2023 Reports 1 to 5 of the Commissioner of the Environment and Sustainable Development to the Parliament of CanadaMore work is needed to fully incorporate climate-related risks in financial supervision

Ottawa, 20 April 2023—A report released today by Commissioner of the Environment and Sustainable Development Jerry V. DeMarco concludes that, although the Office of the Superintendent of Financial Institutions Canada (OSFI) is headed in the right direction by incorporating climate-related financial risks into its management systems and frameworks, more work is needed, and full implementation is still years away.

Climate change poses significant risks to the safety and soundness of Canada’s financial system by affecting the operations of institutions and their balance sheets—these are climate-related financial risks. As a key supervisor of Canada’s federally regulated financial institutions and pension plans, OSFI has recently made meaningful progress toward integrating these risks in its supervisory framework for these institutions. However, the audit found that plans were overdue, and only early steps had been taken, making it unclear how exactly OSFI would ultimately incorporate these risks into its framework and what its expectations of financial institutions would be.

Of note, OSFI did not view its role as including the advancement of Canada’s broader climate goals even though it has been recently brought under the Federal Sustainable Development Act. This presents an opportunity for OSFI to consider how it could adapt its role to further Canada’s whole‑of‑government approach to climate change and sustainable development.

“It is encouraging that OSFI and the international community of financial supervisors have recognized that climate change poses risks to financial institutions and the broader financial system and that they are moving forward in addressing this issue,” said Mr. DeMarco. “However, action is overdue and is now urgent.”

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The 2023 Reports of the Commissioner of the Environment and Sustainable Development, Report 4—Supervision of Climate-Related Financial Risks—Office of the Superintendent of Financial Institutions Canada, is available on the Office of the Auditor General of Canada website.

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