It’s been a decade since Mark Carney, now Canada’s prime minister but then governor of the Bank of England, delivered his influential speech on the so-called "tragedy of the horizons." He warned that financial institutions were failing to account for long-term climate risks, urging them to look beyond the typical one-to-three-year horizon and adopt a ten-year—or longer—view to truly grapple with the threats posed by climate change. Fast forward to October 2, 2025, and the warnings seem more urgent than ever. According to a new report from Finance Watch, banks still haven’t internalized those risks, and their exposure to fossil fuels remains staggering: over USD$1.1 trillion on balance sheets in 2023, ballooning to USD$1.6 trillion when off-balance sheet exposures are included.
Julia Symon, head of research and advocacy at Finance Watch, doesn’t mince words about the situation. "We clearly see that we need to go from soft informational measures to more prescriptive policy measures… We need to price in that risk across the board via regulation, because financial markets are incapable of themselves organizing and recognizing that risk," she told reporters. The numbers are eye-popping: the Asia Pacific region leads the pack with USD$1.079 trillion in fossil fuel exposures, trailed by Europe (including the EU, UK, and Switzerland) at USD$293 billion, and the US at USD$269 billion. Meanwhile, fossil fuel financing itself soared to USD$869 billion in 2024. The risks, both physical and transitional, are only growing as banks continue to back carbon-intensive industries.
This inertia comes at a time when Canada faces another strategic crossroads—this one involving its defense sector. As Prime Minister Carney’s government moves to revitalize the country’s military and industrial base, a chorus of experts is urging a shift in mindset: from simply procuring defense equipment on the open market to actively producing it at home. The distinction may sound academic, but it’s anything but, given the country’s dwindling arms industry and heavy reliance on foreign suppliers—especially the United States, where 75 cents of every Canadian defense dollar is currently spent.
Wendy Gilmour, who recently served as NATO’s assistant secretary general for defense investment, sees the issue starkly. "Yes, we want a military, but we have a deterrence mindset that says we’re going to do just enough to prevent our having to actually use it, which is a great goal, but perhaps not realistic in today’s environment," she told CBC. She points to legislative tools like the Defence Production Act—on the books since 1969 but rarely used—as potential levers in an emergency. Yet, she remains skeptical that the government is truly embracing the kind of defense production mindset that’s taken root in parts of Europe, such as Poland and Denmark, where rebuilding domestic capability is now a priority.
The stakes are high. As Jordan Miller of the Canadian Global Affairs Institute noted in a recent report, Canada must prioritize key industrial sectors for investment and reduce its dependency on foreign suppliers. "This isn’t about car factories shutting and producing nothing but armored vehicles and tanks," Miller explained. Instead, it’s about the federal government sending clear signals to defense companies about what it’s willing to buy, and incentivizing stockpiles of parts and munitions for emergencies. The current system, which relies on slow-moving procurement and competitive bids, often means it takes a decade—or longer—to deliver new military systems. "The idea that we can just buy and that's the end of it, I think is quite short-sighted," Miller told CBC.
At present, the only major defense production initiative in Canada is the National Shipbuilding Strategy, which oversees the construction of Arctic offshore and patrol ships and the new River-class destroyers. But there are signs of change. Last summer, Carney signed a joint strategic defense and security partnership with the European Union, opening doors for Canadian companies to participate in the massive $1.25 trillion ReArm Europe program. Meanwhile, bidders for upcoming big-ticket purchases—like submarines and fighter jets—are pledging to help rebuild Canada’s defense production capacity, including constructing submarine maintenance facilities on Canadian soil. SAAB Canada, for instance, has offered to share intellectual property rights to help the country develop sovereign capabilities. "For all programs, the IP is key and particularly in the current government's intent with regards to creating sovereign capability in Canada, having a part of that IP or all of that IP will be important," said Simon Carroll, president of SAAB Canada, in a recent interview with Radio Canada.
Back in the financial sector, the call for a systemic climate risk buffer is growing louder. Symon argues that such a buffer could help prevent a future financial crisis triggered by banks’ fossil fuel exposures. "The objective of the climate buffer would be to prevent the further buildup of risk right into the future," she said. While the European Central Bank has introduced a climate score for monetary policy operations, no national banks in the EU have yet implemented a climate risk buffer, despite having the authority to do so. Symon believes broader adoption is both possible and necessary. "The ECB has already introduced a climate score for their monetary policy operations, which means that they've already made the step to saying this is the risk and it can be done," she noted. Yet, information gaps persist—especially in the US, where banks don’t fully disclose their exposures, making it even harder to get a clear picture of systemic risk.
Delaying the transition to a green economy, Symon warns, only increases the likelihood of a disorderly and damaging shift, as the risks from physical climate change continue to mount. "We know that the longer we delay the transition, the more disorder [there] is going to be and also in the meantime, the systemic risk due to physical climate change is also growing," she told Finance Watch. The message is clear: whether it’s climate risk or national defense, Canada—and indeed, much of the world—faces a reckoning with the consequences of short-term thinking and underinvestment in critical capabilities.
As both the financial and defense sectors stand at pivotal junctures, the choices made in the coming years will shape not only economic stability but also national security and sovereignty. The need for bold, forward-looking action—whether through regulatory buffers or a reinvigorated industrial base—has never felt more pressing.