Voluntary commitments found inadequate to meet net zero
(Montreal, QC) A new report by Investors for Paris Compliance (I4PC) for the first time grades federal and provincial financial regulators on their climate risk management efforts, finding in general that they are failing to meet their mandates for system stability in tackling growing climate risk. This is I4PC’s final report, issued at the opening of the Montreal Sustainable Finance Summit, with the organization then winding down.
“We’ve spent five years trying to hold companies accountable to their voluntary net zero commitments, but their progress is quite limited,” said Kyra Bell-Pasht, Director of Research and Policy for I4PC. “This means that climate risk continues to build in the system, posing a threat to its stability, which is why regulators must step in.”
Behind the Curve: Canadian Financial Regulators and Climate Risk evaluates over a dozen federal and provincial financial regulators, each of which has a mandate that touches on climate risk, from the Bank of Canada to provincial market conduct authorities that regulate insurance. They are graded on acknowledgement of climate risk, climate disclosure requirements, tools beyond disclosure, and transparency. The report finds:
- Financial climate risk is growing. Billions in climate damages are starting to affect insurance affordability and availability, risks which can also affect mortgages and real estate prices. Transition risk is also ballooning as Canada expands fossil fuel production despite already being heavily exposed to that industry, just as the costs of renewables and batteries plummet worldwide.
- Most Canadian financial regulators acknowledge climate risk management as part of their mandate, but only the Office of the Superintendent of Financial Institutions (OSFI) and the Autorité des marchés financiers (AMF) have taken the first step in requiring climate risk disclosure. Meanwhile, Alberta’s Superintendent of Financial Institutions avoids the term “climate change” altogether.
- Almost no regulator has moved beyond disclosure, despite the existence of other tools. One exception is the OSC holding Purpose Capital to account for alleged greenwashing claims. Global best practices and emerging research show much more is possible, from public transition plans disclosure to transition-aligned capital requirements.
“Some regulators like the AMF are requiring climate disclosures, but there is little evidence that this disclosure-only approach is moving the needle,” said Renaud Gignac, Senior Advisor. “Regulators have other tools in their toolbox that need to be used if climate risk is to be tackled rather than just disclosed by corporations.”
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For more, contact I4PC staff in Montreal:
English: Kyra Bell-Pasht, 416-998-5972
French: Renaud Gignac, 514-260-5616
