Environmental advocates are clear about what they want from Canada’s banking regulator. They say it should force financial institutions to keep more capital in reserve as a buffer against future climate-related shocks. Furthermore, amounts should be tied to how much of their loan books support the fossil fuel industry.
Unlike many other authorities, OSFI doesn’t post responses to its calls for submissions. Some participants, notably green groups, have put theirs online. The banks haven’t, but made some of their positions known in a similar process conducted previously by Canadian Securities Administrators. Conversations with banking and other industry officials have also shed some light.
Matt Price, director of corporate engagement for the advocacy group Investors for Paris Compliance, points out such measures are being discussed in Britain. At a recent Bank of England Climate and Capital Conference, some delegates called for a combination of increased buffers for systemic risks and limits on concentrations of bank business in high-emitting sectors. Mr. Price said financial institutions could also benefit from a system that rewards investments in clean energy.
There is merit to safe-harbour protection if it moves the efforts forward, said Sean Cleary, executive director of the Institute for Sustainable Finance at Queen’s University. “The message there is, ‘Yes, we do want it to be high-quality, high standard. But we need to get moving on it really soon,’ ” he said. “We can’t let perfection kill the process.”