Big banks are failing Canadians

It has barely been a few weeks since we rang in the new year and 2025 is already showing us what to expect in terms of climate catastrophes. The raging Los Angeles fires — made even more intense due to below-average precipitation, drought-like conditions and powerful winds — are a devastating reminder of our inability, thus far, to halt and contain the effects of climate change. So far, some estimates indicate total damages and economic impacts exceeding US$250 billion and insured losses surpassing US$20 billion, setting a record for wildfire-related insurance claims in U.S. history.

Meanwhile, the Parliament of Canada is suspended until the end of March, blocking any legislative attempt to address our stagnant economic growth, competitiveness and innovation, or to align our economic sectors with our climate goals. Bill S-243, the Climate-Aligned Finance Act (CAFA), is one of those bills that was stopped in its tracks mid-study.

I introduced CAFA in March 2022, after identifying significant gaps in Canada’s climate plan and sustainable finance policies, which I detailed in a white paper on Aligning Canadian Finance with Climate Commitments. The objective of this bill was to align financial flows with the transition, facilitating investment in renewable energy and innovation, while also protecting our financial sector from climate impacts.

To date, Canada has never reached any of its climate targets, but rather, increased its per capita greenhouse gas (GHG) emissions while other G7 countries, such as the United Kingdom, Germany and France, have successfully started decoupling their economic growth from their GHG emissions. Meanwhile, countries like Costa Rica and Norway generate almost 100 per cent of their electricity from renewable energy.

As a federal election quickly approaches, political parties should take note: Canada will never achieve its climate goals without the full and proactive participation of the financial sector. Although the Big Five banks have all committed to reaching net-zero emissions by 2050, their actions fail to reflect this imperative. 

Conspicuously, none of the Big Five have published a plan to reach their net-zero goal. On the contrary, between 2020 and 2022, they increased their fossil fuel investment exposure from 15.5 per cent to 18.4 per cent, more than double the fossil fuel exposure of U.S. and European banks. Indeed, Canada’s Big Five banks preferentially invest in fossil fuels over clean energy at a ratio of 3.9-to-1 while global energy investment in 2023 favoured clean energy over fossil fuels at a ratio of 1.7-to-1.

With U.S. President Donald Trump’s return to the White House, the six largest U.S. banks are backing out of the Net-Zero Banking Alliance and their ESG practices, inspiring four Canadian banks to follow suit. Should Conservative Leader Pierre Poilièvre become the next prime minister and follow Trump’s lead in dismantling environmental legislation and regulation, Canada’s renewable energy growth might be at risk of slowing or even halting.

But stopping the expansion of the renewable energy sector won’t be easy or fast. Alberta Premier Danielle Smith and Poilièvre, for example, have different views on how to counter Trump’s tariff threat. While Smith wants to keep selling Canadian oil at a discount to the U.S., Poilièvre has proposed building infrastructure to get Canadian oil and gas to international markets. 

As fewer investors are betting on fossil fuels for long-term sustainable growth (only one new refinery has been built in Canada in the past 40 years), Canada’s fossil fuel industry will continue facing hardships and unreliable buyers. Now is not the time to double down on a precarious industry at the expense of Canada’s competitiveness and innovation in renewable energy. Canadians want to see a detailed way forward to address these urgent economic problems.

On the world stage, initial estimates from the International Renewable Energy Agency (IRENA) show that 2024 has set a record for global renewable power capacity, but it remains well below what is required each year to achieve global targets. Discussions at the 15^th IRENA Assembly in early January emphasized the need to triple renewable energy capacity by 2030.

While we have noticed timid progress to set Canada on this trend, such as the unveiling of a green and transition taxonomy, the publication of the Office of the Superintendent of Financial Institution’s Guideline B-15 on climate-related risk, and the release of the Canadian Sustainability Standards Board’s Sustainability Disclosure Standards, federal financial institutions need a policy environment that encourages sustainable finance and clean growth. 

This will lead to a more resilient economy decoupled from geopolitical whims, and will help Canada achieve its climate goals. The upcoming election — when it is called — will provide the main political parties with the opportunity to pitch their proposal to do so. Those that share these values should actively collaborate to provide leadership and save Canada from its sluggish economic growth.

Canada needs to continue its progress toward a more sustainable financial system. This includes a comprehensive taxonomy focused on clean investments, mandatory disclosures in line with the best international practices, and legislation, such as the Climate-Aligned Finance Act, to help guide our financial institutions in the transition and remain competitive on the world stage.

If current polling numbers prevail through the next election, and the Conservative Party does indeed form the next government, it should not lose sight of how renewable energy is bringing prosperity and co-benefits around the world (energy independence, reduced pollution, more affordable energy); otherwise, they risk steering Canada’s economy and competitiveness toward even deeper decline.

It’s time for political parties to raise the bar. In 2025, let’s make a sustainable financial system a top priority.

The Honourable Rosa Galvez is a civil-environmental engineer and an independent senator for the province of Quebec.