Thank you very much. It's a pleasure to address the committee.

As presented, I'm with the UN. I'm with the part of the UN that works with the finance sector to develop norms for sustainable finance and responsible investment. Most relevant to this session is that we convene several of the net-zero alliances, including the net-zero banking alliance and the net-zero asset owner alliance, which many Canadian financial institutions have signed on to as a means of setting credible, science-based net-zero targets.

As well documented by the Basel committee on banking supervision and many others, climate change poses risks to the financial system. Just last month, the Basel committee formally incorporated climate risks into its core principles, which set out the overarching standards for regulations to keep the global financial system stable. It's increasingly acknowledged that misalignment of capital flows with the global climate objectives may result in short-, medium- and long-term financial risks for financial institutions individually, as well as affect financial stability overall.

The financial industry is largely aware of these risks. In fact, voluntary industry action has been a key driver of sustainable finance around the world, including in Canada, and that is reflected in many financial institutions integrating sustainability considerations into their operations. For example, they identify sustainability as a key priority within their business strategy and reflect this in their governance and compensation policies. They establish systems to analyze climate risks and the impact of their financing. They're big on making sustainability disclosures, and many are setting net-zero targets on a voluntary basis.

However, the pace of progress is uneven. Therefore, in recent years, regulatory initiatives have increased substantially across jurisdictions. The UN Environment Programme has documented over 750 sustainable and green finance regulations established globally since the Paris Agreement was signed. These aim at, for example, increasing transparency of sustainability information, addressing greenwashing, strengthening climate-related risk management practices and starting to mandate transition planning. These developments are an important prerequisite for intensified net-zero alignment across the financial system and the entire economy.

Now, financial regulation can build on voluntary industry commitments to incentivize financing for Canada's economic transition towards a sound and sustainable economy. For instance, OSFI's new B-15 climate risk management guidance is an important step in this direction. Reporting is needed to enhance the transparency, credibility and effectiveness of net-zero commitments across the economy and, ultimately, to ensure the integrity of the transition. The development of international disclosure standards, including through the ISSB—the international sustainability standards board—should be advanced so as to ensure optimal allocation of capital to the net-zero economy. Work by the Canadian sustainability standards board to develop reporting standards aligned to the ISSB is very welcome in this context. Also, there is potential for a Canadian taxonomy to be used as a forward-looking tool to accelerate the net-zero transition.

Over 40 countries today have developed, or are in the process of developing, sustainability taxonomies. Europe already has two years of company reporting whereby companies must disclose the share of their revenues, their capital expenditures and their operating expenditures that are aligned with the EU taxonomy criteria. Results show that many sectors in the EU are investing heavily in the transition now with capex alignments—capital expenditures—consistently higher than revenues.

Way out front in this are utilities whose revenues are already 40% sustainability-aligned, but they're investing almost two-thirds, 63%, of their capex in sustainability-aligned assets. Real estate is another example. It is investing 27% of its capex in sustainability-aligned building stock.

It's important to highlight that finance cannot in itself fill a policy void. Therefore, financial regulation can only truly incentivize transition finance if mirrored by a whole-of-government approach to meaningful action and commitments in the real economy. In addition, voluntary and regulatory action must work hand in hand, giving financial institutions the necessary room to innovate and, at the same time, signalling towards stronger market uptake, learning and ever-increasing ambition and innovation.

Finally, the potential for regulatory fragmentation is serious, and the Canadian economy risks getting left behind if regulatory developments do not keep up with what's happening today in other regions. Without interoperable regulatory frameworks, sustainable finance can become disjointed and primarily compliance-driven, which is a missed opportunity for financial institutions to play their part in enabling the transition. Banks and investors need globally consistent regulatory standards and definitions in order to focus on the transition challenges ahead.

As described, banks and other financial institutions have gone a long way to commit to and implement voluntary commitments. As far as possible—