This senator wants Canadian banks to fight climate change

Rosa Galvez has taken on a Herculean task: force Canadian financial institutions to prioritize the fight against climate change. 

More than two years ago, the independent senator from Quebec proposed legislation that would force banks and pension funds to steer away from emissions-intensive investments, such as the oil and gas sector. 

It would also increase regulatory oversight to determine whether the climate plans laid out by institutions are credible, and limit the presence of fossil fuel executives on the their boards.

The bill, known as the Climate-Aligned Finance Act, has moved slowly. The Senate banking committee only began hearing from witnesses late last year, and had another round of testimony earlier this month.

In a recent interview, Galvez was clear she's under no illusion the bill is likely to become law any time soon. But at the very least, she wants it to generate a debate about the role of the finance sector in climate change.

"I'm not asking for the moon," said Galvez. "I don't want the bill to be passed just like that, or to be rejected just like that."

Before being appointed to the Senate in 2016, Galvez, who is originally from Peru, was an engineer and professor at Université Laval à Québec for over 25 years. 

She researched the impact of the oil spill in the Lac Megantic rail disaster and worked as a consultant on how to protect the Great Lakes and the St. Lawrence River.

As a senator, Galvez said her focus turned to banks and pension funds, which she views as a driving force of the transition toward renewable energy.

"You come to the conclusion that the part that is missing is the finance sector, which actually should be the first sector in order to start obtaining results," said Galvez.

The legislation would give the Office of the Superintendent of Financial Institutions, which regulates the financial sector, greater power to oversee the climate plans of financial institutions.

It would also require fossil fuel projects and other high-emissions sectors to be considered high risk, effectively requiring more capital to obtain a loan — and potentially a higher interest rate once one is secured.

There is logic in a high-risk designation because companies whose value relies on pulling oil, gas or coal from the ground may find their assets "stranded" in a low-carbon economy, said Olaf Weber, a sustainable finance professor at York University's Schulich School of Business.

"As a bank you have a five year loan to fossil fuel company, are the risks higher than in other industries? Probably not," he said.