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Expert Panel on Sustainable Finance warns International investors are leaving Canada

Sustainable finance is focused on harnessing the financial sector to assist and enable companies and allocate capital in a more climate aware manner to mitigate and adapt to climate change. It grew from making investments in green technology to financing companies and communities transitioning to low-carbon environments.  The goal is to build resilience to the widespread impacts of climate change and prevent further exacerbation. The industry has grown significantly with international regulators beginning to add climate change to their risk assessments. Unfortunately, according to the federally appointed nonpartisan Expert Panel on Sustainable Finance, the system as a whole has been far too slow to act, resulting in a significant risk that Canadian companies and communities fall behind in making necessary adjustments transitioning to low-carbon economies.  The lack of focus on climate change exacerbates risks and overlooks opportunities available to Canadian companies.

Canadian companies slow to transition to low-emissions operations are finding it hard to compete internationally.

The panel calls for “a concrete vision and capital plan for Canada’s course toward a competitive low-emissions, climate-smart economy; offering Canadian businesses, financial firms and individuals the ability to connect with that vision through investment and savings; and ensuring that government and industry join forces to pursue opportunity and manage risk.”  

The Expert Panel on Sustainable Finance created a roadmap for the public and private sectors by prioritizing a number of accountable steps needed to make Canada more likely to experience a smooth and successful transition to lower carbon. This involves decoupling economic growth from growth in emissions, protecting our savings and investments, and insuring that our infrastructure can handle the changes ahead – this will position Canada well in the global arena  

The panel is made up of Royal Bank of Canada board director Andy Chisholm; former Bank of Canada deputy governor Tiff Macklem (Dean of Rotman School of Management); Kim Thomassin, executive vice-president at the Caisse de Dépôt et Placement du Québec; and Barbara Zvan, chief risk and strategy officer at the Ontario Teachers’ Pension Plan.

Some highlights from the report include:  The need for a long-term vision for a climate-smart economy; the need to include climate related risk into regulation of Canada’s financial system; the need for broader awareness and education in the retail investment space; and the need to accelerate the development of a building retrofit market. 

The report is thorough and offers 15 recommendations with detailed strategy and suggestions on who might lead each initiative. Below is a brief synopsis of the report, written around three “pillars” to building a stronger, sustainable vision for the country. 

Pillar I: Ways to turn climate change into an opportunity for all Canadians.  

  1. Map Canada’s long-term path to a low-emissions, climate-smart economy, sector by sector, with an associated capital plan. 
  2. Provide Canadians the opportunity and incentive to connect their savings to climate change objectives.
  3. Establish a standing Canadian Sustainable Finance Action Council (SFAC) with a cross-departmental secretariat, to advise and assist the federal government in implementing the Panel’s recommendations. 

Pillar II:  Building blocks for mainstream engagement on sustainable finance in Canada.

  1. Establish the Canadian Centre for Climate Information and Analytics (C3IA) as an authoritative source of climate information and decision analysis. 
  2. Define and pursue a Canadian approach to financial disclosure of climate related issues utilizing the recommendations of the Task Force on Climate Related Financial Disclosures (TCFD). 
  3. Clarify the scope of fiduciary duty in the context of climate change. 
  4. Promote a knowledgeable financial support ecosystem – a shortage of professional training, education and collaborative exploration on topics related to sustainable finance is causing a critical proficiency gap.
  5. Embed climate-related risk into monitoring, regulation and supervision of Canada’s financial system. 

Pillar III: Developing and scaling market structures and financial products that could offer transformative economic benefit to Canada in building a low-emissions, climate-smart future.

  1. Expand Canada’s green fixed income market, and set a global standard for transition-oriented financing. 
  2. Promote sustainable investment as ‘business as usual’ within Canada’s asset management community.
  3.  Define Canada’s clean technology market advantage and financing strategy.
  4. Support Canada’s Oil and Natural Gas industry in building a low-emissions, globally competitive future.
  5. Accelerate the development of a vibrant private building retrofit market.
  6. Align Canada’s infrastructure strategy with its long-term sustainable growth objectives and leverage private capital in its delivery.
  7. Engage institutional investors in the financing of Canada’s electricity grid of the future

(For the full detailed report click here)

The expert panel believes that “Canada has the financial expertise, technological capacity and resource wealth to emerge as a “global leader in climate-smart economic growth.” But they point out that it is more than just an opportunity, it is an imperative. Canada is competing with international companies in a race to supply the world with low-cost clean energy solutions and low-emissions natural resources. Through innovation and investment this can be a Canadian standard that we are all proud of. It is environmentally sensitive, socially responsible, and low cost – but in order to achieve this we must allocate capital and investments accordingly.  Investors are looking to greener shores and without an accelerated push, Canada will become less and less competitive on the world stage.