Climate finance refers to redirecting the flow of dollars away from industries that are harmful and instead mobilize governments, financial institutions, businesses, and individuals resources towards activities and initiatives that mitigate greenhouse gas emissions, adapt to climate change impacts, and create resilient, sustainable economies.
The Policy Details
Canada is known for solid financial regulation and global leadership in banking, but we need new mechanisms, policies and regulations to finance a climate resilient future. Specifically, we advocate for the following financial tools to reallocate capital to align with our climate commitments and stimulate environmental progress:
1. STOP GREENWASHING
Definitions and disclosure are important. Without clear terminology, banks, corporations and governments are able to greenwash their environmental, social and governance impacts with confusing terms like "climate positive" or "net-neutral".
Taxonomy: Climate investment taxonomy (a system for categorizing financial investments or assets) includes definitions for both “green” and “transition” investments to create necessary clarity for capital markets, which are actively seeking sustainable investment opportunities.
Transparency: Rigorous accounting and transparent disclosure on climate impacts, carbon emissions, and environmental costs relative to "economic benefits" (not only of products and supply chains but financed emissions) are critical to ensure companies are making real changes to reduce emissions.
2. BUILD BETTER BANKS
Canada’s banks are among the top funders of the fossil fuel industry globally. Banks need to stop all projects and corporate finance to companies that are still expanding fossil fuel extraction or making investments in new fossil fuel infrastructure (pipelines, coal railways, refineries etc.). Canada needs to make space for a diverse mosaic of innovative financial institutions that allow Canadians to invest in their local communities - co-ops/credit unions
3. MAKE POLLUTERS PAY
Rather than fund a dying industry and planet, our tax dollars and public and private funds can be redirected to renewable energy, clean transport, sustainable agriculture and nature protection. We also must ensure climate adaptation, resilience, loss & damage and justice is strongly funded by both public and private funds for our climate solutions to be effective and equitable.
Eliminate Fossil Fuel Subsidies: Currently Environmental Defense estimates that the Government of Canada and it's agencies give over $15 billion in direct subsidies, tax breaks and financial support to the fossil fuel industry (not even including tax deductions, non-publicly reported funds, and direct government spending). These must be removed or redirected to renewable and sustainable sectors.
Carbon Pricing: There are two overarching systems for pricing carbon in Canada: the fuel charge, which is the carbon tax that Canadians pay on gasoline, diesel, natural gas, and other hydrocarbon fuels; and the output-based pricing system (OBPS), which applies a charge to large industrial emitters. Through an annual rebate, 60% of Canadian households will receive more than they paid in carbon taxes.