Julie Segal
Senior Program Manager, Climate Finance,
Environmental Defence Canada
Today’s investments shape tomorrow’s economy, and globally, we are underinvesting in a safe planet by about $6 trillion USD. People say money makes the world go round, but the way money currently flows is contributing to making our planet volatile through climate change.
Climate finance refers to investments that either reduce greenhouse gas emissions (like renewable energy investments) or help protect against climate damages. This type of investment has grown significantly over the past ten years. However, especially in Canada, current investment levels are far below what’s needed to prevent the most severe climate change impacts.
For example, our largest five banks invest about forty cents in clean energy solutions for every dollar they invest in polluting energy like oil, gas, or coal. Scientists and energy economists say the balance needs to change so that four dollars are invested into clean energy for every dollar invested in fossil fuels.
The flip is achievable, and banks from many other countries, including from the United States, already put more money into clean energy than Canadian banks do. Related to the lower levels of climate finance in Canada, many corporations are likewise left underprepared for the climate transition. Half of the largest companies have not launched even one climate-related action.
Since the government of Canada committed to cut emissions nearly in half by 2030, it is important for the financial sector to allocate money in that direction. The finance and insurance sector in Canada accounts for a larger portion of the economy than mining and oil and gas extraction. While extractive industries represent about 5 per cent of our gross domestic product (GDP), the finance and insurance sector represents about 7 per cent of it. With that significant weight, decarbonizing our economy can only be successful if the financial sector moves in that direction, too.
Falling behind on climate finance has created significant risks for the Canadian economy and communities. In 2024, climate-related insurance claims exceeded $8 billion CAD, which is more than double the record-breaking losses experienced in the previous two years. The 2024 losses were mostly caused by just four extreme weather events: wildfires in Calgary and Jasper, and floods in Quebec and Ontario. From those extreme events, there were even higher losses experienced by households or businesses that weren’t covered by insurance. Damages from climate change clearly harm our economy. Moving too slowly on investing in the energy transition can also cost investors in other ways, like by holding on too long to losing industries or through missed opportunities. Canadian investors could lose $100 billion CAD by the middle of the next decade if we continue to delay investing in the transition.
Succeeding on climate action, and avoiding economic losses, demands more climate finance.
Modernizing financial policy in Canada to better address climate change is important. Work has begun on this, like through the Climate-Aligned Finance Act, which would give financial regulators better tools to help financial institutions prepare for climate change. It includes foundational policies like requiring climate-related transition plans, where business strategy has to take into account matters related to climate change.
Other global partners like the United Kingdom and Australia already have climate transition plan policies as a way to get their financial systems on the right track. Now, Canada needs these policies to advance climate and economic resilience.
To learn more about the work being done at Environmental Defence,
visit climatefinancecanada.ca.
