It’s Tuesday, March 14, and Canada’s big banks face new climate rules.

A girl holds a sign reading Stop Financing my Doom as people participate in a protest against the Royal Bank of Canadas investment in pipelines in Montreal, Quebec, Canada.

The Canadian Office of the Superintendent of Financial Institutions, or OSFI — an independent federal agency that regulates banks, insurance companies, and private pension funds — released new climate change guidelines for the country’s big banks last week. The mandatory rules, which will be phased in over the next two years, aim to hold financial institutions and their management officials accountable for managing “climate-related risks” as the world transitions away from fossil fuels.

Under the new rules, federally regulated financial institutions in Canada will be required to develop and implement a “climate transition plan” to manage mounting legal and physical risks from climate change, such as lawsuits against banks’ fossil fuel clients and property loss from increasingly devastating storms. They will also have to account for and disclose greenhouse gas emissions associated with their loans, bonds, and mortgages — a significant change for the country’s largest banks.

Canada’s announcement comes as regulators in other parts of the world consider more robust climate requirements for their financial institutions. In the United States, the Federal Reserve Board, which helps oversee the country’s monetary policy, has been considering rules that would force major banks to weigh climate-related financial risks in their decision-making. New rules implemented this year by the European Banking Authority require banks in the European Union to report emissions associated with the products they sell — like loans to fossil fuel companies.

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Alan Andrews, climate program director for the Canadian nonprofit Ecojustice, hailed Canada’s new rules but said they don’t go far enough to address financial institutions’ contributions to climate change.

“This requires banks to consider the risks that they face under a 1.5-degree aligned scenario,” he told me, referring to the international target of limiting global warming to 1.5 degrees Celsius (2.7 degrees Fahrenheit). “What it doesn’t do is actually require them to align” with that scenario. Alignment with the target would mean ceasing investments in all new fossil fuel infrastructure, according to a landmark report published in 2021 by the International Energy Agency. Andrews urged the OSFI to not only require banks to publish their climate plans, but to reject those that include financing for new oil, gas, and coal projects.

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