Official Response to OSFI B-15 Guideline on Climate Risk Management from Senator Rosa Galvez

March 7, 2023

Ottawa, March 7, 2023 – The Honourable Rosa Galvez, independent Senator from Quebec, made the following statements in reaction to the Office of the Superintendent of Financial Institutions (OSFI) Guideline on Climate Risk Management:

“This is a good first step in establishing strong disclosure guidelines for federally regulated financial institutions (FRFIs). However, if Canada is to meet its obligations under the Paris Agreement, or even its 2026 emissions reduction target of 20% below 2005 levels, regulators must not only require Canadian institutions to disclose their climate risks but to actively align their operations with climate commitments.”

“The main improvement over the draft guideline is the specific inclusion of a scenario “which limits warming to the level aligned with (…)1.5℃ above pre-industrial levels, based on the 2015 Paris Agreement” when assessing strategy resilience. The final guideline’s explicit reference to climate scenarios such as those from the International Energy Agency is also welcomed added rigor. This inclusion ensures that the Canadian financial market will finally have to start planning for–and hopefully contributing to–a deep transition that avoids dangerous climate change.”

“Unfortunately, without legislative action like Bill S-243, the Climate-Aligned Finance Act (CAFA) , it is unlikely OSFI and key market players will move towards double materiality, that is to recognize the impact that financial institutions, and indeed Canada’s entire financial system, have on the climate. Indeed, in responding to feedback suggesting such, OSFI referred to its ‘legislative mandate’ to decline moving in that direction.”

“The guideline only pays lip service to the importance of capital adequacy to mitigating climate-related risks by vaguely stating that institutions should ‘maintain sufficient capital and liquidity buffers for its climate-related risks. Not only should a one-for-one rule be instituted to address the microprudential risks involved with any new fossil fuel resource or infrastructure, but a new capital surcharge should also be developed to address the macroprudential risks that financial support for fossil fuel activities poses to society as a whole, both of which my bill does.”

“Overall, the release of this guideline underscores how important it is for Bill S-243, the Climate-Aligned Finance Act (CAFA) to become law. Under it, OSFI would be mandated to do much more by having its own enabling legislation amended to ensure all the entities it regulates or supervises align with climate commitments.”

About Rosa Galvez, Ph.D., P.Eng., FEC, FCSCE

Senator Rosa Galvez is an environmental engineer, a former professor at Laval University, an independent Senator for the province of Quebec, and President of the ParlAmericas’ Parliamentary Network on Climate Change. She introduced Bill S-243, the Climate-Aligned Finance Act, a piece of legislation to align the activities of federal financial institutions and federally-regulated entities with Canada’s climate commitments in March 2022. She was sponsor in the Senate of the Canadian Net-Zero Emissions Accountability Act which was adopted in June 2021 and was the recipient of the 2021 Clean50 award for her parliamentary work on environmental policy. She attended COP27 in Egypt advocating for legislative action requiring financial activities to align with and support climate commitments.

For more information please contact:

Karine Péloffy | Parliamentary and Legal Affairs Advisor | Office of Senator Rosa Galvez

343-548-1495 | Karine.Peloffy@sen.parl.gc.ca

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