On October 31, Ecojustice’s Sustainable Finance Project Lead, Karine Peloffy delivered a powerful testimony to the House of Commons’ Environment and Sustainable Development (ENVI) Committee.  

Her message was clear: Canada must reform its financial system to align with its climate goals before it’s too late. 

A Call for Action: Canada’s financial institutions must be regulated to work for, not against, climate action  

In her testimony, Karine emphasized that “in Canada, financial institutions still operate — for the most part — as if the climate crisis did not exist, and as if government efforts to curb carbon emissions do not concern them.”  

Worse, she added that “Canadian banks are some of the largest investors in fossil fuel expansion, that is, they fund the very cause of the climate crisis Canadians and their government have pledged to address. We do not have effective laws and regulation in Canada to compel financial institutions to change tack and to act in coherence with the climate goals we Canadians have taken upon ourselves.” 

However, the path forward is clear. Karine shared that the Climate-Aligned Finance Act (CAFA), currently before the Senate, is the solution.  

“Informed by top experts and the latest climate science, CAFA is one of the most exciting pieces of climate legislation currently in development worldwide,” Karine told the committee, underscoring the risks of sticking with the status quo. Her testimony highlighted that while Canadian banks and financial institutions increasingly discuss the risks posed by climate change, actual progress on transitioning to a net-zero economy is still far behind. 

This delay, she warned, puts Canada’s global competitiveness at risk. As other nations accelerate their clean investment initiatives and impose stricter regulatory standards, Canada risks falling behind in attracting the investments needed for a sustainable, resilient future. 

The Climate-Aligned Finance Act (CAFA): The missing piece of Canada’s climate plan 

Karine’s testimony emphasized the critical role of the Climate-Aligned Finance Act (CAFA)— a piece of legislation designed to reshape Canada’s financial sector and ensure it supports the country’s climate ambitions. CAFA would mandate financial institutions to: 

  • Align with Canada’s climate commitments by submitting credible climate plans that detail their contributions to reaching net-zero emissions. 
  • Address conflicts of interest within financial institutions and ensure climate expertise is prioritized when making investment decisions. 
  • Meet capital requirements that account for the systemic risks posed by climate change, ensuring financial institutions are prepared for the economic shifts that a low-carbon future will bring. 

Karine emphasized that CAFA is not just a piece of legislation, but a critical step toward ensuring that Canada’s financial institutions are investing in a sustainable and climate-resilient future. “CAFA is the missing piece to our climate strategy,” Karine said during her testimony, calling on the committee to recognize the urgent need for legislative action. 

CAFA has already garnered significant support, with over 120 civil society organizations endorsing it and MPs across political parties rallying behind its provisions. This growing consensus is a testament to the bill’s potential to drive real change in Canada’s financial landscape. 

Why Testify?  

Canada is falling behind in regulating financial institutions, many of which are actively working against the nation’s climate goals. While other countries are tightening their financial regulations to support clean energy and low-carbon investment, Canada has yet to implement comprehensive measures that force the financial sector to align with its climate commitments. 

Karine’s testimony made clear that climate-aligned finance legislation is the key to addressing this gap. By requiring financial institutions to align their actions with Canada’s climate targets, CAFA would not only help mitigate the risks posed by climate change but also ensure that Canada’s financial system is a driving force in the global transition to a sustainable economy. 

The road ahead 

Karine’s testimony is a call to action. With CAFA in play, Canada has an unprecedented opportunity to shape a financial sector that is committed to supporting a sustainable future. By aligning financial regulations with climate goals, we can protect Canada’s economy, improve our global competitiveness, and play our part in the global fight against climate change. 

As Canada’s financial institutions and policymakers face increasing pressure to act on climate, the message is clear: It’s time for change. The Climate-Aligned Finance Act is the solution, and Ecojustice is leading the charge to make it a reality. 

Watch Karine’s testimony here, and follow along as we continue to advocate for a financial system that invests in our future.