Bank of Canada Disclosure of Climate-Related Risks 2024

Message from Governor Tiff Macklem

I’m very pleased to present the Bank of Canada’s climate risk disclosure report. This report is an annual Bank publication that outlines the climate risks we face as Canada’s central bank. It lays out our approach to building climate risks into our assessment and outlook for the macroeconomy. And it puts forth our plans to manage the Bank’s own climate risks as an institution.

Sometimes I get asked why the Bank is concerned with climate change. After all, we don’t set climate policy, and we don’t have a formal climate change mandate. But climate change is happening, and it’s having economic and financial consequences. To fulfill our price and financial stability mandates, we need to understand how risks around climate change could affect our economy and financial system.

One set of risks relates to the extent and frequency of the physical impacts from climate change. We only have to remember the severe weather events of the summer of 2024: catastrophic wildfires in Jasper, flooding in Toronto and parts of Quebec and a devastating hailstorm in Calgary. Severe weather and wildfires are becoming more frequent, and they are costly to homeowners, businesses and our economy. In fact, the Insurance Bureau of Canada ranked the summer of 2024 as the most destructive season in Canadian history for insured losses due to severe weather. On a broader scale, severe weather events damage infrastructure, can lead to delays in trade, and cause tragic loss of life for those in their path. We are analyzing the connections between physical risks and their economic impacts and incorporating these insights into our economic assessments.

Another set of risks relates to the disruptions that will emerge as the world transitions to a greener economy and net-zero emissions. We will keep a close eye on the transition and how it plays out across the country to track the real and potential impacts on the economy and inflation. This will allow us to assess how the transition and climate risks could affect our ability to do our main job: maintaining low, stable and predictable inflation for Canadians.

To conclude, this report outlines how the Bank is considering the impact of climate change on the Canadian economy and the measures we’re taking to reduce the environmental footprint of our own operations. We will continue to communicate our progress as an important part of our commitment to openness and transparency.

About this report

The Bank of Canada prepares this climate disclosure report annually in accordance with the Government of Canada’s direction that Crown corporations:

• align with the federal Greening Government Strategy and its set of commitments, including the commitment to achieve net-zero emissions by 2050 and enhance climate resilience1
• publish information on their commitments, including their greenhouse gas emissions footprint in their significant areas of operations
• adopt the Task Force on Climate-related Financial Disclosures (TCFD) standards as part of their corporate reporting

This report outlines the Bank’s commitments, plans and progress to reduce its own environmental footprint. It also provides an overview of the Bank’s approach to climate-related risks and how those risks are considered, analyzed and managed within the Bank’s core operations.

Using the framework of the four categories outlined in the TCFD reporting standards—governance, strategy, risk management, and metrics and targets—this report presents information across three key operational aspects of the Bank:

• physical operations
• balance sheet (financial operations)
• the Bank of Canada Pension Plan

In addition, the report outlines the Bank’s work from a central bank perspective to analyze climate-related risks more broadly and to better understand the impacts of climate change on inflation and the economy.

This is the Bank’s third annual report on climate-related risks. The reported information is as of December 31, 2024, unless otherwise noted.

Climate change and the Bank of Canada

The financial and economic consequences of climate change are far-reaching. Both severe weather events and efforts to move to a low-carbon economy affect many aspects of Canadian society, including jobs, trade and inflation as well as individuals’ fundamental health and safety.

Elected governments are responsible for policies designed to smooth the path to net-zero carbon emissions and to mitigate the physical risks of climate change. However, the Bank must assess the impacts on the economy from the transition to net-zero emissions and from the physical impacts of climate change. By understanding and incorporating these impacts into its economic analysis, the Bank can fulfill its mandate of promoting the economic and financial welfare of Canada.

Impact of climate change on the economy and inflation

Climate change affects economic activity and inflation through:

• more frequent and severe natural disasters (e.g., wildfires, floods) or long-term shifts in climate patterns
• changes in government policies and regulations, technology and markets as a country decarbonizes

Natural disasters can affect the economy through their impact on labour markets, inflation and output. Natural disasters slow growth in real wages and reduce the number of hours worked.2 They could also cause significant swings in inflation.3 Additionally, disasters can have positive and negative effects on growth in gross domestic product (GDP) depending on the fiscal capacity of the affected province. Federal disaster assistance helps mitigate the negative effects on growth in a province’s GDP when the provincial government has low fiscal capacity.4

The Bank has refined its modelling tools to better capture complex economic relationships and how those relationships are changing because of the physical risks of climate change and the transition to a low-carbon economy. This work is important for the Bank’s understanding of the possible impacts on inflation and output. 

As well, the Bank has continued to incorporate the implications of climate-related impacts into its economic outlook. For example, Bank staff incorporated the influence of climate policies on total factor productivity and business investment in the 2024 assessment of potential output in Canada.5

Finally, the Bank included a set of special questions in two of its surveys—the Business Leaders’ Pulse and the Canadian Survey of Consumer Expectations—to better understand how Canadian businesses and consumers experience climate change (Box 1). While firms on average reported negative climate-related transition and physical risks to their businesses, a few also highlighted economic opportunities. Consumers reported facing higher costs due to climate policy and the physical impacts of climate change. To further understand the economic implications of physical risks, the Bank is also expanding its modelling toolkit to include the influence of natural disasters.

Governance

The Bank has integrated climate change considerations into its governance, decision-making processes and risk management practices to effectively tackle climate-related risks:8

• The Board of Directors provides general oversight of the management and administration of the Bank with respect to strategic planning, financial and accounting matters, risk management, human resources and other internal policies. This includes overseeing the Bank’s approach to achieving net-zero emissions by 2050 and the management and reporting of climate risks, as well as considering climate change in the management of the Bank of Canada Pension Plan (Pension Plan).
• Executive Council is responsible for developing and executing the Bank’s Strategic Plan and annual Operating Plan and allocating and managing resources to achieve the goals in these plans. This includes planning and delivering on climate-related strategies, targets and disclosure requirements and effectively managing the Bank’s exposure to climate risks. Two members are specifically responsible for these climate-related activities:
  • the Chief Operating Officer for operations-related initiatives
  • the Executive Director of Policy for the economic and financial implications
• The Risk Oversight Committee informs and oversees assessments of, and mitigation strategies related to environmental and climate-related risks.
• The Project Review Committee reviews and approves initiatives that require significant investment to ensure the effective use of Bank funds. This includes all significant climate-related initiatives.

While the Bank administers the Pension Plan, the Board of Directors is ultimately responsible for the Pension Trust Fund (Pension Fund), including overseeing the Pension Fund’s sustainability practices.9

Evidence shows that sustainability factors, including climate change, can have a material impact on risk and return. This means that considering such factors is consistent with the Bank’s fiduciary duties, which require making investment decisions in the best interests of Pension Plan members.

The Bank ensures that external asset managers incorporate sustainability factors—including risks and opportunities related to climate change—into investment decision-making processes to improve risk-adjusted returns over the long term. The Pension Fund Investment Committee evaluates and incorporates sustainability-specific risks and opportunities, including those related to climate change, into its long-term investment strategy. The committee also evaluates managers, before selecting them, based on whether they integrate climate risks and opportunities into constructing a portfolio and selecting securities.

Strategy

The Bank’s climate strategy considers how the Bank can analyze and tackle climate-related risks through:

• its role as a central bank
• its internal operations

Through these two lenses, the Bank has outlined strategic priorities to guide its efforts (Figure 1). These priorities align with the Bank’s overall strategic direction, as outlined in its three-year strategic plan.10

Figure 1: Climate-related strategic priorities

The following sections further outline the Bank’s strategy for its physical operations, balance sheet (financial operations) and Pension Plan.

Physical operations

The Bank is aligned with the federal government’s Greening Government Strategy that aims to:

• achieve net-zero emissions by 2050
• enhance climate resilience by 2035
• reduce environmental impacts beyond carbon emissions to include the impacts on biodiversity and from waste and water use

The targets set by the Bank are aligned with the federal government’s targets and are listed in the Metrics and targets section.

To achieve its sustainability targets, the Bank has set out plans for its own operations, shown in Figure 2.

Figure 2: The Bank's climate plans and approaches for its physical operations

* For more, see Bank of Canada, Bank of Canada Disclosure of Climate-Related Risks 2022 (April 2023).

Balance sheet

The Bank measures and reports climate-related financial risks from its market operations. This reporting aligns with similar disclosures by market participants. However, unlike other market participants, the Bank cannot easily mitigate these risks because its balance sheet reflects the climate risks facing the country. As well, the size and composition of the Bank’s balance sheet is determined by its mandates.

Pension Plan

The Pension Fund’s strategy continues to revolve around its external investment managers. Better disclosure and data availability is strengthening the Pension Fund’s assessment of existing and prospective managers. Interactions with external managers on specific climate-related topics will help to better integrate climate risks and opportunities into the Pension Fund’s investment strategy.

Risk management

The management and oversight of climate risk and resilience have been integrated into the Bank’s core operations. The Bank’s Enterprise Risk Management policy sets out the overall intent and expectations for effective risk management.11

Physical operations

Due to the critical nature of its operations, the Bank has invested significantly in its resilience by decentralizing critical operations and creating backups where possible so that it can continue to serve Canadians during a disruptive event. For bank notes specifically, the Bank has several mitigation measures in place to guard against supply chain disruptions, demand shocks and climate risks.12 As well, the Bank continually assesses and strengthens the resilience and availability of key infrastructure.

The Bank identified potential extreme weather hazards and assessed the risks to its physical infrastructure. Our analysis concluded that current resilience measures adequately mitigate these risks. The Bank will perform these risk assessments regularly to ensure its physical operations remain resilient as the risks associated with weather events and the environment evolve.

Balance sheet

The Bank’s balance sheet differs from that of other financial institutions because of its unique role as Canada’s central bank. The Bank’s assets and liabilities ensure its independence in conducting monetary policy and fostering a stable financial system; they are not held to generate profit.

The Bank analyzes how the structure and valuation of its balance sheet would respond under various scenarios.

Overview of assets

The Bank of Canada’s assets—like those of other central banks—include a significant portion of sovereign securities. In normal times, the size of the portfolio is driven by the size and composition of the Bank’s liabilities. Therefore, in conducting monetary policy and fostering a stable financial system, the Bank has limited opportunities to diversify its assets and mitigate its balance sheet exposure to climate-related financial risks.

Scope of assets

As at December 31, 2024, Government of Canada (GoC) securities made up 89.4% of the Bank’s assets that are in scope for this disclosure (Table 1).13 The remaining assets are:

• investments:
  • provincial bonds, which are about 3.0% of assets
  • corporate bonds, which are less than 0.1% of assets
• loans and advances:
  • securities purchased under resale agreements, which are about 7.5% of assets

Provincial and corporate bonds were acquired through asset purchase programs as part of the Bank’s response to the COVID-19 pandemic. Because these programs have been discontinued, the Bank’s exposure to these portfolios’ transition risks is small and will continue to decline.14

Securities purchased under resale agreements include the Bank’s overnight repo facility, which offers secured overnight lending to Canadian primary dealers. These operations help reinforce the target for the overnight rate and support the effective implementation of monetary policy.

Note: Figures may not sum to their respective totals due to rounding.

Pension Plan

Risk assessment

Assessments of asset managers are both quantitative and qualitative. The evaluations measure the degree to which an asset manager integrates material sustainability factors—including climate change—into the investment decision-making process.

Scope of assets

The Pension Fund assets that are disclosed for climate-related risk totaled $2.3 billion as at December 31, 2024 (Table 2). The Pension Fund’s remaining private holdings ($92 million) are excluded from this report due to limited data for those assets.

Note: Figures may not sum to their respective totals due to rounding.

Metrics and targets

Physical operations

Figure 3 presents the Bank’s sustainability targets, which are aligned with those of the Government of Canada.

Figure 3: The Bank of Canada’s sustainability targets

The Bank has developed metrics and procedures to measure and report on progress toward these targets, as outlined in the sections below. More information and context on the data presented are available in the data and methodology appendix.

Greenhouse gas emissions

To monitor progress toward its target to achieve net-zero emissions by 2050, the Bank measures greenhouse gas emissions across all three scopes of emissions.15 The Bank currently measures and reports:

• all scope 1 and scope 2 emissions
• scope 3 emissions in its bank note supply chain

The sections below outline these emissions and the Bank’s progress toward its emission reduction targets.

Scope 1 and scope 2 emissions

The Bank’s efforts to reduce scope 1 and 2 emissions have focused on reducing emissions from its buildings. The Bank has implemented several energy reduction measures, such as improvements to its heating, ventilating and air conditioning system and upgrades to energy-efficient lighting. It also continues to purchase renewable energy certificates (RECs) to support the consumption and sourcing of renewable electricity. As a result, the Bank has reduced its building emissions by over 60% from 2018 levels, exceeding its 40% reduction target by 2025 from 2018 levels (Chart 1).

The Bank continues to anticipate achieving its 2030 target of reducing building emissions by 80% based on original reduction plans and the continued purchase of RECs. At the same time, the Bank is optimizing its efforts by reviewing planned improvements and expected efficiencies, as well as actively exploring additional actions to ensure the target remains feasible.

Canada’s 2025 National Inventory Report updated the factors for Ontario’s grid emissions. This update impacted the Bank’s reporting of its scope 1 and scope 2 emissions for location-based emissions data through to 2022. However, this is marginal when factoring in RECs purchased and the resulting market-based emissions data. More details are available in the data and methodology appendix.

In 2024, the Bank continued to reduce its overall inventory of greenhouse gas emissions (location-based) by an additional 13% (Chart 2).

Scope 3 emissions

The Bank currently measures and reports scope 3 emissions in its bank note supply chain (see the Focus on bank notes section).

Renewable electricity

Since 2022, the Bank has met its target to achieve 100% renewable electricity for its owned buildings. The Bank continues to purchase renewable energy certificates (RECs) in line with the Government of Canada's commitment to 100% renewable electricity.

Water use

The Bank measures water use at its facilities to monitor progress toward the target of near-zero water use in Bank facilities by 2035 (Chart 3).

The Bank is currently developing options to further reduce water usage.

Waste diversion

The Bank conducted waste audits at all four Bank-owned facilities in 2023 and 2024 to gather information on the quantities and composition of non-hazardous operational waste and plastic waste generated at each facility. The results of these audits will help the Bank measure and report waste diversion rates and identify opportunities to increase diversion.

Focus on bank notes

The Bank’s responsibility to produce and distribute bank notes that Canadians use contributes to the Bank’s environmental footprint. The Bank has quantified the environmental effects of its bank note supply chain—specifically, GHG emissions, water consumption and waste generation—for the 2018, 2022 and 2023 reporting years (Chart 4, Chart 5 and Chart 6).16 This work included quantifying the upstream production and transportation of raw materials as well as the printing, processing and wholesale distribution of bank notes from the Montréal and Toronto Agency Operations Centres.17 For more details on the metrics for bank notes see the data and methodology appendix.

GHG emissions, waste and water associated with bank note production will vary with the number of new notes produced each year.

In addition to fewer bank notes being produced, lower emissions in 2023 resulted from:

• increased yield in bank note production, resulting in less waste
• reduced transportation resulting from optimized inventory management practices
• improved grid decarbonization particularly at upstream sites that produce raw materials

Balance sheet

The Bank uses the weighted average carbon intensity (WACI) to assess and measure its exposure to climate risks from its balance sheet (Chart 7).

Previously, the Bank also published scores that measured its exposure to the physical risks of climate change through the balance sheet. But these indicators do not easily translate into potential financial losses because they are not expressed as dollars. Rather, they are expressed as whole numbers (between 0 and 100, from low to high risk). Thus, the Bank decided to stop publishing physical risk scores. The Bank continues to consider ways to estimate and report physical risks to its balance sheet.

For more information and context on the data, see the data and methodology appendix.

Weighted average carbon intensity

Recommended by the TCFD, the WACI is a backward-looking metric that measures a portfolio’s exposure to carbon-intensive entities.18 Portfolios with assets from relatively more carbon-intensive sectors are determined to be exposed to greater climate risks.

When calculating the WACI for corporate entities GHG emissions are presented relative to million dollars in sales. For sovereign and sub-sovereign exposures, emissions are presented relative to GDP.

Investments

Government of Canada securities

The WACI of GoC securities decreased by 2% between 2023 and 2024 because GDP increased by a larger percentage than GHG emissions.19 The WACI of GoC securities, 292 tCO₂e/$million, remains significantly higher than the G7 average of 179 tCO₂e/$million, primarily due to the relatively large size of Canada’s carbon-intensive oil and gas industry.20

The WACI of GoC securities is expected to decrease based on the Government of Canada’s plan to reduce emissions by 2030 and achieve net-zero emissions by 2050.21

Provincial bonds

The WACI of provincial bonds decreased by 3% between 2023 and 2024 because GDP increased by a larger percentage than GHG emissions. 22^, 23 If the composition of provincial holdings does not change, the WACI of this portfolio is expected to decrease as the Canadian economy decarbonizes.

Corporate bonds

The WACI of corporate bonds increased by 113% between 2023 and 2024 as securities from entities that are less carbon intensive matured in 2024.24

Loans and advances

Securities purchased under resale agreements

Securities purchased under resale agreements are done through the Bank’s overnight repo facility. In 2024, the WACI of borrowers using this facility stood at 2 tCO₂e/$million. The Bank’s balance sheet had no outstanding securities purchased under resale agreements as at the end of 2023.

Pension Plan

The International Sustainability Standards Board stipulates that commercial banks, insurers and asset managers should report their financed emissions in climate-related disclosures. With respect to the Bank’s Pension Fund, financed emissions are its scope 3 emissions, including greenhouse gas emissions primarily related to its investment portfolios. They serve as a substitute for a carbon footprint of the Pension Fund’s investment portfolios.

Between 2023 and 2024, the WACI of assets in the Pension Fund in scope for climate-related risk disclosure (Chart 8) changed as follows:

• GoC securities decreased by 2%.25
• The provincial bonds portfolio decreased by 4% due to slightly lower weights for bonds from Alberta and Saskatchewan.26
• The corporate bonds portfolio decreased by 26% due to compositional changes in the portfolios of the Pension Plan’s external managers as well as decreases in the carbon intensities of individual issuers.
• Public equities decreased by 14%, mostly due to reduced WACI metrics for some of the Pension Plan’s largest holdings in the energy and industrial
• The WACI for the private debt portfolio, disclosed for the first time, is estimated at 105 tCO₂e per $million. This reflects diversified exposures to sectors that include sectors that are less carbon intensive.

For the Fund’s real estate and infrastructure assets, the Bank reports absolute emissions as well as intensity metrics based on common measures used by the Fund’s investment managers. The asset management industry typically uses the WACI metric for public portfolios and intensity metrics for private asset classes.

Table 3 provides climate metrics for the Pension Fund’s real estate equity assets held through private funds, focusing on core real estate properties in Canada, the United States and Europe. The GHG intensity metrics for the real estate portfolio decreased from 2023 partly due to the impact of capital expenditures programs initiated by the Pension Fund’s external managers to decarbonize the assets.

* The Pension Fund’s share of greenhouse gas emissions is based on its percentage of ownership in each underlying fund.
† Weighted average intensities are based on the Pension Fund’s investment in each underlying fund.
‡ Emissions substantially decreased because one of the external managers changed its reporting methodology.
Note: GHG is greenhouse gas. tCO₂e is tonnes of carbon dioxide equivalent; kgCO₂e is kilograms of carbon dioxide equivalent.

Table 4 provides climate metrics for assets in the Pension Fund’s infrastructure equity portfolio that are held through private funds focusing on core infrastructure assets in developed countries. The emissions intensity for the Pension Fund’s infrastructure portfolio decreased between 2023 and 2024 due to additional investments in sectors that are less carbon intensive as well as specific measures to decarbonize some assets, such as airports.

* The Pension Fund’s share of greenhouse gas emissions is based on its percentage of ownership in each underlying fund.
† Weighted average intensities are based on the Pension Fund’s investment in each underlying fund.
Note: tCO₂e is tonnes of carbon dioxide equivalent.

For additional information and context, see the appendix on data and methodology.

Appendix

Physical operations

Greenhouse gas emissions

Table A-1 outlines the annual amount of greenhouse gas emissions from Bank-owned buildings.

Note: tCO2e is tonnes of carbon dioxide equivalent. Emissions from buildings include the following sources: natural gas, diesel generators, fugitive emissions from refrigerants, electricity, steam and chilled water. Scope 2 emissions for electricity are calculated and reported using the market-based approach (refer to the GHG Protocol Scope 2 Guidance), whereby procurement of renewable electricity using renewable electricity certificates is taken into account. The Bank’s historical emissions have been updated in line with the Canada’s 2025 National Inventory Report. Details about this change can be found after Table A-2.

Table A-2 outlines the Bank’s inventory of greenhouse gas emissions, including emissions from its vehicle fleet and the production and distribution of bank notes.

Note: Greenhouse gas emissions are calculated in tonnes of carbon dioxide equivalent (tCO₂e).

The following are notes and caveats for the data on greenhouse gas emissions presented in Table A-2:

• These results conform with the standards set by the World Business Council for Sustainable Development and the World Resources Institute.27
• The underlying data and methodologies for calculating and reporting emissions continue to evolve and improve, and the Bank will adapt its emissions reporting methodology accordingly to ensure transparency, consistency, accuracy and alignment with best practices.
• The Bank’s current scope 1 and 2 emissions footprint captures emissions from owned buildings only and does not include leased buildings, which account for 4% of the Bank’s overall footprint of buildings.
• The World Resources Institute’s GHG Protocol Scope 2 Guidance has two methods for accounting for scope 2 emissions: location-based and market-based. The location-based method accounts for emissions from the electricity grid, while the market-based method considers the impact of the purchase of energy attributes on emissions. This distinction in methods is only applicable to scope 2 emissions.28
• The Bank has purchased renewable energy certificates since 2022 to achieve 100% renewable electricity at the four Bank-owned buildings located in Ontario and Quebec, in line with the Government of Canada's commitment to 100% renewable electricity. This resulted in a reduction in the Bank’s scope 2 market-based emissions.
• Variations in the Bank’s annual energy use can be attributed to fluctuations in seasonal weather and equipment replacement and recalibration.
• The Bank’s historical emissions have been updated in the 2024 report to reflect the following recent updates to underlying data and methodologies:
  • The updated emission factors from Canada’s 2025 National Inventory Report have been used, which included significant revisions to the historical electricity generation emission factors.29 This resulted in a significant increase in the Bank’s reported location-based scope 2 emissions and a marginal increase when using the market-based method.
  • The Intergovernmental Panel on Climate Change’s Fifth Assessment Report has been used instead of the Fourth Assessment Report, resulting in a minor decrease to the Bank’s total scope 1 emissions.
• The most recent inventory results for the bank note supply chain have a one-year delay due to data availability at the time of preparing the report. This delay is caused by the time required to collect data from suppliers.
• For bank notes, the 2018 and 2022 results have been slightly adjusted due to rounding.
• Individual figures may not sum to their respective totals due to rounding.

Renewable electricity procurement

Table A-3 outlines the annual renewable electricity procured by the Bank to support its renewable electricity procurement target.

Water use

Table A-4 outlines the annual water use at Bank facilities.

Note: m³ is cubic metres.

Bank notes

Table A-5 outlines the GHG emissions, water use and waste generated from producing and distributing bank notes.

Note: tCO₂e is tonnes of carbon dioxide equivalent; m³ is cubic metres. Figures may not sum to their respective totals due to rounding.

The following are notes for the data presented in Table A-5:

• The quantity of bank notes produced and distributed, which varies annually based on end-user demand, influences the total GHG emissions metric.
• Work to modernize the Agency Operations Centres in 2022 contributed to the 9% increase in waste during the period assessed.
• The historical emissions have been updated. Details about this change can be found after Table A-2.

Balance sheet and Pension Plan

Quality of data for the Bank of Canada’s balance sheet and Pension Fund portfolios

The Bank estimates some reported emissions based on the results of modelling from vendors that supply data for this report.

For 2024, the balance sheet assets in scope for climate-related risk disclosure do not include any modelled emissions. The Pension Fund’s assets in scope include 17% of modelled emissions for equity and 11% for corporate bond portfolios respectively (Table A-6).

As well, parent mapping was conducted for assets on the balance sheet. The mapping increased total coverage by 93% for securities purchased under resale agreements and 67% for corporate bonds. Parent mapping of the Pension Fund’s corporate bond portfolio increased total coverage by 11%.

* Based on notional value.
† Emissions data provided by the Pension Fund’s external managers have been aggregated for private assets.
Note: Figures may not sum to their respective totals due to rounding.

Endnotes