Climate Aligned Finance Act Reintroduced in the Senate
Two weeks ago, the Climate Aligned Finance Act (CAFA) was reintroduced into the Senate by Senator Rosa Galvez. Through a number of legislative proposals, CAFA seeks to limit both the risks that financial institutions pose to the climate, and the risks climate change poses to Canada’s financial system.
CAFA was first introduced in March of 2022, where it was endorsed by 89 investment firms, academic organizations, and environmental groups, and heralded as one of the most ambitious pieces of climate legislation currently underway. At the Toronto Climate Observatory, we looked to CAFA to help inform the recommendations of our inaugural Bay St. Climate Report (linked below). CAFA has been similarly upheld by environmental organizations and sustainable finance experts, including Environmental Defence and Shift Action for Pension Wealth and Planet Health, as an amalgamation of leading thought on climate-aligned legislation in Canada.
This new version of CAFA includes most of the important sections from its first iteration, while changing some pieces that were holding it up under its first reading. In its current version, CAFA includes actions such as:
📌 Mandating financial institutions to develop emissions reductions targets that align with climate commitments.
✅ Requiring financial institutions create climate transition plans detailing their plans to achieve these targets.
➡️ Directing federal regulators to create guidelines on transition risks and exposures for financial institutions.
🔎 Enforcing the disclosure of conflicts of interest, with regards to the fossil fuel industry, by any individual who sits on the board of a financial institution.
Our work at the Toronto Climate Observatory has shown that voluntary commitments from financial institutions are insufficient, further positioning this bill as a critical step in Canada’s climate transition. As it moves forward through the legislative process, CAFA remains a benchmark piece of legislation in Canada, providing the structural rules and accountability necessary to align our financial system with climate action.
For more information, read this summary from Environmental Defence Canada: https://environmentaldefence.ca/2025/11/03/long-live-the-climate-aligned-finance-act/
Watch this interview with Senator Rosa Galvez: https://www.youtube.com/watch?v=mQpD1W5Yujo
Learn how this relates to the 2025 Federal Budget from Shift Action: https://www.shiftaction.ca/news/2025/11/05/climate-finance-experts-react-budget-2025