Sustainable Finance and Climate Risk

Key Takeaways for the Financial Sector from Canada’s 2030 Emissions Reductions Plan

Alyson Slater, Senior Director, Sustainable Finance, GRI
Yibo Bu, Climate Research Analyst, GRI
Nan Ge, Research Associate, GRI


ABOUT THIS REPORT:

Attempting to avoid the worst physical impacts of climate change, many of Canada’s  largest financial institutions have set, or are considering, an ambitious target of net-zero financed carbon emissions by 2050, with significant cuts in financed emissions realized by 2030. The urgency of the low-carbon transition was underscored in the latest report by the United Nations Intergovernmental Panel on Climate Change 2022 which assessed mitigation progress and national pledges. The findings are concerning – holding warming to 1.5 degrees Celsius above pre-industrial levels, as agreed internationally, is nearly out of reach and is only achievable if global carbon emissions peak in 2025.

The tough task for financial institutions, in the immediate term, is assessing the risks and opportunities facing clients and issuers as they face the transition to a low carbon future. The Federal Government’s 2030 Emissions Reductions Plan (2030 Plan) provides a road map and predictable policy environment to inform investment and lending decisions along the path to net zero.

The 2030 Plan is the first issued under the Canadian Net-Zero Emissions  accountability Act passed in 2021. A series of additional progress reports, targets and plans will follow, bringing more specificity to how the government will reach its target of net-zero emissions by 2050. The logic behind the 2030 Plan is clear – it outlines Canada’s highest greenhouse gas (GHG) emitting sectors (Figure 1) and the emissions reduction targets each need to achieve by 2030. The 2030 Plan came with $9 billion in funding and a slate of policy initiatives for implementing and incentivizing action. The 2022 Federal Budget followed on the heels of the 2030 Plan and outlined an additional C$12 billion across four areas: reducing pollution, clean
and resilient energy sector, protecting the environment and building the net-zero economy.

A clear sector-by-sector breakdown and prioritization provides clarity to industry, financiers and policymakers for the coming decade as the extent of the  transformation facing these sectors is better understood. The overall target is to cut emissions from 2005 to 2030 by 40 percent - just eight years from now. This is the cumulation of specific targets across Canada’s eight highest emissions sectors (Figure 2).

Download and read the full report Key Takeaways for the Financial Sector from Canada’s 2030 Emissions Reduction Plan