Appearance at the Standing Committee on Finance Study on green finance; green investment; transition finance; and transparency, standards and taxonomy

Opening Remarks: Superintendent, Peter Routledge

Date: April 20, 2023

Good morning, Mister Chair and members of the Committee.

Thank you for the opportunity to speak with you about OSFI’s approach to climate change. I am joined by my colleague Stéphane Tardif, Managing Director of OSFI’s Climate Risk Hub.

Climate change is a financial system risk because it will alter the cash flows generated by some financial assets and businesses. For example, stronger and more frequent natural disasters are changing the economic fundamentals in some insurance segments.

OSFI’s purpose is to contribute public confidence in the Canadian financial system. To fulfill our purpose, we must ensure Canadian financial institutions manage the risks that could impact their safety and soundness. Among these risks are the physical and transition risks associated with climate change.

We have made tremendous progress towards this objective over the past 18 months.

We created a new Climate Risk Hub. We’ve grown this team to 30 people, all dedicated to leading OSFI’s response to climate-related risks.

On March 7, we released our first ever Guideline B-15 on Climate Risk Management, to accelerate Canadian financial institutions’ readiness to manage climate-related risks.

When developing this guideline, we met with representatives across all sectors, including members of the public in all regions, to better understand the impacts of our regulations on their businesses. We received over 4,300 submissions during the most extensive consultative process in OSFI’s history.

Our consultations produced a balanced, sensible regulatory approach that will help Canada’s financial system navigate and adapt to the uncertainties and risks presented by climate change. Our supervision of climate risk management is not one-size fits all. It enables the institutions we regulate to adapt their approach to climate risk management in a manner that supports both competitive and prudential aspirations.

That said, we acknowledge that we have a bias towards early action in adapting to climate change. One might ask why. Our climate scenario analysis indicates that a financial system that starts climate change adaption early and progresses more gradually on this path is a sounder financial system. Thus, our approach stems from the underlying purpose assigned to OSFI by Parliament.

Thank you. We are happy to answer your questions.