal
5:30 p.m.
NDP
Laurel Collins NDP Victoria, BC
Thanks.
My question is for Ms. Quigley.
First of all, thank you so much for being a voice of science and reason on this panel.
You talked a little about greenwashing. Canadians are concerned about this.
Can you talk a bit about how mandating compliance with specific standards for climate alignment, and using other tools like capital requirements, could help increase public trust?
5:30 p.m.
Research Professor, University of Cambridge, As an Individual
That's a great question.
Again, it's essential. You should all be interested in this as parliamentarians, because people are losing trust in our public institutions. They can't trust the information they get, yet that's the basis on which they make their decisions. This is an increasing concern for the public.
Also, we are seeing—again, Canada is behind—other places doing this. Citizens of other countries can actually have greater trust in the information they're getting from companies.
5:35 p.m.
Conservative
Michael Kram Conservative Regina—Wascana, SK
Thank you very much, Mr. Chair.
Professor Pardy, earlier you were unable to respond fully to a question from Mr. van Koeverden, and Ms. Collins made a statement about one of your Twitter posts that you didn't have the opportunity to respond to.
Would you care to take a minute to say what you would have said in response?
5:35 p.m.
Professor of Law, Queen's University, As an Individual
Yes. Thank you very much.
My analysis assumes that everything Mr. van Koeverden would say about climate change is true. It accepts the proposition that there is anthropomorphic climate change and that the situation is as has been widely suggested. I'm not suggesting anything to the contrary. The point is this: If we think that is true, if this is really an emergency and if the planet is actually burning, then the things you are suggesting are wholly inadequate, which means that maybe you don't believe it yourselves.
I'll use the analogy of a burning house. Your house is burning down and you have no fire department, no hose, no water. You grab your neighbour's cup of coffee and you throw it on the fire because it's wet. You say, “Well, I'm doing something about it.” No, you're not. You're doing nothing about it. All of these will have no effect because Canada is not the source of carbon emissions. Yes, it's 1.5%, but as I alluded to earlier, the main sources of carbon emissions are other countries with big populations and lots of coal and no restrictions in international regimes like the Paris Agreement.
If you're serious about this, then you need to find a different path to find an actual solution to the actual problem you're claiming exists.
5:35 p.m.
Conservative
Michael Kram Conservative Regina—Wascana, SK
Professor, you also indicated that we could increase Canadian prosperity and decrease global emissions by increasing natural gas exports to Asia and increasing Canadian exports of nuclear technology.
Could you elaborate on how that would be beneficial?
5:35 p.m.
Liberal
5:35 p.m.
Professor of Law, Queen's University, As an Individual
Both those things would displace other activities that would produce more carbon emissions.
5:35 p.m.
Liberal
5:35 p.m.
Liberal
Shafqat Ali Liberal Brampton Centre, ON
Thank you, Chair.
My question is for Mr. Routledge.
In what ways does climate change impact the financial system that governments are not accounting for?
5:35 p.m.
Superintendent, Office of the Superintendent of Financial Institutions
There are two parts to climate change. There's physical risk and there is transition risk.
On physical risk, through the insurance industry we have a sense of what the increase in catastrophes and the cost of the catastrophes are as a result of climate change. The Insurance Bureau of Canada does great work on that.
Where we are less certain is on what the impact of transition risk might be, the impact of stranded assets if they were ever to arrive. The purpose for our climate risk returns is to begin to empirically measure what that risk is so that boards of directors can make informed decisions. That's the gap we're trying to close through guideline B-15.
5:35 p.m.
Liberal
Shafqat Ali Liberal Brampton Centre, ON
Thank you.
Are there additional steps that OSFI is considering to improve rules requiring disclosure of risks related to climate change?
5:35 p.m.
Superintendent, Office of the Superintendent of Financial Institutions
Our first priority is getting the measurement right. Getting to scope 1, scope 2 and scope 3 emissions isn't easy. It's hard. It has implications downstream for their clients.
At the appropriate time, we can oblige banks to disclose. Indeed, if you read our current rule, we do oblige banks to disclose. Even if we didn't have it, bank shareholders and creditors are demanding that. That is why I think we haven't heard too much complaint from the industry that we regulate about the disclosure requirements outlined in guideline B-15.