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.)

The Hon. the Speaker: Is it your pleasure, honourable senators, to adopt the motion?

Hon. Robert Black: Honourable senators, I rise today to speak to Bill S-5, the strengthening environmental protection for a healthier Canada act.

As you know, I am a longtime supporter of the agricultural industry, and it’s what I know best. So as you can likely assume, my focus today will be the way in which Bill S-5 may impact the agricultural industry. I understand that this is the first time the Canadian Environmental Protection Act, or CEPA, has been amended since 1999. It is clear, as my colleague the Honourable Senator Kutcher highlighted in his earlier speech, that a great deal has changed since then. A great deal has changed about our world in general but also in the world of agriculture. Farming is smarter and more connected now than it ever has been before. As things are continuing to change, the agriculture community is ready to change with it.

That being said, I have recently learned from a few agricultural stakeholders that there are minor concerns about the inclusion of and language around a precautionary principle throughout the bill, particularly since it states that a weight-of-evidence approach and a precautionary approach should be taken.

Members of the agricultural community are concerned that it’s commonly understood that a precautionary approach is used in the absence of data. A weight-of-evidence approach, on the other hand, suggests there is evidence in place.

While the balance between the precautionary principle and weight-of-evidence approaches referenced in the bill isn’t new, as it already is in CEPA, there is a need for clarity as to how it is to be applied to the broader subset of potentially toxic substances this bill brings into CEPA consideration.

It is important to note that there is existing guidance on how the two are balanced by Environment and Climate Change Canada. However, agricultural stakeholders have highlighted the critical need to ensure the end result is as fully informed decision making as possible. And I agree with their concern that Canadian regulators should have a clear mandate to pursue additional evidence where it’s found lacking.

Ultimately, given the important role this bill will play in evaluating substances present in our environment, I believe that where there is an absence of data, there should be legislated processes and mechanisms to request more data. I am hopeful that members of this chamber will consider such a matter at committee and investigate how we can possibly strengthen this bill to ensure its success.

Another area that members of the agricultural industry have flagged is regarding chemistries that are not yet registered as pesticides and whether or not they will fall under the Canadian Environmental Protection Act, 1999, or CEPA. This would be critical to receive clarification on this, so that manufacturers can be mindful of speed to market for innovation and tools that will support food producers.

Due to administrative burdens, farmers remain concerned with lost competitiveness and any further delays in getting access to new innovations. In fact, every year that Canadian farmers go without a product that’s available to our major trading partners represents an additional obstacle to their competitiveness and to Canada’s competitiveness on the world stage. Health and safety are paramount for and to farmers, but the efficiency of Canada’s regulations in addressing this priority needs to be examined closely to ensure it supports and strengthens the competitiveness of the Canadian agricultural industry.

One additional area of concern that agricultural stakeholders have raised is with respect to section k, wherein it states:

expand certain regulation-making, information-gathering and pollution prevention powers under that Act, including by adding a reference to products that may release substances into the environment;

Depending on how they are applied, there is a question about whether these powers will impact on farm activities. I am hopeful that farmers and the greater agricultural community will be consulted on this section to assess potential implications.

Finally, as Senator Kutcher highlighted, thousands of substances have been identified as needing risk assessments, and many that have been previously assessed may require re‑evaluation because of new uses, new scientific information and greater exposures than were the case at the time of the original evaluation.

This could cause delays and backlogs in the use of these substances, which could potentially lead to further issues and concerns. While I am pleased to see that the time is being taken to understand the potential risks of these substances, we must ensure it is an efficient and effective process.

All that being said, there are aspects of the bill that members of the agricultural community have voiced their support for, namely, the efforts to reduce, refine and replace animal testing. Agriculture has actively worked as a partner towards this change, but it cannot be successful without further support from government.

I heard from Syngenta Canada, a leading agriculture company offering innovative products, expert agronomic advice and support for best management practices, on their work in animal testing. They shared that the scientific community has been working to help the government make scientifically backed decisions that protect both human and environmental health with the use of fewer animal studies. To that end, Syngenta has been working with multiple agencies to develop other methods and evaluation strategies that will allow the agricultural industry, government and regulatory agencies to make better decisions. In fact, some of the methods they have developed and advocated for have already been accepted by regulatory agencies.

As a long-standing member of the agricultural community, I’ve risen on a number of occasions in the Senate Chamber to highlight the role of Canadian agriculture in relation to their efforts to protect the environment and support the fight against climate change.

Across the country, farmers are changing the way they farm by adopting more sustainable approaches, like the way they seed, till and prepare their land, as well as the control of weeds. Practices such as crop rotation and the use of cover crops to help improve soil health, slow erosion and increase soil organic matter all promote healthy crops and livestock, as well as contribute to a healthy ecosystem. All of this helps support a healthier, more sustainable environment.

The challenge for the agriculture and agri-food sector will be to mitigate greenhouse gases while adapting to the impacts of climate change without jeopardizing food security. To do so, Canadian agriculture producers and food processors will need government support in transitioning their operations to be more sustainable, and they will also require the government to continue engaging with the industry as they seek to change decades-long practices and procedures.

On that note, I would like to commend the government for its recently published discussion document on reducing emissions arising from the application of fertilizer in Canada’s agriculture sector. This document addresses one of the measures put forward in the government’s strengthened climate plan, which is a national target to reduce absolute levels of greenhouse gas emissions arising from fertilizer application by 30% below 2020 levels by 2030. This is an important measure. While many in the agriculture sector are already working to improve nutrient management and reduce emissions associated with crop production, it is important to note that fertilizers are responsible for a growing share of overall agricultural emissions.

I was pleased to see that the document discusses the 4R Nutrient Stewardship approach developed by Fertilizer Canada, as it was raised by a large number of stakeholders during the first phase of consultations as a pathway for achieving emission reductions. This is exactly the type of ongoing consultation and collaboration that is needed going forward.

I hope that the officials from Environment and Climate Change Canada, in addition to those of Agriculture and Agri-Food Canada, will continue to strengthen and enhance their relations with Canada’s agricultural community. As farmers and the agricultural community at large are the stewards of our land, they must be involved in the conversation around protecting our environment. Most importantly, they are willing to be partners in that conversation and those efforts to safeguard Canadian ecosystems.

Honourable colleagues, I am pleased to see that steps are being taken to update the Canadian Environmental Protection Act, especially after so much has changed since 1999, including our understanding of the environment. However, as I mentioned earlier, the agricultural community has some concerns about the language and use of some of the matters included in Bill S-5, and we all believe these issues should be investigated further by both the committee and government. Further, it is my hope that this investigation will lead to amendments to this bill in committee and, therefore, before it reaches the other place.

We are all well aware that our world continues to change. With it comes changes in industry, science and the environment. It is my hope that Bill S-5 will give Canadians a well-thought-out and integrated plan for the assessment of substances insofar as it remains committed to the risk-based approach.

It is also my hope that the public and private sectors, as well as everyday Canadians, will continue working alongside and supporting the agricultural industry as they work to adapt to a changing environment and seek to strengthen and enhance their practices. It is not enough to tell farmers what needs to be done to make their operations greener and more environmentally friendly. It must be a collaborative effort that will keep Canada’s agricultural industry strong for generations to come.

Thank you. Meegwetch.

The Hon. the Speaker: Senator Galvez, will you take questions?

Senator Galvez: Yes.

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