Hon. Percy Mockler: Honourable senators, my question is also for the government leader in the Senate.

Senator Gold, the President of the Forest Products Association of Canada recently told the House of Commons Standing Committee on International Trade of the industry’s concern with anti-Canadian forestry legislation that is currently being advanced in the state legislatures of California and New York. Mr. Nighbor said that these bills, if passed, are designed to restrict Canadian forest exports to those states through their own procurement channels.

The industry is very concerned. And we saw the Forest Products Association of Canada, Unifor and the United Steelworkers calling out the anti-Canadian forestry legislation in California and New York, knowing that it would devastate our forestry sector and our communities. Mr. Nighbor told the committee that they want to see action and engagement on this file from the senior political level of the Government of Canada itself — the cabinet.

Senator Gold, will the Prime Minister and his cabinet defend our forestry sector against these bills going through legislatures in the United States? We know the impact that would have on the livelihood of hundreds of thousands of Canadians.

Senator Mockler: To the Leader of the Government in the Senate, Senator Gold, let’s take this into consideration: The Forest Products Association is also asking the Department of Global Affairs to carry out a formal, legal review of both bills currently on the floors of the legislatures in Albany and Sacramento to clearly understand this impact. Mr. Nighbor told the House committee that Global Affairs has so far refused to do this work.

Mr. Leader, I understand, however, that the Forest Products Association of Canada’s own independent review of these bills suggests that concern about the potential impacts of these bills go well beyond Canada’s forest sector.

There could be precedent-setting impacts in Canada, such as on Canada’s agriculture, energy, hydroelectric power and mining sectors, as well as their workers.

Leader, this doesn’t appear to be an unreasonable request. Can you tell us why Global Affairs won’t review these bills? Will your government intervene to request that the department conduct these reviews? There is much at stake. This will impact hundreds of thousands of Canadians working in those sectors.

Hon. David Arnot: Honourable senators, I am speaking to you from Treaty 6 territory and the homeland of the Métis. In treaty territory, I can tell you the sun is shining, the grass is growing and the river is flowing, and that’s the way it should be.

I rise to speak in favour of the recommendation of the Senate Standing Senate Committee on Legal and Constitutional Affairs that the Senate adopt Motion No. 14. I would like to say that it made good sense for the Senate to send this to the committee. I appreciated the opportunity to attend meetings of the committee to hear witnesses.

The witness for CP Rail advised that the corporation launched the litigation in Saskatchewan with intent to eventually achieve a win-win result. By that, he meant investment or partnership between Canadian Pacific and the Saskatchewan government to develop rail-line infrastructure. My interpretation of that is this: CP is attempting to lever additional monetary subsidies for rail‑line maintenance.

The question of fairness has arisen in this debate. I ask my colleague senators these questions: Is it fair for a corporation to claim recovery of taxes it paid since 1905 based on a historic anomaly created 142 years ago? Is it fair for that same corporation to assert a claim to be exempt from taxes in perpetuity today? Is it fair to give one corporation a huge advantage in the marketplace — a place where other competitors must pay their fair share of taxes but not Canadian Pacific? Is it fair to force the taxpayers of Saskatchewan to provide an unjust, unfair enrichment to a corporation listed on the New York Stock Exchange that recorded a profit of $2.8 billion in 2021?

The answer to each question is a resounding no, in my opinion. It is absolutely patently unfair and unconscionable to foist that burden, that responsibility, on the citizens of Saskatchewan.

In my view, “CP Kansas City,” as its name will become, comes to court seeking fairness with “unclean hands,” and that should never be rewarded. To explain, CP was allowed to abandon passenger service in Canada. They were allowed to abandon branch rail lines throughout Canada, and particularly Western Canada. They obtained subsidies to their liking in 1966. They were described in 1966 by Minister of Transport John Pickersgill as a fine example of good corporate citizenship when they agreed to end the in-perpetuity tax exemption.

Today, I say to you that it is open to draw the opposite conclusion from CP’s current actions. In my opinion, if we balance the scales of justice today in the modern era, those scales weigh heavily in favour of the taxpayers of Saskatchewan and not Canadian Pacific Kansas City rail.

The question of retroactivity has arisen in this debate. Concern about questions related to retroactive application of law is valid. Legitimacy of retroactivity is always open to debate. It deserves examination. The courts and the public are well aware of the unfairness of the concept unless there is a legitimate reason. Retroactive application of tax law is legitimate in some narrow circumstances.

The Supreme Court of Canada dealt with this issue in 2007 in the Kingstreet case. The court specifically noted the possibility for Parliament or a legislature to enact valid taxes and apply them retroactively to limit the recovery of previously paid ultra vires taxes. The Supreme Court of Canada made it clear that retroactive application of tax law is possible, lawful and constitutional.

In some circumstances, that mechanism may provide an equitable remedy. In my opinion, it is a legitimate remedy to an obvious inequity in the situation we have before us.

The amendment sought by the people of Saskatchewan will not provide a blanket precedent that would allow a hypothetical rogue government to pass laws with retroactive application for some nefarious purpose. The case is far too narrow and very unique. Its wide application is extremely unlikely.

Retroactivity in this case is the only fair way to protect the innocent taxpayers of Saskatchewan from the heavy fiscal responsibilities created by historical anomalies and the fact that CP took up the cudgel of litigation.

I’d like to pause there for a second to consider this historical context. Sir John A. Macdonald did not want one thin dime of financing for the railway to come from the United States of America. He needed Canadians to form a consortium of investors. Canadians George Stephen, from the Bank of Montreal, and Donald Smith, from the Hudson’s Bay Company, stepped up. They sought investors from the United Kingdom, France, Germany and the Netherlands.

The Canadian consortium needed the kind of incentive Macdonald provided — a tax exemption in perpetuity. In February 1885, George Stephen wrote to Macdonald that he and Smith would be considered fools by every businessperson in Canada for taking on such a high-risk venture. Why? Because they did not know the exact cost to build a rail line north of Lake Superior and through the Rocky Mountains. They did not know with any real certainty when revenue would flow to repay that debt. In fact, at one point, Stephen left Parliament Hill in Ottawa — he was an MP — to go home to Montreal, believing that he was about to go bankrupt; he was disillusioned and despondent. But that story changed miraculously.

Stephen and Smith became billionaires in today’s meaning. They retired in the United Kingdom and were appointed to the House of Lords: Stephen as Lord Mount Stephen and Smith as Lord Strathcona.

Historical context is very important. I want to remind you of this historical fact. When government surveyors came to the west to survey the land for the railway and the newcomers, they were turned back peacefully by the First Nations people. They were told they were not welcome on the land. That act accelerated the making of treaty with the First Nations in order to fulfill the national dream of a coast-to-coast railway.

As Senator Pate has mentioned in debate, and as Senator Clement raised in the committee and in public, there is much unfinished treaty business in this country. There is a lot of history to examine. The good intentions of the treaty parties were replaced by the paternalistic policies inherent in the Indian Act just a few weeks after Treaty 6 was created.

Now back to the CPR. I do not believe one can find a government in the last 200 years in the Western world that has given a corporate tax exemption to a single corporation in perpetuity and, in addition, incorporated the exemption in the Constitution of the said country. The clause in question is extremely rare and is probably the only example of its kind. The Legal and Constitutional Affairs Committee heard expert opinions of three constitutional law experts. I can say, in my opinion, it is extremely rare for Canadian constitutional law experts to be able to agree on one idea concisely and congruently. They found motion 14 is wholly constitutional.

In addition, the Senate has four constitutional experts, not all lawyers, in our midst: Senator Gold, Senator Harder, Senator Cotter and Senator Dalphond. I believe the first three senators have all commented favourably on the constitutional legitimacy of motion 14.

I have a caution. I believe there is one precedent the Senate should be loath to set. That precedent is the Senate rejecting the report of the Standing Senate Committee on Legal and Constitutional Affairs and, in effect, thwarting the will of the elected members of the Legislative Assembly of Saskatchewan and the will of the elected members in the other place. That will cause major public opprobrium in Manitoba, Saskatchewan, Alberta and, I believe, elsewhere in Canada. I ask any senator thinking about voting against the motion to give due consideration to that precedent-setting consequence. Thank you.

Hon. Jim Quinn: Honourable senators, when I hear the words “constitutional amendment,” I believe the matter being considered to be a serious one. We have heard that there have been constitutional amendments in the past, such as when the name of the province of Newfoundland was changed to Newfoundland and Labrador. We also heard other amendments being referenced by honourable colleagues during earlier debates, and we have heard that some of these amendments have been legally challenged after the adoption of the amendment.

The amendment now under consideration has been approved by the Saskatchewan legislature and the lower chamber without debate or committee consideration, including witness input. Only the Senate of Canada has really spent time studying the bill with the involvement of witnesses.

I have two issues that I think we as senators need to reflect upon. First is the retroactivity consideration contained in the bill and the fact that we have the issue before the courts in Saskatchewan. The question of retroactivity for me is a question of fairness. We have heard that there have been numerous occasions over the past decades when a constitutional amendment could have been initiated but was not. Now we’re being asked to make the amendment while, at the same time, a court case could be influenced by such an action.

When witnesses at our committee were asked if they felt the current court case could be influenced if this amendment were passed before the conclusion of the court case, there was, I would propose, some belief that the amendment could in fact have an impact on the case. I questioned the Attorney General of Saskatchewan. I asked if he believed, given the primacy of the Constitution, that the amendment of the Constitution could in fact have an impact. His response was:

It would be our position, senator, that it would have some effect on the litigation, but we’re not sure what effect it is going to have.

In conclusion, honourable senators, why would we put the Senate in the position of agreeing with the proposed amendment when even the Attorney General of the Province of Saskatchewan is certain there will be some effect on the court case, but to what extent he’s unsure?

After all of these decades, the urgency of this bill on the eve of a court decision seems to be a way to make a change today that could influence tomorrow. Why would we not simply allow the court case to come to a conclusion over the next few weeks, after which the appropriate amendment could be introduced to allow for the request of a constitutional amendment?

Hon. Scott Tannas: Honourable senators, I wish to make some comments on this matter.

First, I want to thank Senator Jaffer for her leadership and the Legal Committee for their efforts on this file. In terms of committee meetings, witnesses and questions by senators, it was all a textbook exercise of the due diligence we undertake in the Senate of Canada, and it was done well.

I had a couple of reflections that I wanted to express. As has been said — and I think will be said more — the experts left us with absolutely no doubt about the legality of this action. It is entirely legal for Saskatchewan to do what they did, and we should not be troubled by that at all.

However, one of the legal scholars, an eminent fellow from the University of Ottawa, did draw a distinction. He talked about the difference between legality and legitimacy, particularly as to the retroactive extinguishment of what is a legal right under a valid contract today. This is the piece that continues to trouble a number of people, including a number of senators, and it troubles me as well.

It also became clear — and Senator Quinn has just referred to this — that this action is intended to have an impact on legal proceedings and on the imminent judgment of a court in this matter. This has helped to highlight the issue for me.

As you may know, I have been troubled by this motion and its potential consequences since it was first delivered to us. I have to say that in my heart I wish it did not have to come to this. For a while I wanted to find out how and why it came to this. However, in the end and on reflection, it really doesn’t matter for our deliberations if the government moved too quickly or if the company, as was just suggested, was trying to overplay a hand. It is here and we need to deal with it.

I am offended by the notion of retroactivity and the obvious intention to circumvent court proceedings — not just to put a finger on the scale of justice, but to actually knock the scale off the table.

I am also troubled by the issue of CP being the big, bad company that has unjustly enriched itself through an illegitimate perpetual benefit. I don’t think there is another company in the history of our country that has contributed more to the building and preservation of this country through its actions — well over one hundred years ago, but through the actions it took way back then.

Today, Canadian Pacific employs 10,000 Canadians. Ninety‑one per cent of the shares of CP are lodged in Canadian financial institutions, which leads me to believe that most of the shares are owned by Canadians — most of them probably in pension funds, mutual funds and so on. I would not be surprised if a significant percentage of Canadians, if not a majority, have some ownership in Canadian Pacific.

The committee meetings, the debates and the extra time we’ve had for reflection, rather than passing the bill with alacrity — hurrying up and passing the bill, as was suggested earlier — have been helpful to me as I consider what my job as a senator is: sober second thought, but also humility and respect toward other orders of government, especially in my own region. We had a job to do and I think we’ve done it. I believe that today is the time to vote.

I cannot bring myself to support this motion; however, I do not think it is legitimate for us to vote this motion down. It may be legal, but it is not legitimate. By the same arguments we heard in committee, there are things we can do legally that are not legitimate. I believe that in this case we must do the legitimate thing.

While I cannot support this motion, I do not think it is right to oppose it and risk it being voted down. I will make my own small statement on this issue by abstaining. Thank you, colleagues.

[Translation]

Hon. Brent Cotter: Honourable senators, I wish to speak briefly in support of motion 14, which will adopt a resolution to amend The Saskatchewan Act.

The Legal and Constitutional Affairs Committee heard and reported that the proposed constitutional amendment is legal, including its retroactive aspect, and has recommended its adoption.

My remarks will focus on two process points and two points on the policy dimensions of the issue, which I will call the equities process.

First, our process. I want to thank Senator Tannas for his determination in seeing this motion referred to the Standing Senate Committee on Legal and Constitutional Affairs for consideration. As others have said, the Senate appears to have taken this important question more seriously than others, and this does honour to this chamber.

We learned a good deal about the motion from the parties significantly affected by it, giving them a hearing in a sense, and from experts. All of us from the committee came away better informed, more able to advise the Senate as a whole and more able to make the best possible decision with respect to this motion.

Thank you, Senator Tannas.

A second process point related to the substance of the issue itself. A multi-province approach to this historical anomaly, as Senator Simons suggested two days ago in her very fine speech, is or would be good policy but not an immediate option for a couple of reasons.

First, as Senator Dalphond has noted, this is a bilateral constitutional amendment, a Canada one-province amendment, and any motion and resolution therefore needs to be province specific. They have to be individual motions.

Second, the one before us is specific to Saskatchewan. Even if we would like to form a common front on this issue, despite efforts, none has been developed, and we have little choice but to deal with the amendment before us.

With respect to the equities, in one aspect of this, I hope to answer Senator Quinn’s concerns and, quite frankly, some of Senator Dalphond’s suggestions.

The first point is legal. CP gave up its provincial tax exemption in 1905. By that time, CP was doing just fine, thank you very much, and its initial investors, according to Pierre Berton and others, had become immensely wealthy and quite distinguished as a result of the transcontinental railway.

CP has paid provincial taxes uninterrupted for over a century. As Senator Arnot noted, it was lauded as a good corporate citizen by then Minister Pickersgill for additionally giving up the municipal tax exemption in the other place in 1966, having already given up the provincial tax exemption.

I want to suggest to you that any other understanding of provincial taxes is not plausible. How likely is it, for example, that Tommy Douglas, a provincial-rights premier and notoriously careful about his government’s finances, would only have lobbied Ottawa, as he did, for an end to CP’s municipal tax exemption if, at the same time, CP was still claiming an exemption for provincial taxes? Not a chance.

CP abandoned this provincial tax exemption long ago. Let me just say, as a matter of contract law — which you have just heard Senator Dalphond speaking to — if this was just a contract, the fact that CP abandoned its tax exemption would be today held against it. In any other context than constitutional law, legal doctrines of estoppel would prohibit CP from now coming forward and claiming this exemption.

The concept of estoppel, simply put, is that you are estopped from asserting a right that you have abandoned, which CP did, and that someone else has relied upon, which the Province of Saskatchewan has done. Unfortunately, estoppel is recognized everywhere except with respect to constitutional rights. With the CP tax exemption, long abandoned, embedded in the Constitution, CP has been able to get around this estoppel problem and raised, a century later, something that in any other context it could not do.

As Senator Dalphond has noted, the Supreme Court of Canada decision in Kingstreet enabled taxpayers to go after present and back taxes that are found to be ultra vires. CP combined these fortuitous developments to reassert its long-abandoned exception from provincial taxes and now seeks to pocket in its claim up to $340 million from the Government of Saskatchewan, but essentially from the taxpayers of Saskatchewan.

Perhaps it is what corporations, or at least the Canadian Pacific and Kansas City Southern Railway, think they should be doing on behalf of their shareholders, but it is unprincipled. If the idea of making the constitutional amendment retroactive sticks in your craw, this corporate manœuvre should stick in your craw even more — we have the authority to prevent it from happening.

My second policy or equities point is this: Only Saskatchewan, Alberta and Manitoba are exposed to this vulnerability. No one, for example, exempted the headquarters of CP from tax — wherever it might have been — in 1881. This has exposed these three provinces, since 1905 and 1881 respectively, to a vulnerability that is unacceptable in principle.

If nothing turned on it, we might have just left this to be a curious relic of Canada’s peculiar constitutional history, as, in fact, we have done since 1905, but something does turn on it. When a company revives this relic of history to try to assert a claim it has long since abandoned, this is nothing less than an attempt to exploit an unintended loophole to avoid paying taxes that, like other taxpayers, it has actually been paying for a very long time. What turns on it is a financial risk to three provinces that should never have been imposed on them in the first place.

Senator Dalphond argues that it’s a small financial risk. As a matter of principle, that’s irrelevant. The basis on which he makes that argument is an interpretation by a trial judge in another case that has no binding effect at all on Saskatchewan or the people of Saskatchewan.

In public finance terms, what turns on this is a potential burden of hundreds of millions of taxpayer dollars, a responsibility they should never have been asked to shoulder in the first place.

Your vote on this issue is significant, in part on the basis of what you will be saying to the people of Saskatchewan and what you will be saying about tax fairness to three provinces that Ottawa burdened unfairly over a century ago.

If you are inclined to vote against this motion because of its retroactivity, I ask to you keep in mind these two things: first, the unfairness of this burden from the get-go; and second, the opportunism pursued by CP in this venture. Thank you. Hiy hiy.

Some Hon. Senators: Agreed.

Hon. Dennis Glen Patterson: Honourable senators, I too rise to speak to Bill S-5, with the short title “Strengthening Environmental Protection for a Healthier Canada Act.” This bill proposes to do three things. If passed, it would make over 100 changes to the Canadian Environmental Protection Act, or CEPA, as we fondly know it. It would make related amendments to the Food and Drugs Act, and it would repeal the Perfluorooctane Sulfonate Virtual Elimination Act.

I would like to focus my remarks on the first slough of amendments related to CEPA. It is known internationally as a world-leading, flexible and risk-based piece of environmental legislation. It declares that:

. . . the protection of the environment is essential to the well‑being of Canadians and that the primary purpose of this Act is to contribute to sustainable development through pollution prevention.

According to the Environment and Climate Change Canada website, “Canadians have indicated that the Act is fundamentally sound.”

That said, no legislation is perfect. Between 2004 and 2007, consultations were undertaken by Environment Canada and Health Canada in an effort to identify issues with CEPA that could be addressed during a comprehensive review of the legislation.

According to a 2017 paper posted by Environment Canada entitled The Canadian Environmental Protection Act, 1999: Issues, these consultations identified 12 specific concerns and 3 broader ones.

The 12 specific concerns all sought to bring clarity and certainty to the bill, as well as to alleviate unnecessary bureaucratic red tape by streamlining certain processes. How, for example, would the government deal with substances added to the Domestic Substances List created in 1988, prior to the requirement for rigorous testing established by CEPA?

There was also the question of national consistency. The report states that national consistency with regard to regulations:

. . . creates a more level playing field by reducing problems associated with having a patchwork of different regulations across the country being applied to the same industry sectors.

This overall desire for more certainty and consistency across jurisdictions in an effort to mitigate a guessing game by potential investors and proponents is what has helped shape my opinions on this bill.

Colleagues, Bill S-5 seeks to add a preambular clause that would recognize the right of all Canadians to a healthy environment. Clause 5 of the bill then goes on to outline the multi-year consultative process that will set out how to implement this right.

However, as we look at this bill, my question is this: What does that right actually mean for Canadians? To explore this question, we must first look at Canadian jurisdictions that have similar provisions and look at the body of jurisprudence we currently have available.

Ontario, Yukon, N.W.T. and Nunavut all recognize the right to a healthy environment in their legislation in preambular clauses. Quebec put the right into its Environment Quality Act in 1978 and added it to its provincial Charter of Human Rights and Freedoms in 2006. This has resulted in the ability of cases to be brought against CEOs of companies, who, in that province, can be held personally liable for any detrimental environmental effects resulting from their companies’ mismanagement.

In recent years, four actions have been launched in Canada asserting that the Constitution guarantees Canadians a right to a healthy environment. In late 2018, a group called ENvironnement JEUnesse launched a class action, alleging that the Government of Canada, by adopting what they felt were ill-conceived GHG emission targets, failed in its duty to protect the right of Canadians to a healthy environment. They argued that this right is inherently granted under section 7 of the Charter of Rights and Freedoms, which lists a right to “. . . life, liberty and security of the person . . . .” In their submissions, they stated that:

. . . by adopting inadequate targets and failing to put in place the necessary measures to achieve these targets, the government is violating the class members’ right to live in a healthful environment in which biodiversity is preserved, protected by the Québec Charter.

The Government of Canada submitted, in turn, that this issue was not justiciable, as those were inherently political arguments. In the end, the class action was not certified. The July 11, 2019, decision did not disagree with the substantive issues but instead found that the age group of Québec residents, 35 years or younger, that the organization claimed to be representing was an arbitrary one. So Justice Morrison did not certify the claim based on procedure, and the substantive question about what a right to “a healthful environment” entails went unanswered.

In 2019, La Rose v. Her Majesty the Queen and Mathur, et al. v. Her Majesty the Queen in Right of Ontario were launched in quick succession of one another. They were both launched by children throughout Canada and Ontario, respectively. Some of the plaintiffs were Indigenous children, while others were vulnerable children whose medical conditions or geographical locations made them more susceptible to pollutants or drastic changes in the environment. Both claims stated that section 7 of the Charter created a constitutional obligation to protect the right to a healthy environment.

According to the summary by climatecasechart.com regarding La Rose:

On October 27, 2020, a Federal Court judge dismissed the lawsuit by Canadian youth against the Canadian government on a pretrial motion to strike for failing to state a reasonable cause of action. . . .

A similar motion was put forward in Mathur, but it was rejected by the Ontario Superior Court of Justice, so that case has yet to be heard.

The final case that follows this theme is Lho’imggin et al. v. Her Majesty the Queen, which was launched in February 2020 during the blockades resulting from some Wet’suwet’en opposition to the Coastal GasLink pipeline. The plaintiffs argued that Canada has failed in its international obligations under UNDRIP, and that the government’s inaction on climate change has caused irrevocable damage to their traditional lifestyles and land. They also contend that Canada “. . . has a constitutional duty to maintain the peace, order and good government of Canada . . .” The case has not yet been heard.

Honourable senators, I am concerned by what I have learned. With two cases looking to define what the right to a “healthful environment” would afford, it seems prudent to wait to introduce such a right in legislation.

It brings me back to the need to preserve the certainty that so many have lauded in CEPA. Environment and Climate Change Canada, on their own website, describes CEPA as providing:

. . . a structured predictable approach to risk management decision-making that provides for the input and full consideration of public values and concerns at all stages of the decision-making process. . . .

In my opinion, if we are to agree to put the official recognition of this right into a bill that industry relies upon for clarity on process and policy, we must ensure we know right here and now what that right means. We should not be waiting years for answers regarding how to implement this right or what actions and expectations that right entitles Canadians to.

There are many other concerns that I have with this bill, colleagues, that will not fit into the short time that I have in speaking to it today. I have not had a chance to discuss my concerns regarding the potential infringement on provincial or territorial jurisdiction, nor do I have time to fully discuss concerns regarding the change in how substances are labelled “toxic” or, as clause 75.1 states, “. . . capable of becoming toxic.”

I will close in saying that I believe careful and thorough study of this bill must be done in committee. I sincerely hope our committee is not rushed as it considers this important bill since I, for one, am hoping to gain more clarity and comfort through that process.

Thank you.

Senator Simons: That might be a good idea. That request could be addressed to Senator Patterson, or maybe you want to move a motion in amendment yourself.

(On motion of Senator Martin, debate adjourned.)

[English]

Hon. Peter M. Boehm moved the adoption of the report.

He said: Honourable senators, I rise today as Chair of the Standing Senate Committee on Foreign Affairs and International Trade to explain amendments to Bill S-217, as adopted by the committee.

Bill S-217, An Act respecting the repurposing of certain seized, frozen or sequestrated assets, otherwise known as the frozen assets repurposing act, or FARA, was referred to the committee on March 1 after being introduced in the Senate on November 24, 2021, by Senator Omidvar.

The committee began its study on March 24 and welcomed three panels of officials and experts over two meetings. We completed clause-by-clause consideration on March 31.

I wish to thank all the witnesses, especially the bill’s sponsor, and all committee members and staff for their work in ensuring the committee discharged its duties effectively and in a timely manner. This was very important, honourable senators, given the grave geopolitical conflicts, wars and refugee and humanitarian crises we see all around the world.

Honourable senators, as stated in the summary of Bill S-217, it:

. . . provides for the reporting and disposition of assets seized, frozen or sequestrated under the Special Economic Measures Act, the Freezing Assets of Corrupt Foreign Officials Act, and the Justice for Victims of Corrupt Foreign Officials Act (Sergei Magnitsky Law).

The committee adopted two amendments based on recommendations of expert witnesses. Both were moved by Senator Coyle and fully supported by the bill’s sponsor, Senator Omidvar. The first amendment is to clause 2 and the second amendment to clause 6.

Ultimately, colleagues, both amendments have the effect of strengthening the bill by harmonizing its language and conditions for repurposing assets with that found in its enabling legislation, the Special Economic Measures Act, also known as SEMA.

These amendments, if approved by the Senate, will help to ensure that courts tasked with repurposing assets frozen in Canada are able to do so fully and in the fundamental spirit of Bill S-217. Therefore, I move the adoption of the report.

Thank you, colleagues.

Hon. Ratna Omidvar moved the adoption of the report.

She said: Honourable senators, Bill S-209, An Act respecting Pandemic Observance Day, would designate March 11 of every year as an annual pandemic observance day. Bill S-209 was referred to the Standing Senate Committee on Social Affairs, Science and Technology on December 9, 2021. Over the course of two meetings, the committee heard from the sponsor of Bill S-209, our colleague the Honourable Senator Mégie, in addition to eight witnesses representing six different organizations. On behalf of the committee, I wish to thank the sponsor and all witnesses who assisted the committee in our study of the bill.

Based on the testimony received, the committee is recommending one amendment to strengthen the preamble of the bill, explicitly acknowledging the disproportionate effect of the pandemic on certain populations, and adding language around the intent of pandemic observance day. Many witnesses discussed the disproportionate impact of the COVID-19 pandemic on vulnerable populations, including Indigenous peoples, racialized communities, elderly people and members of the LGBTQ2+ communities. The committee also heard the importance of validating diverse lived experiences by including more specific language in the bill.

As amended, the preamble now acknowledges the multi‑dimensional effects of the pandemic on every person in Canada in addition to stating that this pandemic has worsened the various forms of inequality in Canada and has had a disproportionate impact on vulnerable people within society and members of historically disadvantaged groups.

The committee heard from the bill’s sponsor, the Honourable Senator Mégie, that pandemic observance day would have three purposes: recovery, remembrance and preparation for the future. The committee heard from witnesses that they appreciated this intent and found that it could be stated more explicitly in the bill.

The preamble, as amended, emphasizes that the pandemic observance day would give the Canadian public an opportunity to commemorate the efforts to get through the pandemic, to remember its effect and to reflect on ways to prepare for any future pandemics.

Thank you.

Some Hon. Senators: Hear, hear.

Hon. Salma Ataullahjan moved the adoption of the report.

She said: Honourable senators, the committee presented its report, which contains three amendments. I am providing you with the effects of these amendments. Bill S-211 will contribute to the fight against forced labour and child labour by imposing reporting obligations on certain private entities and government institutions. Similar supply chain transparency legislation has been adopted in other jurisdictions, including the United Kingdom and Australia.

The transparency approach encourages the adoption of good practices by giving consumers, shareholders and other stakeholders the information that they need to make informed choices. Clauses 6 and 11 of Bill S-211 set out the specific information that must be contained in annual reports. The required information is similar for private entities and government institutions. It includes but is not limited to any information on any relevant policies, due diligence processes, employee training or measures taken to remediate forced and child labour. The committee heard from several witnesses that forced labour and child labour arise from complex socio‑economic issues. Indeed, child labour often occurs where children need to work to help their families survive. While this bill alone cannot solve these complex issues, it is a starting point that seeks to encourage better practices by both private entities and government institutions.

The first two amendments expand upon the requirements already contained in clauses 6 and 11 to provide information on remediation measures. The effect of these amendments will be to require annual reporting by both private entities and government institutions on any measures specifically taken to remediate lost income for the most vulnerable families affected by measures to address forced labour and child labour.

The purpose of these amendments is to encourage companies and government institutions to think about the impacts of their supply chains on vulnerable families and to ideally go beyond merely avoiding use of forced labour and child labour.

By requiring transparency about good practices relating to remediation, stakeholders will have the information necessary to support good actors, and other actors will be encouraged to adopt better practices.

Finally, for private entities subject to this bill, clause 11 requires that each member of the entity’s governing body sign off on each annual report. The committee’s third amendment is simply a technical amendment to remove the requirement that such signatures be completed manually. The effect of this will be to allow electronic signatures, thereby simplifying the reporting processes.

I would like to take this opportunity to thank all the witnesses who testified.

I would also like to take this opportunity to congratulate Senator Miville-Dechêne on drafting this bill. This marks the first step toward putting an end to forced labour and child labour in our supply chains. Thank you.

The Hon. the Speaker pro tempore: Are honourable senators ready for the question?

The Hon. the Speaker pro tempore: Honourable senators, when shall this bill, as amended, be read the third time?

(On motion of Senator Miville-Dechêne, bill, as amended, placed on the Orders of the Day for third reading at the next sitting of the Senate.)

On the Order:

Resuming debate on the motion of the Honourable Senator Bovey, seconded by the Honourable Senator Cordy, for the second reading of Bill S-208, An Act respecting the Declaration on the Essential Role of Artists and Creative Expression in Canada.

Hon. Salma Ataullahjan moved second reading of Bill S-225, An Act to amend the Prohibiting Cluster Munitions Act (investments).

She said: Honourable senators, I first learned of cluster munitions in the 1980s, when Russian troops dropped cluster munitions across Afghanistan, leaving the countryside riddled with unexploded ordnances to this day.

Bill S-225, the cluster munitions investment prohibition act, would create a provision in the Prohibiting Cluster Munitions Act banning investments in an entity that has breached a prohibition relating to cluster munitions, explosive submunitions and explosive bomblets.

Cluster munitions are weapons designed to carry and disperse multiple explosive submunitions and/or bomblets. These weapons can be dropped from an aircraft or fired from the ground or sea by rockets or artillery. They are designed to open in mid-air and release from tens to thousands of submunitions that have the ability to indiscriminately saturate an area on the ground up to the size of several football fields. Anyone within striking areas of cluster munitions, be they military or civilian, has a substantial chance of being killed or seriously injured.

Also, any ordnance that fails to activate upon landing will effectively turn into a landmine on the ground, posing an immediate threat to the population and also for decades after the conflict is over or until the bombs have been cleared and destroyed.

This is my second time introducing this bill. The closest it has come to reality was during the First Session of the Forty-second Parliament in June 2017.

I would like to thank both Senator Jaffer and former Senator Hubley for speaking on this bill in 2017. Your insights, observations and personal experiences have spurred my determination to put an end to investments in cluster munitions in Canada.

My family has witnessed the destruction of these weapons first-hand. At the height of the Russian invasion of Afghanistan, my uncle, an orthopedic surgeon in Peshawar, Pakistan, treated countless casualties of cluster munitions, who, in desperation, had been brought over the border from Afghanistan by any means possible, including on foot, by donkey, pickup truck, car or bus, seeking medical help.

So many years later, cluster munitions are still claiming the lives of Afghan people. Sadly, I fear we may be witnessing this violent past repeating itself in Ukraine.

A few weeks ago, the UN Human Rights Office announced it had received credible reports of several cases of Russian forces using cluster munitions in populated areas in Ukraine. The International Criminal Court has since opened an investigation into possible war crimes, and testimony from survivors of suspected cluster bomb attacks is chilling. Experts also believe cluster bomblets were used in an attack on a kindergarten in the town of Okhtyrka.

These weapons know no borders and do not discriminate between civilians and soldiers on active duty. Cluster munitions were used during the Karabakh conflict, which ended in November 2020. Once again, the cluster munitions attacks caused civilian casualties, as we are currently witnessing in Ukraine.

The UN Office for Disarmament Affairs has made it clear that all types of cluster munitions cause unacceptable harm to civilians.

According to the International Committee of the Red Cross, cluster munitions, generally being free-falling weapons, are vulnerable to the slightest error or gust of wind, which means they can strike well outside the targeted area.

To make matters worse, the high failure rate of cluster munitions can prevent refugees and internally displaced persons from returning to their homes. The looming threat of these weapons also hampers humanitarian, peace-building and development efforts, including the clearance of mines and cluster munitions.

Travis was a U.S. Marine corporal deployed to Iraq. After most of the hard fighting, he decided to stay and volunteer in the removal of unexploded cluster bombs and landmines. On July 2, 2003, he was killed by an unexploded cluster munition. His mother Lynn now speaks out against the use of cluster munitions, saying:

If even the best trained military personnel can accidentally fall victim to this weapon how on earth do we think we can expect civilians to return to a land littered with them and not fall prey to them.

This, senators, is our biggest fear as we see the conflict in Ukraine.

Despite the Convention on Cluster Munitions’ successful implementation in 26 states parties that have since destroyed their stocks of cluster munitions, we still face many challenges in putting an end to the use of these weapons. A total of 16 producers of cluster munitions have yet to commit to stop production in the future, including China and Russia. Consequently, weapons that are unable to distinguish between combatants and civilians are still being manufactured and used in ongoing conflicts around the world, causing a disproportionate number of civilians to be severely injured or killed each year.

According to the Landmine and Cluster Munition Monitor, at least 360 people died or received injuries from cluster bombs in 2020. Casualties from cluster bomb remnants were also higher than for live attacks. Sadly, all recorded victims were civilians and nearly half were children.

Children are particularly at risk of falling victim to cluster munitions because they often mistake unexploded ordnances lying on the ground for toys. In fact, the cluster munitions used in Afghanistan were all disguised as bright toys, and children would reach out to pick them up. The Landmine and Cluster Munition Monitor estimates that 44% of the victims of cluster bombs worldwide are children. The number of children injured or killed by cluster bombs has risen since I last spoke on this bill.

As I just mentioned, drawn by their bright colours and toy-like appearances, children often activate unexploded munitions by picking them up, as did 4-year-old Emam who died from injuries he sustained after picking up a cluster bomblet in 2016 in east Aleppo.

Canada was among the first countries to adopt the Convention on Cluster Munitions in 2008. As of September 2021, a total of 110 states parties are adhering to the convention’s comprehensive prohibitions. The convention entered into force on August 1, 2010, and is the sole international instrument dedicated to ending the suffering caused by cluster munitions.

In 2015, Canada ratified the convention and enacted the Prohibiting Cluster Munitions Act. Yet, our current legislation does not reflect our international commitment, and it fails to meet the convention’s standards.

In September 2021, the Cluster Munition Coalition, an international civil society campaign working to eradicate cluster munitions and prevent further harm from the weapons, reported that six Canadian institutions had invested a total of US$5.75 million in companies that manufacture cluster munitions.

When I read this report, I was shocked and horrified to learn that Canadian financial institutions were continuing to invest in the production of these insidious weapons of war following the release of a previous report by the Dutch peace group PAX in 2016, which had revealed that four Canadian financial institutions had invested $565 million in cluster munitions manufacturing.

Honourable senators, I believe this is proof that naming and shaming Canadian institutions that continue to invest in cluster munitions manufacturing is not sufficient to uphold our commitment to the convention. We need stronger legislation. Otherwise, it would be hypocritical of us, as Canadians, to pride ourselves on our country’s humanitarian work abroad.

I was pleasantly surprised to learn that the Convention on Cluster Munitions’ process and substance was modelled upon the Ottawa Convention that banned anti-personnel landmines in the late 1990s.

Unexpectedly, Canada cut its international effort to help clear cluster munitions from Laos in 2012 after contributing more than $2 million between 1996 and 2011. Laos is the most cluster-bomb-contaminated country in the world on a per capita basis. The Vietnam War’s legacy in Laos is not an isolated case and 29 countries remain contaminated by cluster munitions. In 2020, casualties due to cluster munition remnants were recorded in six other countries: Afghanistan, Cambodia, Iraq, South Sudan, Syria and Yemen. Sadly, I think we will be adding Ukraine to that list now.

By continuing to allow Canadian institutions and, through them, fellow Canadians to invest in cluster munitions manufacturing, we are complicit in these avoidable deaths and injuries.

Senators, investing ethically has increasingly become an issue that is important to Canadians. In fact, 70% of Canadians believe it is important to invest in companies with strong environmental, social and governance performance.

The Canadian investment community itself has been seeking clarity regarding the issue of investment in cluster munitions, given that there is no definitive prohibition in the current legislation. Many people to whom I have spoken about this bill have been surprised to learn that our legislation does not include an explicit prohibition against investing in companies that manufacture cluster munitions. They have all expressed grave concern that the financial institutions in which they have entrusted their investments would ever invest their money in these weapons.

Investing in companies that produce cluster munitions is an active choice to support weapons that cause devastating harm, mostly to civilians. They are indiscriminate and inhumane weapons that no Canadian financial institution should be investing in. Additionally, as a banned weapon, they are a poor investment. As more countries have ratified the convention, we have seen that the market for these weapons is starting to dry up — we hope.

If the financial resources required to manufacture these weapons were no longer available to the companies that make them, this would be another positive step toward the eradication of cluster munitions. Together we can significantly enhance the protection of civilians during armed conflict, as well as post‑conflict reconstruction efforts, in concordance with the spirit of the convention.

A subsequent article in the convention states that there can be no reservations with respect to the legal obligations contained within the convention. They must be accepted in their entirety and without exception. I would also like to mention that Canada played a leading role in drafting Article 21 that established clear limitations with respect to interoperability. Other countries, such as France and Belgium — as well as other NATO and non‑NATO states — and the United Nations also value interoperability and do not have such exceptions in their respective laws.

The act in its current form, as stated by former Senator Hubley in 2017, does not go far enough. Bill S-225 aims to bring the Prohibiting Cluster Munitions Act in line with the spirit of the convention. By explicitly prohibiting investments in cluster munitions manufacturing, we would set clear guidelines for Canadian financial institutions that welcomed the idea over a decade ago. Bill S-225 also closes other existing loopholes by prohibiting Canadian financial institutions from loaning funds to these entities and even prevents them from acting as a guarantor for their loans.

The act has important gaps and has received international criticism. When the Standing Senate Committee on Foreign Affairs and International Trade studied Bill C-6, an Act to implement the Convention on Cluster Munitions, in 2014, it heard from almost 30 witnesses. In addition to the need for an explicit prohibition of investment in cluster munitions producers, a section on joint military operations also raised many concerns. The act was also publicly denounced by the International Committee of the Red Cross, and the International Committee to Ban Landmines and Cluster Munitions called it the worst legislation of any state party to the convention. Simply put, the act fails to meet the standards of the convention.

Many countries, including common law countries, have already enacted legislation prohibiting investments in companies that produce cluster munitions. One of the most effective ways to end the production of cluster munitions altogether is to cut financial ties to companies who produce them. This can only be achieved through explicit and definitive legislation.

In 2016, former minister of foreign affairs, the Honourable Stéphane Dion, was optimistic about Canada’s role in disarmament and peace building in an address at a conference marking the twentieth anniversary of the start of the Ottawa Process. He said:

Under Justin Trudeau’s leadership, Canada will again be a leader in disarmament, a leader that works with its international partners to pursue pragmatic but important change. . . .

Canada, as a determined peacebuilder, is committed to making the possible a reality.

Honourable senators, Canada has been a global leader against landmines but has lost its way. The future envisioned by the Honourable Mr. Dion did not come to fruition under the current government.

This is our chance to become leaders against the production and use of cluster munitions by drying up the financial resources to build these weapons. Thank you.

(On motion of Senator Petitclerc, debate adjourned.)

On the Order:

Resuming debate on the motion of the Honourable Senator Patterson, seconded by the Honourable Senator Tannas, for the second reading of Bill S-228, An Act to amend the Constitution Act, 1867 (property qualifications of Senators).

Hon. Marty Deacon: Senator Simons, thank you for that entertaining aspect of the history. I think it’s really important to know around this bill.

My question for you relates to the thorough historical perspective you did right up to the work of Senator Banks.

As you have been doing this work, beyond the issues that you describe around Quebec and the will to make a change, are there any other barriers or things that you learned along the way that could stop us from moving forward on this given the issue that you just described at the end of your speech? Is there anything else in the way?

Hon. Rosa Galvez moved second reading of Bill S-243, An Act to enact the Climate-Aligned Finance Act and to make related amendments to other Acts.

She said: Honourable senators, I stand before you to introduce Bill S-243, An Act to enact the Climate-Aligned Finance Act and to make related amendments to other Acts, CAFA for short. CAFA is an efficient legislative tool to attain coherence, increase transparency and implement accountability while protecting the finance system from climate risks and aligning finances with our national and international climate commitments. These aspects are essential to facilitate an orderly transition to a low-carbon economy, which is already under way and accelerating around the world.

This legislative initiative is the natural and logical progression of climate action following the adoption of the Canadian Net‑Zero Emissions Accountability Act, which I sponsored here in the Senate, but also to put Canada at the right place in the race for a clean industrial revolution to increase the chances that we remain a prosperous, competitive nation.

In this speech, I will provide context in terms of finance and climate risks which justifies the objectives and content of the bill. I will describe the work and process that led us to this proposal. Finally, I will dive into the bill itself and the problems it solves.

The Intergovernmental Panel on Climate Change, composed of the world’s leading climate scientists, has now published all three sections of its landmark Sixth Assessment Report addressing the physical basis of climate science, the impacts of the climate crisis and the pathways for the world to reduce its emissions to a safe level.

They found that countries were falling behind on the policies and actions needed, that financial flows are three to six times lower than the levels needed by 2030, and that drastic changes will be needed to all aspects of the global economy. Avoiding the worst consequences is still possible, but only if governments take immediate and decisive action such as halving global emissions by 2030. Fortunately, the report says mitigation options are readily available, as low as US$100 per tonne of CO₂ equivalent or less.

During the release of these reports, the United Nations Secretary-General António Guterres did not mince his words. He described the second report as an “atlas of human suffering and a damning indictment of failed climate leadership.” On Monday, he said that “the truly dangerous radicals are the countries that are increasing the production of fossil fuels.”

Colleagues, we are the decision makers; we are the leaders. I don’t know if you have an idea how depressing it is for scientists, health practitioners, young generations, concerned citizens, responsible corporations, workers for just transition, Indigenous peoples, racialized communities affected by pollution and women and girls disproportionately impacted by climate change to witness such a destructive path for our planet.

By now, several points should be very clear: They see us as enablers of the crisis. They have lost confidence in our democratic process. Extreme weather events are more frequent, destructive and expensive. Climate risk is systemic and growing. Further delay in climate action is dangerous. No, this is not a moralizing speech; these are just the facts.

Recently, the U.S. Office of Management and Budget assessment found that climate change could provoke a 7.1% annual revenue loss — equivalent to US$2 trillion per year — by the end of the century. That means, “Future damages could dwarf current damages if greenhouse gas emissions continue unabated.”

Meanwhile, a study by the Swiss Re Institute estimates that Canada, along with the U.K. and U.S., would lose 6% to 7% of its annual GDP by 2050 with 2 to 2.6 degrees of warming.

[Translation]

The Paris Agreement was adopted by 196 nations in 2015. Its goal is to limit global warming to well below 2 degrees Celsius, preferably to 1.5 degrees Celsius, compared to pre-industrial levels. In November, Canada submitted its Nationally Determined Contribution, or NDC, at COP26 in Glasgow. Canada has committed to reducing its emissions by 40% to 45% below 2005 levels by 2030, a commitment that was formalized last year with the passage of the Canadian Net-Zero Emissions Accountability Act.

COP26 was an opportunity for countries to submit ambitious NDCs while addressing the issue of financing the transition. It did not meet all of its objectives, but several promising initiatives emerged, including the Glasgow Financial Alliance for Net Zero, led by former Bank of Canada governor and the UN Special Envoy on Climate Action and Finance, Mark Carney. The alliance is a group of financial actors that are committed to putting climate change at the centre of their work. I support Mark Carney’s efforts. It is clear that we will never achieve our goals without the full and proactive participation of the financial sector.

In Canada, the financial sector is lavishly supporting emissions-intensive industries with billions of dollars in direct funds. Export Development Canada supported the industry by providing between $8 billion and $12.4 billion in financing and insurance annually from 2015 to 2020, which directly contradicts the goals of reducing government subsidies and emissions. Canada’s big six banks have provided $694 billion in funding and invested $125 billion in fossil fuels since 2015.

Despite the good intentions behind these international collaborations, there is an obvious contradiction between the financial actors’ promises and their actions. Around the world, government policies and technology are changing rapidly as the transition moves forward. Canada has never met its emissions reduction targets, and our financial system is threatened by climate risks. Our financial institutions have to catch up and align their actions with the latest climate science. We have to build on the sustainable finance efforts of developed nations, like the European countries, members of the European Union and the Commonwealth countries. Then we could set off an economic transformation that will fuel future prosperity sustainably, by preserving our country and planet the way our generation experienced it.

[English]

Currently, our financial sector is facing an increasingly volatile climate and uncertain future, leaving it vulnerable to major risks. These risks, however, are not reflected in market prices, tilting capital flows toward riskier, emissions-intensive assets and away from low-carbon assets. If market expectations change suddenly due to an acceleration in global policy or a technological breakthrough or a series of destructive weather events such as the ones we have now, it could cause massive repricing. In this scenario, billions of dollars’ worth of emissions-intensive assets could become stranded, resulting in losses that could then cascade through the entire financial system and trigger instability or widespread collapse.

Half of the world’s fossil fuel assets could become worthless by 2036 in a net-zero transition, and three quarters of Canadian oil is unburnable in a world where warming is limited to 2 degrees. Those who are slow to decarbonize will suffer, while early pioneers will profit.

Initiatives like the Task Force on Climate-related Financial Disclosures aim to improve and increase reporting of climate‑related financial information through voluntary disclosures, hoping that investors would have a greater overview of the impacts on climate of their investment portfolios. Unfortunately, the lack of legislative framework and enforcement provokes an inconsistent application. Those who do disclose find themselves at a disadvantage compared to those who don’t and end up being penalized by investors.

While the climate crisis poses incredible risk to the financial sector, the opposite is also true. Combined, these two opposite effects are termed “double materiality.” Through its massive investments in high-emitting industries, the financial sector is enabling the further increase of emissions in the atmosphere. These financed emissions add to the burden of the climate crisis.

In 2015, Morgan Stanley Capital International assessed the carbon footprint for several of its indexes and found that a US$1 million investment could be associated with as much as 439 tons of CO₂ equivalent.

How can an individual financial institution address this conundrum? The financial sector is on the front line of climate risk, and despite their continued support of fossil fuels, the sector, along with major international corporations, rushed to announce decarbonization commitments to prove their willingness to change. Yet, these pledges lack transparency or accountability. At best, they bring us false comfort that climate action is under way. At worst, they are a deliberate attempt at greenwashing to delay substantial climate action.

There are still no clear standards or enforcement measures that would bring much-needed transparency to these pledges. Certainly, we applaud those private sectors who have set and are making meaningful progress toward ambitious climate targets. Bill S-243 is in full support of them. But individual corporations have neither the responsibility nor the incentive to ensure that their peers and competitors follow suit. They cannot ensure an orderly and comprehensive transition of the economy on their own let alone take responsibility for reducing the climate risk posed to the entire financial sector. Only the government can fulfill this function.

These are the issues that my proposed legislation solves. So how was Bill S-243 developed?

In September 2020, I invited several experts to the Senate to provide their insights on how to develop a more equitable and resilient economy after recovering from the pandemic. These experts included Dr. Peter Victor, economist and professor emeritus at York University; Dr. Cameron Hepburn, director of the Smith School of Enterprise and the Environment at Oxford University and also Dr. Joseph Stiglitz, laureate of the Nobel prize in economics and former chief economist at the World Bank. This webinar, along with our research on various advocated approaches to post-pandemic economic recovery, resulted in the publication of a white paper called “Building Forward Better: A Clean and Just Recovery from the COVID-19 Pandemic.”

Last summer, we adopted the Canadian Net-Zero Emissions Accountability Act, a legally binding accountability framework for the government to attain net-zero emissions by 2050, and it allowed for important debate in this chamber.

In January, the Bank of Canada and the Office of the Superintendent of Financial Institutions, or OSFI, published the final report on the Climate Scenario Analysis Pilot to better understand the risks to the financial system that could arise from a transition to a low-carbon economy. It emphasizes the systemic nature of climate risk threatening the economy and the whole financial system, and it recognizes the need to build up capacity to assess these risks. Regrettably, it falls short of making significant recommendations for proactive climate action by financial institutions. The window for action is getting smaller, and the climate emergency does not give us the luxury of time.

Within the context of these developments, my office and I have worked on a white paper for the past several months that seeks to provoke the next logical progression in the transition. Based on international best practices and leading thinkers in economic policy, climate science and sustainable finance and on exchanges during COP26 and the GLOBE summit, we identified the gaps in the Canadian financial landscape and proposed a set of recommendations.

These recommendations define what leapfrogging from laggard to leader would look like for Canada in terms of ensuring a climate-aligned, stable, low-carbon financial system. These findings, recommendations and feedback so far can be found in the white paper published last month called Aligning Canadian Finance with Climate Commitments.

The feedback so far has been inspiring, and I sincerely thank all my colleagues who have taken the time to read and respond to my analysis, discussion and recommendations.

Rich with this knowledge, Bill S-243 was co-designed through collaborations and consultations led by Karine Péloffy from my office and Professor Amr Addas of the Concordia University Sustainability Ecosystem, supported by the Trottier Family Foundation. We organized a series of consultations and working‑group meetings. We convened over 40 national and international experts in sustainable finance from various backgrounds. They represented investment entities, pensions, think tanks, law firms and academia and brought together both finance and climate expertise in the hopes of developing a stringent, measured and coherent solution to help our financial sector align with our climate commitments.

During these consultations, we received exceptional feedback, which is synthesized in a “What We Heard” discussion paper that was released earlier today. These consultations sought to obtain advice on fiduciary duties of directors, reporting and planning from institutions, capital adequacy requirements, disclosures, technologies and how they are used and much more. The resulting feedback is directly reflected in this bill proposed today.

Bill S-243 complements the Canadian Net-Zero Emissions Accountability Act, increasing structure, coherence and efficiency in attaining our committed goals by bringing the financial sector into the race to net zero — the last crucial piece to activate the transition machine.

Countries like the United Kingdom and New Zealand have already legislated the requirement for mandatory climate disclosures for many of their financial institutions. The White House issued an executive order in May 2021 which, along with recognizing the risks to the stability of the financial system caused by climate change, established a policy “. . . to advance consistent, clear, intelligible, comparable, and accurate disclosure of climate-related financial risk . . . .” In October 2021, the order was followed by a roadmap to build a climate-resilient economy, which embodies the precautionary approach while aiming to mobilize “. . . public and private finance to support the transition to a net-zero U.S. economy . . .” and safeguard “ . . . the U.S. financial system against climate-related financial risk . . . .”

Recently, the U.S. Securities and Exchange Commission proposed new rules that make it mandatory for companies listed on American stock exchanges to report the full scope of their emissions. These changes would put Canadian companies trading on U.S. exchanges at a great disadvantage, unable to meet American investors’ standards and expectations.

While other G20 countries have a much larger portfolio of clean energy options, including tidal, wave, hydro, gravity, wind, solar and nuclear energy, we are sadly still developing the expensive, complex, polluting and socially divisive energy of the past. Put simply, Canadian policy is behind, and our misguided actions are having a major impact on our international competitiveness. We must act with the legislative tools at our disposal.

These are the urgent reasons why I introduced Bill S-243, which aligns the activities of federal financial institutions and other federally regulated entities with the superseding economic and public interest matter of achieving our climate commitments. It aims to make timely and meaningful progress toward safeguarding the stability of both the financial and climate systems. It recognizes the systemic risks posed to all sectors of the economy by not aligning financial flows with climate commitments.

So what is alignment? Climate commitments refer to our obligations and commitments under the United Nations Framework Convention on Climate Change, the Paris Agreement and the Canadian Net-Zero Emissions Accountability Act with attention to meeting the 1.5-degree target with no or low overshoot, avoiding carbon lock-in, preserving natural carbon sinks and enhancing resilience.

To be considered aligned with climate commitments involves contributing to the realization of climate commitments; avoiding inconsistency with those commitments; avoiding contribution to prolonging the impacts of climate change or disturbing natural carbon sinks, and producing overall positive climate impacts while respecting the right of Indigenous peoples, using the best available science and not hindering other social and environmental goods. To achieve this, the bill comprises seven important measures.

The first measure addresses an issue that we heard often during our consultations: that fiduciary duty technically includes consideration of climate risk. However, in practice, the risk is ignored or under-represented.

The Expert Panel on Sustainable Finance recommended in 2019 that the federal government, “. . . clarify that fiduciary duty . . . does not preclude the consideration of relevant climate change factors.”

In addition, Queen’s University’s Institute for Sustainable Finance’s September 2021 report surveyed sustainable finance experts and highlighted the need for clarifying the scope of fiduciary duty, which was, “. . . widely recognized as a crucial initiative to act on in the near term.”

Former Supreme Court Justice McLachlin also recognized that corporations have a duty beyond just the bottom line. She said:

Corporations must take environmental impacts of their activities into account in making a decision . . . Corporations, public and private, must consider the interests of all their stakeholders. Like all good citizens, corporations must respect the environment, relations with Indigenous peoples, and the diversity of modern societies.

The climate-aligned finance act, therefore, creates a duty for directors, officers and administrators to exercise their powers and functions in a way that enables their organization to be in alignment with climate commitments.

The second measure is the alignment of various federal-adjacent organizations with climate commitments. This set of straightforward amendments requires the Bank of Canada, the Office of the Superintendent of Financial Institutions, the public sector, the Canada Pension Plan and key Crown corporations, such as Export Development Canada, to perform their duties in a manner that is aligned with our climate commitments.

The third measure is an obligation for setting targets, planning and reporting on climate commitment alignment for federally regulated organizations unless they have no or negligible emissions. These reporting entities include federally regulated financial institutions, parent Crown corporations, federally incorporated companies and other federally regulated entities, such as railways and airlines. Their targets and plans must apply to all emissions in their value chain, represent the best available science and be aligned with the climate commitments. Federal financial institutions — including banks, insurance companies, pensions, the Bank of Canada and some key Crown corporations — will be subject to additional requirements, such as the consideration of their financed emissions in their targets and plans.

Colleagues, we required this from the government last year with the Canadian Net-Zero Emissions Accountability Act. Now it is time to extend a similar requirement to the financial sector.

The fourth measure is ensuring certain boards of directors have the climate expertise they need for the transition and that conflicts of interest are avoided. This bill establishes a definition of climate expert and requires that major Crown corporations have at least one climate expert on their board. The conflict of interest provision will be introduced in two steps. For the first four years after coming into force, board members associated with an organization that is not in alignment with climate commitments would have to declare their conflicting activities in the reporting entity’s annual climate commitments alignment report. From the fifth year onwards, such individuals will not be eligible for board appointments. We have heard that all financial boards are populated with the same few hundred people. This measure aligns with the trend of bringing diversity and wider expertise to boards.

The fifth measure is the establishment of capital adequacy requirements that better reflect the microprudential and macroprudential risks generated by financial institutions. When financial institutions invest in non-transition-ready sectors, ripples of financial risk are generated and propagated throughout our financial system. Requiring banks to hold more capital — an amount proportional to their investment in emissions-intensive operations, for example — would cause banks to internalize the costs of those systemic risks that their financial activities generate.

[Translation]

To that end, the bill requires the Superintendent of Financial Institutions to develop new guidelines for capital adequacy for financial institutions with respect to climate commitments. The first guidelines would apply to entities governed by the Bank Act and would be published in the year following the entry into force of the legislation. A second set of guidelines would then be developed for funding requirements and investment policies with respect to climate commitments by pension funds, insurance companies and other entities that report to the superintendent.

The sixth measure would have the government develop an action plan for aligning financial products with climate commitments. Full alignment requires a global approach that exceeds the scope of a Senate private member’s bill. The federal government has considerable powers and the constitutional jurisdiction required to act on these issues.

Finally, the seventh measure guarantees the holding of timely public review processes on the progress of the implementation to ensure iterative learning.

The bill requires that two reports be presented. A document tabled every year in Parliament by the Office of the Superintendent of Financial Institutions will report on the progress made by the entities under its jurisdiction in implementing the requirements. The Minister of Finance will table a similar report for Crown corporations.

Within one year of the act coming into force, a single report will be co-developed by the Bank of Canada, the Office of the Superintendent of Financial Institutions and representatives of Indigenous peoples based on the consultations that will have taken place to obtain Indigenous peoples’ perspectives on such matters as long-term investment and the resilience of the financial system. Another report will be prepared by the Bank of Canada on monetary policy in relation to climate change, and it will be developed in consultation with persons with climate expertise. These reports will also be tabled in Parliament.

An independent review of the provisions of the act and their administration shall be carried out every three years in consultation with persons with climate expertise, followed by a report that will also be tabled in Parliament.

I also want to mention a recurring theme in the bill. Based on comments made by representatives of Indigenous peoples, the Climate-Aligned Finance Act recognizes their interests in the following ways. First, the preamble of the act refers to the UN Declaration on the Rights of Indigenous Peoples and the disproportionate impacts of climate change on these peoples. Second, climate expertise includes “Indigenous ways of knowing, being and doing.” Third, the definition of the term “alignment with climate commitments” includes respect for the rights of Indigenous peoples, including those set out in the UN Declaration on the Rights of Indigenous Peoples. Finally, the Bank of Canada must prepare a joint report with representatives of Indigenous peoples on their perspectives.

[English]

The Hon. the Speaker: Honourable senators, when shall this bill be read the third time?

(On motion of Senator Black, bill placed on the Orders of the Day for third reading at the next sitting of the Senate.)