Tammy Nemeth: Dereliction of Duty or Conflict of Interest? Outsourcing Legislation Writing in Canada

[Great news, everyone! Dr. Tammy Nemeth, who, along with Irina Slav and Stu Turley, joins me on the Gang of 4 panel for the Energy Realities Podcast each week, is now writing at Substack. Below is an excerpt from her first post at her new site, The Nemeth Report Substack. I highly encourage everyone here to subscribe.]

Canadians might reasonably ask why a senator is having an outside group develop legislation and why a major foundation with its own ideological interests is funding the development of a government bill?

According to a report by the Montreal Economic Institute, since the Liberal Party was elected in 2015 the number of federal civil servants has increased by 37.9%, more than at any other time in the past 30 years. Yet, despite increasing the civil service, and what seems to be in contrast to previous practice, the Liberal government has taken to sometimes outsourcing the development of legislative bills to outside entities.

For example, Senate Bill S-243, The Climate Aligned Finance Act, introduced by Independent Senator Rosa Galvez, was put together in collaboration with the Concordia Sustainability Ecosystem with funding assistance from the Trottier Family Foundation.

In fact, the Trottier Family Foundation (TFF) recently boasted about this funding to Philanthropy for Climate:

"In more low-key interventions, TFF has also provided technical and convening capacity for Canadian experts and constituents to propose climate-aligned finance legislation."

In the space of eight years, since the Liberals were elected, the TFF has gone from funding groups "to provide alternatives to policymakers", to funding the writing of the legislation. Here is the rationale:

"TFF states that philanthropy can be bolder and more innovative in its interventions because it is not directly accountable to voters or shareholders. That is why the Foundation’s climate advocacy priority focuses on national politics and is rooted in systemic change."

“Not accountable to voters or shareholders”; “systemic change” – let that sink in. Why is the Government of Canada allowing a well-funded unaccountable foundation to pay for the development of legislation that will fundamentally transform the Canadian financial system and with it usher in a "systemic change" that could very well cripple the Canadian economy?

How well funded is the Trottier Family Foundation? Looking at the Blumbergs Charity Data website that brings together CRA filings of charities and non-profits, provides some insight into the TFF's finances. Since the Liberals were elected in 2015 there has been a considerable increase in gifts for which the foundation issued a tax receipt – over $607 million with an astonishing $480 million in 2022 alone. For context, between 2007 and 2015 the amount of gifts totalled around $49.3 million.

It is unclear from this accounting if these amounts are from the sale of assets or from individuals or other entities: the CRA data is inconclusive. If anyone knows how to access more granular data, please reach out. The amounts, however, are staggering, especially the $480 million in 2022, and call into question the wielding of this money for apparent influence.

What’s in it for the Trottier Family Foundation? The Trottier Foundation says, given that

“it is a significant asset owner, and an influential Canadian environmental funder, the Foundation has a responsibility to exercise strong leadership in the financial sector and among our peers to reshape the logic of capital markets.”

What does that mean? What is in S-243, The Climate Aligned Finance Act, that could “reshape the logic of capital markets”?

1. The bill applies to all corporations incorporated under the federal Canada Business Corporations Act and all federally regulated financial institutions including federal financial crown corporations, all domestic and foreign registered banks, trust and loan companies, credit unions, pension funds, and insurance providers.

2. The bill enshrines federal government interference in the fiduciary duty of banks, insurers, pension funds and other investors by mandating the superseding of climate-related financial risk over conventional financial risks. [Part 4, para 2]

3. The intent, as conveyed in “The Enactment of the Act”, is to force or mandate behaviour change and investment away from GHG emission intensive activities and into favoured alternative activities. [Part 1, para 2]

4. Climate commitments include “avoiding new fossil fuel supply infrastructure and exploring for new fossil fuel reserves and instead planning for a fossil-free future,” and participating in the “preservation, enhancement and restoration of natural carbon sinks, including forests and peatland.” (4)

5. The requirements of being “Climate Aligned” are for entities to not financially assist in any way activities that are “inconsistent with climate commitments.” [4(1)(b)]

6. The bill mandates transition planning and reporting, as well as the accounting and disclosure of all scope 1, 2, and 3 emissions with detailed plans and targets of emission reductions including linkage to executive compensation, governance, and strategy. The use of offsets are severely restricted.

7. Under “Capital Adequacy” the bill mandates unrealistic and punitive capital-risk weights and surcharges for financing fossil fuel projects and other emissions generating entities based on absolute emissions: Capital-risk weight of 1,250% for debt exposure to new fossil fuel projects and infrastructure; 150% or more for any loan or financing of existing fossil fuel activity. [Part 3, para 9 (1)(a)(i-ii)] There is also a capital surcharge depending on how much an institution facilitates emissions in general, which has implications for agriculture and livestock production. [Part 3, para 9 (1)(b)(i-iii] In other words, a financial institution is actively discouraged from financially facilitating or providing any assistance of financial value that supports fossil fuel activity in any way or any business, like agriculture, livestock production, or manufacturing, that has significant emissions along the entire supply chain, if it is not in alignment with Canada’s climate commitments.

8. Federal financial institutions must report on the emissions that are facilitated or funded by it. They must, among other things, indicate how they plan to “incentivize decommissioning emissions-intensive activities”, finance zero-emissions energy and infrastructure, and “exclude entities that are unable or unwilling to align with climate commitments.” [Part 2, Plans and Targets, FRFIs, 6 (c)(i)-(ii), p.14]

9. The bill mandates under “Achievement” and “Appointments, Conflicts of Interest and Duties” an ideological purity test for board members and directors of banks and other federally regulated financial institutions including pension funds: At least one person on the board must have “climate experience” (this is the equivalent of the Soviet “political officer” appointed to every board) and exclude any person from being a director or on a board if one was an employee or lobbyist or owns or has owned shares in a fossil fuel company or a company “offside the commitments”; directors or board members will be removed or disqualified from serving if they do not act in full alignment with the bill’s objectives. [Part 4, paras 13-16]

In the context of Senate Bill S-243 the reshaping of Canadian capital markets means forcing federally regulated financial institutions and corporations to not only alter their boards to exclude individuals who may have been associated with oil and gas firms, but also to penalize the financing of Canadian oil and gas companies and projects by requiring a 1250% risk charge.

Read the rest at this link.

That is all.