Environment Committee on Oct. 30th, 2024

[The Vice-Chair, Conservative, Dan Mazier]

Hello, everyone.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Mr. Chair, I would like to know if you have heard anything about Minister Randy Boissonnault appearing before the committee. The last time, we were discussing possibly in December. Do you have any more details?

[The Vice-Chair, Conservative, Dan Mazier]

I'll turn to the clerk.

There are no updates on that.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

I would also like to know if you have any news about Mark Carney potentially appearing.

[The Vice-Chair, Conservative, Dan Mazier]

Is there any update on Mr. Carney?

I'm sorry to report no updates on either one.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

The sooner the better.

Thank you very much.

[Adam van Koeverden, Liberal, Milton, ON]

I have a point of order, Mr. Chair.

[The Vice-Chair, Conservative, Dan Mazier]

Go ahead, Mr. van Koeverden.

[Adam van Koeverden, Liberal, Milton, ON]

Thank you, Mr. Chair. Welcome to the chair seat for the day.

I want to point out the unprecedented number of ministers who have appeared at this committee over the last year. We've been very fortunate with their availability, and I certainly hope it will continue.

I think we received an update on Mr. Carney's availability at the last meeting.

Thank you, Mr. Chair.

[Branden Leslie, Conservative, Portage—Lisgar, MB]

On a point of order, Mr. Chair, I would like to highlight the number of Liberal scandals that have led to the number of Liberal ministers coming before this committee.

[The Vice-Chair, Conservative, Dan Mazier]

I'll call this meeting to order.

Welcome to meeting number 129 of the House of Commons Standing Committee on Environment and Sustainable Development.

Before we begin, I would ask that all in-person participants read the guidelines written on the updated cards on the table. These measures are in place to prevent audio and feedback incidents and to protect the health and safety of all participants, including our interpreters.

Today's meeting is taking place in a hybrid format. All witnesses have completed their required connection tests in advance of the meeting.

I would like to remind participants of the following points. Please wait until I recognize you by name before speaking. All comments should be addressed through the chair. Members, please raise your hand if you wish to speak, whether participating in person or via Zoom. The clerk and I will manage the speaking order as best we can.

I understand that Mr. Bachrach is going to be subbing for Ms. Collins.

[Laurel Collins, NDP, Victoria, BC]

That's for the last half-hour.

[The Vice-Chair, Conservative, Dan Mazier]

Okay, that's good. We have that out of the way.

Pursuant to Standing Order 108(2) and the motion adopted by the committee on Tuesday, October 31, 2023—almost a year ago—the committee resumes its study on environment and climate impacts related to the Canadian financial system.

I'd now like to welcome our witnesses. Up to five minutes will be given for opening remarks, after which we will proceed with rounds of questioning.

We will open up with CIRANO and Ms. Hubert.

Welcome.

[Anne-Marie Hubert, Fellow, CIRANO]

Mr. Chair, I want to thank you and all members of the committee for inviting me and for the work you do for all Canadians.

I also want to thank the Anishinabe Algonquin community where I grew up in the Upper Gatineau region, and which continues to share and preserve its unceded land for future generations. They are a model to be emulated.

After 39 years at EY, I recently started the next chapter of my career with the Centre interuniversitaire de recherche en analyse des organisations, CIRANO.

CIRANO provides a neutral, science-based forum that brings together global and local scientists, investors, standard setters and other stakeholders in the pursuit of one common goal, which is to accelerate the building of local and global market infrastructure, and the data and technology solutions required for sustainable finance and sustainable growth.

Our work plan is designed to help turn five critical issues into opportunities for our country.

First, public and private finance are required in support of transitions. Businesses are for profit and must deliver appropriate returns. It's the same for investors. Public finance must be leveraged smartly to enable the attraction of the private capital required to drive sustainable growth.

Second, support is needed for citizens impacted by transitions. Some jobs will change and some jobs will disappear. Some jurisdictions are making more progress than others to get relevant disclosure needed from employers to identify sectors, people and communities impacted by climate transitions. We will need similar information for AI transitions in order to develop support programs for people and communities impacted.

Third, global investors need consistent global sustainability disclosure. They've joined forces at the international level with global standard setters, IOSCO and central banks to get the information they need.

Progress is happening much faster than expected. Global investors are not waiting for country adoption to ask portfolio companies to reduce their scope 1 and 2 emissions, and to utilize their procurement power to engage with upstream value chains to reduce scope 3 emissions and align with other sustainable procurement requirements. When organizations like Apple, Microsoft, Walmart, Amazon, the City of Toronto or the City of Vancouver align their procurement practice to meet investor needs, Canadian businesses must adapt to keep access to market for their products.

Fourth, small and medium businesses feel the pressure from the buyers of their products, who are asking for higher sustainability maturity levels. SMEs need support to meet those new sustainable procurement and financing requirements.

Financial institutions and most large buyers are spending a lot of money to build technology platforms in support of SMEs. Some global industry associations are investing in industry solutions to ask for the same information in the same format for all suppliers globally. Lack of coordinated efforts to do this in Canada results in redundant costs and redundant requests for SMEs, which makes us less competitive. All this could be reduced with coordinated leadership efforts.

Fifth is the overload of regulation. The last thing we need is more regulations in this country. In the U.S., investors have worked with the federal, state and municipal governments to ask for the same baseline of sustainability disclosure. As a result, U.S. businesses experience a lower cost of doing business and faster approvals for projects.

Our work at CIRANO will contribute in two areas. It will provide evidence to support decisions and public policies that will accelerate rationalization and alignment of global sustainability standards that can be leveraged for private and public finance, consistent attributes of sustainable finance products, transition finance, infrastructure projects and carbon markets. We will also provide analysis to identify and compare best practices, tools and other sustainable growth accelerators to improve access to capital markets, reduce trade barriers, reduce compliance costs for business and accelerate project approvals.

I am proud of the voices of Canadian leaders from our scientific and financial markets, standard-setting and labour organizations, and first nations communities that are contributing to shape the global rules of the game to transform financial markets.

We also need to speak with one voice to guide and support the success of businesses and people in Canada. We at CIRANO will do our share to help you drive coordinated efforts for success.

A country like Canada, with one of the best energy mixes in the world, with natural resources, and with an educated and connected population, can and should be a global leader in sustainable growth and sustainable finance.

I will be pleased to answer your questions.

Thank you.

[The Vice-Chair, Conservative, Dan Mazier]

Thank you, Ms. Hubert.

We're now on to Mr. Dubey for five minutes.

[Akshay Dubey, Chief Executive Officer, CVW CleanTech]

Thank you, Mr. Chair.

I thank the members for inviting me to speak—what an honour it is to do so.

First, I begin by acknowledging that we are gathered on the traditional unceded territory of the Anishinabe Algonquin people and by recognizing that Canada's oil sands reside on Treaty No. 8 territories, home of the Cree and Denesuline peoples, and on the unceded territory of the Métis peoples of the lower Athabasca region.

I state clearly and unequivocally that climate change is absolutely the most critical and existential issue of our time. I'm often reminded of the indigenous proverb, “We do not inherit this land from our ancestors, but instead borrow it from future generations.” It is imperative that public policy and private priorities focus on reducing the impact of industrial emissions, while at the same time understanding that these topics affect many peoples' livelihoods. Understanding the micro-level individual effects of these policies is crucial for developing public policy that garners public support and for ensuring the long-term stability that businesses need to make these transformational investments.

I've been lucky, in my career, to hold different roles in corporate finance within the resource industry. This includes time in investment banking at a Canadian bank and at a prominent Canadian pension plan, as well as now leading a clean technology innovator. As a young person, I often struggled with my conscience, being part of an industry often labelled as “dirty”. As my career progressed, I realized that it would be easy to leave the industry, but that simply ignoring the problem, including through actions such as divestment, won't solve it. Instead, we need to constructively work on solutions.

Specifically, fossil fuel use is a global demand-side challenge versus a supply-side issue. By this I mean that as long as the world continues to need energy, the world is going to look for sources for that energy. Today, over 50% of that energy comes from fossil fuels, with Canada making up just 6% of global oil supply. Just imagine if, tonight, every gas station were out of fuel. The entire country would grind to a halt. Think about any disaster: The first place people rush to is gas stations. Energy is vital to human civilization. While we have made impressive gains in renewable power, they collectively make up only 17% of the world's energy needs today.

From a Canadian perspective, if we turn off the tap in Canada and abandon the industry and those who work in it, we will see other sources of fossil fuels replacing our production. This alternative production will shift to other countries with more adverse environmental standards than Canada, where improvements are unlikely, especially in regard to decarbonization. The sector also employs over 900,000 people, which means there are hundreds of thousands of families, many of whom indigenous and from western Canada, whose lives are dependent on a healthy Canadian oil and gas sector.

At the same time, we must acknowledge that this sector is the single largest source of Canadian emissions today, at over 30%. This means we need to invest in solutions for the problems facing our energy industry, including carbon emissions but also other key issues, such as oil sands tailings ponds. We have the ability to continue to deliver the energy the world needs while minimizing its impact as the world transitions. This is the critical piece to me: We are in an energy transition that may span decades, and we must utilize technology to improve our energy industry instead of simply ignoring it in the short term.

At CVW CleanTech, we have a ready-to-deploy technology to reprocess the waste or tailings from mining oil sands to recover additional hydrocarbons as well as critical minerals, including titanium, zircon and rare earth elements. These critical minerals are central to the energy transition and national security, and they impact things like nuclear energy, electric vehicles, renewable power and the aerospace industry. By recovering additional oil lost in the oil sands mining process, we also recover an important resource that would otherwise be lost to tailings ponds, preventing an environmental liability for future generations.

Oil sands tailings ponds are also the single largest source of fugitive methane emissions in Canada and, potentially, the world. By recovering these hydrocarbons, we remove the substrate for subsequent methanogenesis, reducing those fugitive methane emissions by over 90% and oil sands emissions by 5% to 10%, effectively reducing Canada's emissions by 0.5%.

Our company developed this made-in-Canada technology through support from both the Alberta and federal governments, which highlights the important role governments play in helping drive innovation forward. We recently announced a partnership with four indigenous communities in the Treaty No. 8 region, and we are appreciative of our indigenous partners trusting us to move forward with this important technology, which aligns with their concerns about air and water quality in the region.

This underscores another important topic: the fact that economic reconciliation with many indigenous communities, especially in western Canada, is intertwined with the success of our resource industries. The industry's lack of implementation of this ready-to-deploy technology highlights the gap that exists between innovation, which is strong in Canada, and commercialization, with which the country struggles.

The thought I'll leave you with is that public policy initiatives must be designed to drive sector-wide innovation aimed at reducing emissions, both through regulatory means that push the industry to deploy feasible solutions and through incentives such as the announced ITCs, which aren't fixated on the method of carbon reduction but instead on the reduction itself.

I'm a strong believer that investing in human ingenuity and promoting innovation in Canada will help deliver the solutions we need.

Thank you again, and I look forward to your questions.

[The Vice-Chair, Conservative, Dan Mazier]

Thank you, Mr. Dubey.

Now we move on to Ms. Péloffy for five minutes.

[Karine Péloffy, Lawyer and Sustainable Finance Project Lead, Ecojustice]

Mr. Chair, ladies and gentlemen of the committee, thank you for inviting me to be here. I want to thank you especially for undertaking this important study on the climate and environmental impacts related to Canada's financial system.

It is a dry and complex subject, which is too often left to bankers and financial analysts. The fact that you are studying it nonetheless indicates how important you consider this crucial matter to be for Canadians today.

When I started my legal career in 2007 at Davies Ward Phillips and Vineberg, one of Canada's top-tier corporate law firms, British economist Sir Nicholas Stern was calling climate change the biggest market failure the world had ever seen. Almost 20 years later, despite the grandstanding and all the noise, we have not yet addressed this great market failure that is climate change. Large Canadian financial institutions still operate, for the most part, as if the climate crisis does not exist and as if the government efforts to curb carbon emissions do not concern them.

Worse, Canadian banks are some of the largest investors in fossil fuels: That is, they fund the very cause of the climate crisis, even as the governments of the world came together in Dubai last year and finally pledged to transition away from fossil fuels. This should be a very clear signal that financing fossil fuels is unsustainable finance.

Much of the conversation on how finance pre-empts climate change focuses on disclosure of material risks—mostly, the risks that climate change poses to their operations. Worryingly, an Oxford study earlier this year revealed that investors are “flying blind” to the risks of climate lawsuits, even as court cases against polluting companies, and the financial institutions that support them, are mounting globally. By the time these lawsuits reach judgment, which could amount to trillions of dollars in liabilities, the risks will have materialized and it will be too late for the prudent risk management that the current rules are meant to ensure.

Overall, the risk-based framework is ill-suited to address the climate crisis. As a former Bank of England economist said, “Just discussing risks, and assessing risks, does not mean we are actually transitioning to net zero. Many firms may discuss risks—and do exactly nothing to advance the transition.”

We cannot afford to wait any longer for the financial industry to realize its error in underestimating climate risk and to recognize its fundamental materiality for all aspects of business decision-making.

The United Nations principles for responsible investment call Canada a “low-regulation jurisdiction by international standards”. We are dangerously lagging behind our more forward-looking trading partners.

I was the legal architect behind the climate-aligned finance act, introduced by independent Senator Galvez in 2022. This bill was drafted on the advice of dozens of national and international experts. It is informed by the best available climate science, financial expertise and international practices. It is now before the Senate's banking committee.

The CAFA has been endorsed by 120 civil society organizations and by MPs from four different parties. Five petitions in the House of Commons have been filed in support of this bill. The Financial Times' “Moral Money” recently called it “one of the most interesting pieces of climate legislation...in the works anywhere.”

We need a financial sector that supports—rather than one that works against, as is the case today—Canada's goals to reduce global warming emissions. We need to regulate our way out of unsustainable finance. The time has come to mandate action and to stop waiting for financial institutions to self-regulate.

The climate-aligned finance act introduces the regulatory elements that we need.

First, financial institutions are to be aligned with Canada's international and national commitments and produce credible climate plans and annual reports on progress.

Second, they also need to avoid conflicts of interest at the board level and leverage climate expertise while dealing with climate change as a new, superseding public interest duty.

Third, the CAFA calls for new capital requirements that account for systemic climate risks generated by the activities of financial institutions.

The climate-aligned finance act is the missing piece we need to align Canada's financial sector with a climate-safe future and to foster a clean investment boom that will future-proof our economy.

I hope your report on the present study will shed light on this important matter for Canadians and suggest possible solutions, including aspects introduced by the climate-aligned finance bill.

I look forward to your questions.

Thank you.

[The Vice-Chair, Conservative, Dan Mazier]

Thank you, Ms. Péloffy.

Our final panellist for this round is Mr. Brooks. You have five minutes.

[Richard Brooks, Climate Finance Director, Stand.earth]

Good afternoon.

I'm honoured to appear before the committee today. I'm appearing from the territories of the Haudenosaunee, the Wendat, the Anishinabe and the Mississaugas of the Credit in Toronto.

My name is Richard Brooks, and I'm the climate finance director at Stand.earth, which is a binational NGO working on climate protection. Our climate finance program, supported by our one million members, works to transform financial institutions from climate laggards into champions advancing the energy transition.

As you all know, there's no community untouched by the devastating fires, floods and smoke of climate-caused disasters. When one-third of Jasper burns, when Toronto, our financial centre, floods repeatedly and when our country racks up over $5 billion to date in climate-related damages this year alone, it's a risk to our economy.

Just today, the World Health Organization endorsed the call from The Lancet, the world's foremost medical journal, urging financial institutions to divest from fossil fuels “to save lives”. The WHO's director, Dr. Maria Neira, stated:

We are seeing record-breaking heat waves, droughts and food insecurity affecting millions of lives worldwide. Yet, we continue to pour trillions of dollars into fossil fuels, which are driving these crises. It’s time to stop funding harm and start investing in health.

Earlier this month, the University of Toronto's climate observatory released a groundbreaking report. It studied the financed emissions of 18 banks, pension funds and asset managers. These 18 financial institutions have financed emissions that are double Canada's reported emissions and 100 times those of the city of Toronto. Their $1.2-trillion of financing and investments in fossil fuel companies in 2022 account for 1.4 billion tonnes of CO2 emissions. If they were a country, these 18 financial institutions would be the fifth-largest emitter in the world.

In June, the CEO of the Royal Bank of Canada appeared before this very committee. You'll recall he could not remember what his salary was when asked repeatedly. He stated that 80% of RBC's clients have transition plans, but he neglected to say that only 2% of those clients have 1.5°C-aligned transition plans. That's the magic number.

Dave McKay also couldn't recall that the bank had disclosed that RBC's emissions from financing oil and gas companies are equal to the emissions from all cars and light trucks in Canada every year.

CEOs from the other banks mentioned the need for a slow and “orderly” transition, but there's nothing orderly about Canadians fleeing fires. There's nothing orderly about towns being evacuated and thousands being unhoused, yet our banks continue to finance the cause of the problem—fossil fuel emissions—and claim that phasing this down would be disorderly.

A report released just today, Urgewald's “Global Coal Exit List”, revealed that over the last year, RBC, TD and BMO actually increased financing to coal-exposed companies. Canada is a founding member of the Powering Past Coal Alliance. Why are our banks enabling new coal deals?

Indigenous nations and disenfranchised communities in Canada disproportionately bear the brunt of climate impacts. They're also on the front lines of many of the financially risky, polluting oil and gas projects that banks are financing and enabling. These include projects like PRGT, Coastal GasLink, Rio Bravo and the pipelines and gas lines associated with these.

A couple of weeks ago, Exxon issued a new bond. This was long-dated to 2074. This bond is for general corporate purposes to facilitate the company's drilling and digging for another 50 years, long past the date of any net-zero plans and commitments in Canada and beyond. There were four banks that underwrote this bond. The Royal Bank of Canada, which has a 2050 net-zero commitment, was one of them. This is a clear example of a bank's CEO misleading you, the public and investors by professing to help its clients transition. That's a false rationale to enable fossil fuel giants to pollute long past 2050. It is not orderly. It is not just. It is just greedy.

We cannot reach our national climate goals, meet our international commitments and protect our communities if our banks are not on side with us.

Of the banks you heard from in June, TD is now known as the top money launderer for drug cartels. RBC is under investigation by the Competition Bureau for allegedly misleading consumers about its climate claims and greenwashing. CIBC and BMO have been fined for improper record-keeping, and Scotiabank was fined for unlawful commodities trading.

We cannot trust voluntary actions by our banks. To date, they have proven to be neither trustworthy nor accountable.

Here are the actions that my organization proposes you support in your report and recommendations.

Embolden the commissioner of the Competition Bureau to use his enhanced powers to investigate all of the banks. Move forward and support the climate-aligned finance bill. Mandate climate transition plans that are standardized and credible for all banks. The banks have record profits right now. Tax them with a climate impact tax and have those funds dedicated to compensation for the climate damages, which I named earlier. Incentivize further investments by financial institutions in renewables and climate solutions.

I urge you to issue a formal report and to include these recommendations in your findings.

Thank you for your time.

[The Vice-Chair, Conservative, Dan Mazier]

Thank you, Mr. Brooks.

Thank you, everyone, for your remarks.

I will now open up the floor to questions.

We will kick off the first round with Mr. Deltell.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Thank you very much, Mr. Chair. Congratulations on the new role you are taking on today.

I want to say hello to the ladies and gentlemen attending today as witnesses. Many thanks to them.

My question is for Mr. Dubey from CVW CleanTech.

We all know that climate change is real, that it is having strong effects and that we have to adapt. We recognize that it is real, but we must also recognize that we cannot radically change our way of doing things overnight. We have to go in stages, which is what we call the energy transition.

The most recent report by the HEC Montréal states that close to 19 billion litres of oil were consumed in Quebec last year, which is a 7% increase. About half of that oil is from the United States, primarily Texas and Louisiana, while the remaining half is from Alberta. I want to point out that neither Texas nor Louisiana contributes to equalization payments, while Quebec receives about $14 billion in equalization payments, money that comes primarily from provinces that are developing their energy potential.

Mr. Dubey, since we are in an energy transition, I want to ask you the following question.

If all oil production in Alberta were to stop tomorrow morning, or if we didn't have the necessary funding to continue developing what is happening and being done in Alberta, what would the impact be on consumption? Would it decrease or, on the contrary, would the oil simply be produced elsewhere? All revenues would then go elsewhere and ultimately that would not help the planet but instead would help other countries.

[Laurel Collins, NDP, Victoria, BC]

I have a point of order, Mr. Chair.

Just on the translation, I'm not sure if there is a way to adjust the volume of the actual speaking in the headset. You can make it out, but the volume level of the floor, combined with the translation, makes it a little hard to follow. It has been good in the past, but this time it was just a little more difficult. I'm not sure if the IT folks can adjust that.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Was it because my microphone was a bit too low?

[Laurel Collins, NDP, Victoria, BC]

No, I think it's the volume in here.