Hon. Senators: Question.

An Hon. Senator: On division.

(Motion agreed to and bill read second time, on division.)

Some Hon. Senators: Hear, hear.

Hon. Michael L. MacDonald: Honourable senators, I rise today to speak as the critic for Bill S-243, An Act to enact the Climate-Aligned Finance Act and to make related amendments to other Acts.

Bill S-243 is an ambitious piece of legislation for a Senate public bill. I will not spend a lot of time summarizing Bill S-243 because its author and sponsor, Senator Galvez, has already done that, and there are substantive materials on her website that provide a brief overview of the bill.

For the record, however, and to refresh your memory, I do need to mention a few things.

First, Bill S-243 sets out to achieve two broad objectives. One objective is to align the activities of federal financial institutions and other federally regulated entities with the superseding economic and public-interest matter of achieving climate commitments. Second, the bill aims to make timely and meaningful progress towards safeguarding the stability of both the financial and climate systems.

In other words, this bill attempts to protect our financial institutions from risks posed by climate change and to protect our climate from risks posed by our financial institutions.

I would note that these are not imaginary risks. The March 2023 Climate Risk Management report by the Office of the Superintendent of Financial Institutions breaks this down into two categories: physical risks and transition risks.

Physical risks can be understood as the risks posed by severe climate-related events such as floods, storms and wildfires. These events can cause physical damage to infrastructure and properties, including those owned by financial institutions. The costs of repairing or replacing damaged assets can be substantial and could impact the financial stability of these institutions.

Transition risks arise from the process of transitioning to a low-carbon economy. As governments and regulators implement policies and regulations to mitigate climate change, industries that rely heavily on carbon-intensive activities, such as fossil fuels, may face significant challenges. This can lead to stranded assets, devalued investments and increased credit risks for financial institutions that have exposure to these industries.

In addition to physical risks and transition risks, we could add liability, reputational and market risks.

Liability risks are those faced by financial institutions due to climate change-related events. For example, if a company’s operations contribute to greenhouse gas, or GHG, emissions or environmental degradation, they may face lawsuits or regulatory penalties. Financial institutions that have invested in or provided financing to such companies could be held liable for their actions.

Reputational risks are largely public relations concerns but should not be misunderstood as insignificant. One only needs to recall the rapid slide into insolvency that was experienced by a number of U.S. banks after the public lost confidence in the viability of their balance sheets. Although climate-related reputational risk is not likely to manifest itself on this scale, it underscores the reality that public confidence in our banking institutions must be maintained. Customers, investors and other stakeholders are increasingly demanding that financial institutions align their activities with sustainable practices, and failure to do so could lead to reputational damage and potential loss of business.

Market risks are changes in consumer preferences and regulations which, in turn, lead to shifts in market demand for certain products and services. Financial institutions that are not prepared to adapt to these changes could experience decreased demand for their offerings or lose out on investment opportunities in emerging sustainable sectors.

However, these are just the risks that our financial institutions face from climate change. There are also risks that the climate faces from our financial institutions, which are also very real.

For example, as noted by Senator Galvez and other speakers, financial institutions play a crucial role in providing funding and capital to industries that contribute to GHG emissions, such as the continuation and expansion of fossil fuel projects, new oil and gas exploration and high-emission transportation. If left unchecked, these investments could prolong the reliance on carbon-intensive energy sources, further exacerbating climate change.

Inversely, if our financial institutions demonstrate a lack of support for the low-carbon transition, this will result in a diversion of capital away from low-carbon or renewable energy projects. Insufficient investment in clean technologies and sustainable infrastructure would hinder the transition to a low‑carbon economy, slowing down efforts to mitigate climate change.

Colleagues, there are more risks we could talk about, but suffice it to say that the risks are real. If our federally regulated financial institutions choose to ignore them, they do so at their peril and at ours.

It is these risks which Bill S-243 attempts to address by implementing the following seven measures.

First, the legislation establishes a duty for directors, officers and administrators to align their entities with climate commitments set out in the bill. The idea is that financial institutions should be working towards the achievement of these commitments, not against them.

Second, the Climate-Aligned Finance Act, or CAFA, establishes a requirement for various federal adjacent organizations such as the Bank of Canada, the Office of the Superintendent of Financial Institutions, or OSFI, Export Development Canada and others to align with climate commitments.

Third, federally regulated organizations must develop action plans, targets and progress reports on meeting climate commitments.

Fourth, certain boards of directors will have to have a director with climate expertise and they will need to avoid conflicts of interest.

Fifth, the bill would establish capital adequacy requirements to ensure financial institutions can withstand potential climate change shocks or vulnerabilities.

Sixth, the bill requires that the government develop an action plan to align financial products with climate commitments. This is one of those measures that cannot be addressed in a Senate public bill, so Senator Galvez has done what we see other senators do, which is essentially calling for the government to create a framework to see it happen. This skirts the problem of introducing a Senate bill which imposes spending obligations on the government.

Finally, Bill S-243 mandates timely public review processes on implementation progress to ensure we are learning as we go and can build on our successes.

By now you should understand why I said at the beginning that this was an ambitious piece of legislation for a Senate public bill.

The problem, senators, is that, in my view, it is too ambitious. I do not quarrel with the objectives of ensuring that our financial institutions are protected from risks posed by climate change and that our climate is protected from risks posed by our financial institutions. But I do believe this is the wrong way to proceed to do that.

There are numerous reasons why I believe this, but allow me to briefly share two of them with you.

Number one: The Office of the Superintendent of Financial Institutions and the Bank of Canada are already working on this.

On January 14, 2022, the Bank of Canada and OSFI released a completed climate scenario analysis pilot in collaboration with six Canadian federally regulated financial institutions. This analysis was the culmination of a pilot project which had launched in November 2020 in order to: (i) build the capabilities of authorities and participating financial institutions to perform climate transition scenario analysis; (ii) support the Canadian financial sector in improving its assessment and disclosure of climate-related risks; and (iii) contribute to the understanding of the potential exposure of the financial sector to climate transition risk.

Later, in January 2021, OSFI released a discussion paper entitled, “Navigating Uncertainty in Climate Change: Promoting Preparedness and Resilience to Climate-Related Risks.” The purpose of this discussion paper was to engage federally regulated financial institutions and federally regulated pension plans in a dialogue on the risks resulting from climate change that could affect the safety and soundness of these institutions. The objective was to begin to define, identify, measure and build resilience to climate-related risks.

Following the release of the January 2022 climate scenario analysis, OSFI then launched a public consultation on draft guidelines for climate risk management in May of 2022. Those consultations led to the release of the finalized Guideline on Climate Risk Management in March of this year.

This guideline sets out OSFI’s expectations for the management of climate-related risks by federally regulated financial institutions and followed one of the most extensive consultations in OSFI’s history where over 4,300 submissions from a wide range of respondents were received.

The guideline implements three expected outcomes for federally regulated financial institutions to achieve: they must understand and mitigate against potential impacts of climate-related risks to its business model and strategy; they must have appropriate governance and risk management practices to manage identified climate-related risks; and they must remain financially resilient through severe, yet plausible, climate risk scenarios, and operationally resilient through disruption due to climate-related disasters.

The burden to achieve these goals is placed on the financial institutions, and will be assessed through minimum mandatory disclosure requirements with specific deadlines.

The impact of this guideline effectively addresses the second objective of this bill, which was to make timely and meaningful progress towards protecting our financial institutions from risks posed by climate change. Although Senator Galvez’s response to the guideline was to point out a number of deficiencies, I note that OSFI itself sees this as one step in the right direction and intends to review and amend the guideline as practices and standards evolve.

Furthermore, on the question of climate scenario analysis and stress testing, along with capital and liquidity adequacy, OSFI has noted it is likely to develop their guidance on these issues further in a future iteration of the guideline.

I do understand, however, that while this work by OSFI addresses the risks that climate change poses to our financial institutions, it does not address the need to protect our climate from risks posed by our financial institutions.

That brings me to my second point that this, too, is already being addressed.

In April 2021, 43 founding members established the Net-Zero Banking Alliance, which has since grown to represent over 40% of global banking assets totalling more than $74 trillion U.S. dollars. The number of Canadian institutions which have joined this alliance has grown to eight and includes Vancity, Coast Capital, Bank of Montreal, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, National Bank of Canada, Royal Bank of Canada and the Toronto-Dominion Bank.

The alliance was convened by the United Nations Environment Programme Finance Initiative and represents a group of banks committed to aligning their lending and investment portfolios with net-zero emissions by 2050.

In order to join, each bank’s chief executive officer must sign a commitment statement that describes the target setting and reporting process said to be the primary catalyst for achieving the net-zero transition. All signatories must commit to transitioning the operational and attributable greenhouse gas emissions from their lending and investment portfolios to align with pathways to net zero by 2050 or sooner; to, within 18 months of joining, setting 2030 targets — or sooner — and a 2050 target, with intermediary targets to be set every five years from 2030 onwards; to focusing the banks’ first 2030 targets on priority sectors where the bank can have the most significant impact, with further sector targets to be set within 36 months; to publishing absolute emissions and emissions intensity annually in line with best practice, and within a year of setting targets disclose progress against a board-level, reviewed transition strategy setting out proposed actions and climate-related sectoral policies; and to taking a robust approach to the role of offsets in transition plans.

Colleagues, considering that the alliance represents over 40% of global banking assets, this is not to be dismissed lightly. It is a tremendous commitment that, frankly, is not likely to be achieved as quickly or as efficiently through the heavy-handed legislative process modelled by Bill S-243.

As noted in the January 2023 edition of The Sustainable Finance Law Review:

In Canada, sustainable finance has developed within the voluntary frameworks and best practices developed through the International Capital Market Association’s (ICMA) Green Bond Principles, Sustainability-Linked Bond Principles, Social Bond Principles and the Climate Transition Finance Handbook. There is broad market acceptance of the various sustainable finance instruments contemplated within these frameworks.

It continues:

Growing market understanding of the importance of environmental, social and governance . . . considerations to stakeholders has led more companies to adopt voluntary sustainability disclosure frameworks such as the Task Force On Climate-Related Disclosures . . . but also others, as part of their regular disclosure, which, in turn, has facilitated the utilisation of sustainable financing instruments. More and more companies are adopting net-zero emissions targets in line with Canada’s national commitments, including Canada’s largest banks.

Colleagues, I propose to you that what Bill S-243 wants to do is already taking place through both regulatory and voluntary means.

I would further suggest that if legislation of this magnitude were ever needed, it is imperative that it be a government bill, not a Senate public bill. This legislation would not only implement the climate-aligned finance act, but it would also amend the Bank of Canada Act, the Financial Administration Act, the Office of the Superintendent of Financial Institutions Act, the Public Sector Pension Investment Board Act, the Business Development Bank of Canada Act, the Canada Infrastructure Bank Act, the Canadian Net-Zero Emissions Accountability Act and the Canada Pension Plan Investment Board Act.

In my view, this is a significant overreach for a Senate public bill. To attempt to impose sweeping changes on our federally regulated financial institutions through private members’ business is far from an appropriate use of Senate public bills.

However, to quote Senator Harder from his article Complementarity: The Constitutional Role of the Senate of Canada, this does not mean the bill has no purpose, for I believe it is to be primarily an exercise of exerting:

 . . . influence in the policy process through a wide range of “soft power” tools (such as public policy studies and Senate public bills).

Senator Harder went on to note:

. . . the Senate works wonders when it uses its power not to coerce but to persuade, whether through a first round of amendments to legislation received from the House of Commons, leveraging the visibility of Parliament to alert public opinion, initiating Senate Public bills, or through the publication of prescient committee reports addressing public policy.

The exercise of soft power through initiating Senate public bills is an appropriate role for this legislation, so in my view Bill S-243 has served its purpose.

In Senator Galvez’s speech on this bill, she noted that financial institutions must help finance the transition to sustainable emissions targets and that the vulnerability of the financial sector to climate change catastrophes must be addressed. As I have outlined, this process is already well under way and that continuing further with Bill S-243 would potentially delay and perhaps even hurt rather than help the ongoing process.

In light of the already-established initiatives I have outlined, and in spite of this bill’s good intentions, I don’t believe we should support it at second reading, and I don’t recommend that we send it to committee for further study. The concerns raised in this bill, albeit legitimate, appear to be already addressed and well in hand. Thank you, honourable senators.

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

Some Hon. Senators: Agreed.

Hon. Yonah Martin (Deputy Leader of the Opposition): Honourable senators, I rise to speak to Bill S-251, An Act to repeal section 43 of the Criminal Code (Truth and Reconciliation Commission of Canada’s call to action number 6).

I want to begin my speech by recalling the words of Senator Kutcher when he spoke to this bill last October. He said, “I think every member of this chamber wishes that all violence against children would stop.”

I couldn’t agree more. But of course, wishing it and achieving it are two different things. In the specific case of parents, I can’t imagine any sane or responsible parent who would wish to inflict physical violence on their child. Legislation or no legislation, it almost goes against nature. My sense is that those who have done so, maybe in a fit of pique or exhaustion, did not do so at least without feeling some huge measure of remorse. And as for those who don’t, I don’t think the repeal of section 43 is going to stop them.

I understand the appeal of this legislation, honourable senators, but I think for the most part, when it comes to parents, few need a bill or a section of the Criminal Code to stop them from beating or even laying a hand on their child. We have come a long way from the very long-ago days when it was common to hear the phrase “spare the rod, spoil the child.”

All children in Canada are protected from all forms of violence through the Criminal Code, which contains general criminal offences to protect all persons from violence, and several offences that specifically protect children — for example, the failure to provide the necessaries of life, child abandonment and several child-specific sexual offences.

In addition to protections under the Criminal Code, every province and territory has laws to protect children from family violence and abuse. These laws allow the state to act where a child is in need of protection from physical, emotional and psychological harm or neglect. Many provinces and territories also have laws and policies that prohibit the use of physical punishment of children in foster homes, child care settings such as daycares, as well as in schools.

In B.C., section 38 of the Teachers Act states that a teacher is prohibited from engaging in:

(a) physical harm to a student;

(b) sexual abuse or sexual exploitation of a student;

(c) significant emotional harm to a student.

This bill, and section 43, which it seeks to repeal, goes beyond simply parents to include teachers or anyone else standing in the place of a parent. Specifically, section 43 of the Criminal Code states:

Every schoolteacher, parent or person standing in the place of a parent is justified in using force by way of correction toward a pupil or child, as the case may be, who is under his care, if the force does not exceed what is reasonable under the circumstances.

This bill, as Senator Kutcher and others have noted, is the latest rendition in a succession of bills attempting to address the issue of corporal punishment. Senator Kutcher mentioned that former Senator Hervieux-Payette introduced the bill eight times before former Senator Sinclair took over the responsibility. I believe that Senator Kutcher mentioned other efforts going back to 1989.

I think the length of time that has elapsed between when the effort first began to the current bill we are dealing with today is a significant indication that this is not necessarily a straightforward issue. It is worth noting that as recently as 2004, the Supreme Court of Canada, in the case of Canadian Foundation for Children, Youth and the Law v. Canada (Attorney General), upheld section 43, saying the provision does not violate the Canadian Charter of Rights and Freedoms. As six of nine justices concluded, it does not, infringe a child’s rights to security of the person or their right to equality. Nor does it constitute cruel and unusual treatment or punishment.

In its conclusion, the court provided the following guidelines:

One, parents or caregivers can only use corrective force or physical punishment that is minor or “transitory and trifling” in nature. For example, spanking or slapping the child hard enough that it leaves a mark or a bruise would not be considered transitory and trifling and would not be reasonable.

Two, teachers cannot use force for physical punishment under any circumstances. Teachers may be permitted to use reasonable force toward a child in appropriate circumstances, such as to remove a child from a classroom.

Three, physical punishment cannot be used on children younger than 2 years old or older than 12 years old.

Four, physical punishment cannot be used on a child in anger or in retaliation for something a child did.

Five, objects, such as belts or rulers, must never be used on a child, and a child must never be hit or slapped on the face or head.

Six, any use of force on a child cannot be degrading, inhumane or result in harm or the prospect of harm.

Seven, physical punishment cannot be used on a child who is incapable of learning from the situation because of a disability or some other factor.

Eight, the seriousness of the child’s misbehaviour is not relevant to deciding whether the force used was reasonable. The force used must be minor, no matter what the child did.

The court ruled — the majority of the court, I should say — that the use of force must be sober and reasoned, address actual behaviour and be intended to restrain, control or express symbolic disapproval. It also must not be intended to harm or degrade the child.

I don’t think anything is served by couching this decision in inflammatory language, language such as, “While it is no longer legal to assault wives or employees — as the 1892 law allowed — it is still permissible in our Criminal Code to assault children.”

Let me be clear: Parents who go beyond the bounds outlined by the Supreme Court of Canada, those who abuse their children, deserve to be punished.

Raising children is a challenging endeavour filled with trial and error. Parents want what is best for their children. They want them to behave and be productive members of society, to understand the rules and nuances of getting along with others. Parenting is simply the act and attitude of unconditional love. Under those conditions, using corrective force that is minor in nature is a tool some parents will employ. I would suggest that all parents at one time or another consider spanking their children. Most don’t, but punishing those parents who do and sending them to jail for this will do irreparably more harm to the family.

As I mentioned earlier, section 43 also goes beyond parents to teachers as well, and the court ruled on that also. While it ruled out corporal punishment as permissible in schools, it said teachers may use force to remove children from classrooms or to secure compliance with instructions.

Honourable senators, the unfortunate fact of our society today is that you are more likely to see students assaulting teachers than the other way around. Don’t get me wrong; neither is something that you want to see or something that should be allowed in schools, but the problem of violence in schools today is a general one, and in many ways, in certain influential and vocal segments of our society, the response to it is the complete reverse of what you might expect.

Police, for instance — the usual ones you would call in response to a violent attack — are now considered to be the perpetrators of violence, sometimes by their mere presence. I’m thinking of an incident recently in an Ottawa school where a child, on Bring Your Parent to School Day, was not allowed to bring his father wearing a police uniform. Police, in general, are often not welcome in the schools nor by school boards.

Honourable senators, as I said, we are dealing with a very complex issue. It is reflective of that, that the court was split in 2004. Justice Ian Binnie argued in his dissenting opinion that the section 43 defence should not be available to teachers. Justice Louise Arbour, in her opinion, argued that section 43 was “unconstitutionally vague,” a violation of children’s security and “not in accordance with the . . . principle of fundamental justice.”

Justice Marie Deschamps argued that section 43 violates section 15 of the Charter because it:

 . . . encourages a view of children as less worthy of protection and respect for their bodily integrity based on outdated notions of their inferior personhood.

It was her view that a law that permits more than only very minor applications of force unjustifiably impairs the rights of children.

Honourable senators, while the majority ruled on the court, as it is intended in our democracy, it would be an oversight in our debates here not to recognize that there were very different and strongly argued opinions as well.

We have that here in the Senate, which we saw in the exchange between Senator Kutcher and Senator Plett. As you will have guessed from my earlier remarks, while I respect the views of Senator Kutcher and all those who have spoken to this bill since — mostly in favour — I have concerns about the bill for reasons I have articulated.

Nonetheless, I support this bill being referred to committee for further study and further debate.

Thank you.

(On motion of Senator Plett, debate adjourned.)

On the Order:

Resuming debate on the motion of the Honourable Senator Martin, seconded by the Honourable Senator Marshall, for the second reading of Bill C-241, An Act to amend the Income Tax Act (deduction of travel expenses for tradespersons).

Hon Senators: Agreed.

(Notice of motion withdrawn.)

(At 5:56 p.m., the Senate was continued until Tuesday, June 13, 2023, at 2 p.m.)

Hon. Salma Ataullahjan, pursuant to notice of June 6, 2023, moved:

That the Standing Senate Committee on Human Rights be permitted, notwithstanding usual practices, to deposit with the Clerk of the Senate, no later than September 30, 2023, interim reports on issues relating to human rights generally, if the Senate is not then sitting, and that the reports be deemed to have been tabled in the Senate.

Hon. Marty Klyne: Honourable senators, pursuant to rule 5-10(2), I withdraw this notice of motion.

Hon. Donald Neil Plett (Leader of the Opposition): Honourable senators, I note that this item is at day 15, and I’m not ready to speak to it at this time. I’m kind of exhausted. Therefore, with leave of the Senate and notwithstanding rule 4-15(3), I move the adjournment of the debate for the balance of my time.

The Hon. the Speaker: Is leave granted, honourable senators?

The Hon. the Speaker: Is leave granted, honourable senators?