Toronto financial institutions must do more to advance the energy transition
There is no doubt Canadians are absorbed by the many challenges related to the trade war, the attack on sovereignty and bringing the Stanley Cup back home. While each of these issues demand our attention, Canadians concerned about the American desires for territorial aggrandizement should not place climate-change action on the back burner. Despite our neighbours from the south abandoning the fight against climate change and proceeding to amplify the wicked problem, it is perhaps the most opportune time for Canadians to ensure our financial institutions are aligned to meet net-zero targets as soon as possible.
Toronto and Montreal have historically shared the financial centre of Canada via two distinct approaches. While Toronto takes a more traditional path of hosting the headquarters of many of the country's banks, insurers and pension funds, Montreal is the leader in making Canada's financial system more environmentally and socially sustainable.
A 2023 report from the University of Toronto found that in 2022, Bay Street-based financial institutions were responsible for financing 1.44 billion tonnes of carbon dioxide equivalent. As the study explains, if Bay Street were a country, it would be equivalent to the fifth-largest polluter in the world, behind only China, the US, Russia and Japan.
This report was inspired by a 2019 report by Greenpeace and the World Wildlife Fund, which showed that London comparatively financed just over half of those financed by Toronto institutions, despite London having a larger financial sector in terms of dollars at the time. Despite this, until very recently, the City of Toronto has not made significant strides to address the climate pollution of its financial sector.
By contrast, Montreal has been a clear frontrunner on shifting the financial sector toward sustainability and reducing climate pollution. Last month, Montreal displayed its leadership on sustainable finance at its annual Sustainable Finance Summit (Sommet de la finance durable). This event drew experts from across Canada to discuss ambitious leadership initiatives and investments toward a more sustainable financial system. One such initiative is Quebec's Sustainable Finance Roadmap, which aims to modernize the province's financial sector for social considerations and climate action.
Furthermore, Quebec-based Desjardins and Caisse de dépôt et placement du Québec (CDPQ) are two of the most forward-looking financial institutions on climate change to be found globally: Desjardins leads Canada in its ratio of sustainable energy financing to fossil fuels, while CDPQ has nearly completed an exit from coal and oil investments.
Other cities globally are taking their competitive edge even further. London ranks first in the Global Green Finance Index (GGFI), while other cities have made significant strides forward. Notably, Singapore's 2019 green finance action plan helped it climb from number 23 to second in the Global Green Finance Index in just five years. Auckland has seen notable success in issuing its own green bonds to finance green public infrastructure, and in 2021, three of New York City's pension funds fully divested from fossil fuels, collectively divesting $4 billion in public securities.
Canada just ensure our financial institutions are aligned to meet net-zero targets as soon as possible, write Stephen Kibsey and Robert Soden
Toronto can fix its climate pollution problem. In late March 2025, the Toronto city council made a decisive step toward advancing as a leader in sustainable finance by adopting a new motion (2025.MM28.37) on the matter. This would establish a sustainable finance hub in Toronto, require the city to commission a report on best practices from peer cities in partnering with the financial sector on climate mitigation, and require the city to encourage federal and provincial regulators to set ambitious climate-aligned financial regulations.
Overall, Canada is well-positioned to attract green investment and emerge as a leading North American destination for climate-aligned capital and financial innovation. A strong, predictable and rules-based environment is vital to attracting global investment in the energy transition.
Looking forward, Toronto should advance the recommendations from the sustainable finance motion and help advance policy that would enable the financial sector to decarbonize its financial portfolios. Montreal should continue to provide an example and collaborate with Toronto to achieve successful climate-aligned finance. Canada must use the momentum it provides to build a stable regulatory environment and work to become North America's sustainable finance leader.
With lifelong sustainable finance expert Mark Carney now serving as Canada's prime minister, we have both the expertise and the political opportunity to lead on stronger rules for climate-aligned finance. The cities of Toronto and Montreal can, and should, play an important role in encouraging Carney to show credibility on climate-related financial rules, which is the issue he built his career on before joining Canadian politics. As other countries are reversing action on climate change, the time to continue building an economic edge in financing the energy transition is now.
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