Evidence of meeting #37 for Foreign Affairs and International Development in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was development.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

  • Fraser Reilly-King  Policy Analyst, Aid & International Co-operation, Canadian Council for International Co-operation
  • Toby A.A. Heaps  Chief Executive Officer and Co-Founder, Corporate Knights Inc.
  • Paul Romer  Professor, Stern School of Business, New York University, As an Individual

4 p.m.

Chief Executive Officer and Co-Founder, Corporate Knights Inc.

Toby A.A. Heaps

What's going on within the international bond markets right now is really interesting. Just to step back, if we look at global capital markets and how they've changed in the last decade, a decade ago equity markets—stocks—were twice as big by volume as bonds. Now the international bond market is valued at $95 trillion, and it's roughly twice the size of the global equity market. There has been a shift in terms of the importance of capital flows, and bond markets are the primary vehicle.

To answer your question on how we might be able to get involved, most countries have development plans, whether it's Mexico or the Congo. The Congo, for instance, has plans to enhance its energy generation from the Congo River, which has approximately one-twelfth of the world's hydro energy capacity right there on one river. It's a massive river. It could power a substantial portion of Africa, even on its growth trajectory. They need substantial capital to properly build the hydro generators and the transmission lines to get the energy to the domestic market and to the export markets. They don't have the capital right now to do it themselves.

There are two choices available to them. One is to make a deal with the Chinese. The Chinese will say that they'll build it in exchange for mineral concessions. Then they box us out, and they get the mineral concessions on advantageous terms.

Another way is emerging. The Asian Development Bank has done this in many cases, and the World Bank has done about 20 of these deals. For example, a country could say that they need to raise $2 billion to finance all the costs of a project, and they'll make it a sovereign issue. But they have junk status in terms of their credit rating, so they'll make an arrangement whereby Canada will backstop it. If they don't pay the money back, we could be on the hook for part of it, so in return, SNC-Lavalin and Brookfield and Boralex and other large Canadian firms get front-of-the-line access to build it.

This is how the world works. I'm not saying that I'm the biggest fan of the tied-aid approach, but nations, if they're going to put their credit on the line, have to have some benefit.

In terms of the financial risk to our country, because we have a really solid financial standing in the international community and some might worry about what this might do to it, the way EDC does these things when they backstop a loan is to reinsure it out. They sell off all the risk, and it doesn't come back to bite us. You can ramp it up slowly, see how it goes, and make sure that the Canadian companies are getting the business. The deal flow in this area is the fastest-growing area of deal flow in the world on a per cent basis.

4:05 p.m.

Conservative

The Chair Dean Allison

Mr. Heaps, I'm going to have to cut you off. That's all the time we have. It's very interesting. Maybe someone else will pick it up.

Ms. Murray, welcome back to committee. I'll turn it over to you, for seven minutes.

4:05 p.m.

Liberal

Joyce Murray Vancouver Quadra, BC

Thank you very much. It's great to be here. Thank you to the presenters for very interesting information and two very different but complementary perspectives on the issue.

I don't disagree with Ms. Brown that people around the table want to help these countries get to where they're on their own feet and are able to drive their own development. I would say that cutting CIDA by $377 million by 2015 isn't the primary way we do that, mind you.

In talking about the partnerships with the private sector, one concern—I would imagine—is whether that money would go toward creating corporate social responsibility or other partnerships in the countries they're investing in, which they would or should be doing anyway.

How would one ensure additionality?

4:05 p.m.

Policy Analyst, Aid & International Co-operation, Canadian Council for International Co-operation

Fraser Reilly-King

Maybe I'll come back to some of Ms. Brown's comments and what Toby has said.

I just want to pick up on this issue of tied aid and Export Development Canada. What Export Development Canada provides isn't tied aid. Export Development Canada provides loans, guarantees, etc. It has nothing to do with aid, which is grants to low-income countries.

I think there is potentially some role for EDC to play in helping to create domestic bond markets, in backstopping, and in encouraging further investments in sustainable energy or renewable energy projects, etc. That's what I was talking about. That's a market and a gap that needs filling.

How can CIDA go about doing this? I'll take the first part of your question.

4:05 p.m.

Liberal

Joyce Murray Vancouver Quadra, BC

I have two other questions, so please be as brief as possible.

4:05 p.m.

Policy Analyst, Aid & International Co-operation, Canadian Council for International Co-operation

Fraser Reilly-King

A key message that I also wanted to bring is about balance. Not only has CIDA cut its funding, but it's also shifted increasingly away from providing support to governments, bilateral funding, and civil society organizations, and increasingly towards multilaterals. We need support for multilateral initiatives like the ones Ms. Brown talked about, but I think it's a question of balance. When you're trying to get governments to stand on their own feet, taking away money from governments to try to do that isn't helpful. You want to be focusing on things like domestic resource mobilization. The IMF, itself, has said that Mali, for example, should increase the royalties that it should get from natural resource revenue.

In terms of CSR, I think CSR is an obligation of private companies. As I said, for the most part it comes from within their own corporate interests and it's guided by their corporate interests. Where CIDA maybe has a role to play is where it can tap into the core business model of a private-sector organization and partner it with other organizations. But when it's not core, it's not going to work.

4:10 p.m.

Liberal

Joyce Murray Vancouver Quadra, BC

What you just said about supporting countries is what I just heard in a speech by former Governor General Michaëlle Jean about Haiti. I visited Haiti with a multi-party delegation and saw just how much money is being poured in and how little long-term resiliency and self-responsibility is really occurring. Her key comment is that this aid has to be partnering directly with the company, walking side by side down this pathway with the country, with the national government, and not about private sector investments as the leading point.

I'd like to ask Mr. Heaps, when you're talking about financing alternative energy—under the United Nations Framework Convention on Climate Change one of the six or seven envelopes or chapters was exactly about that—how do we finance these countries in their alternative and clean energy and efficiency, so they can reduce greenhouse gas emissions and address that upfront cost of new types of energy, especially when fossil fuels are so heavily subsidized in so many countries, including Canada?

Are you suggesting that because Canada has pulled out of the Kyoto Protocol this could be something that we're trying to go it alone through CIDA as a model for helping finance this infrastructure and clean energy? If that's what you're suggesting, can you comment on whether that's effective compared with working on this in partnership with the international community through a protocol like the Kyoto Protocol?

4:10 p.m.

Chief Executive Officer and Co-Founder, Corporate Knights Inc.

Toby A.A. Heaps

Sure. There are many avenues. This is consistent with working through initiatives within the international community. What I was speaking about with the credit enhancement is a little bit different from the Kyoto Protocol clean development mechanism in that this isn't about Canada donating and paying the whole shot, it's just about us lending our balance sheet so that countries can get a lower cost of capital, and in return for that, we could get some of the business.

Where it also gets interesting is that there are some products out there now with things called “carbon kickers”. The way it works is we could do the deal with, say, Mexico, which has a $5 billion infrastructure plan to reduce carbon that involves subways and trains, and we could do a deal where we would help to backstop their bond issue for $5 billion to do it, and our companies would get some of the contracts and then we would also get some of the carbon credits that might accrue, because it's been approved under the UNFCCC framework. So it could be a kicker.

Presently, financial markets don't put any value on carbon credits, so it would have to be a kicker. I'm not suggesting that we should do this as a substitute for engaging internationally, but it's entirely consistent and complementary to that kind of approach.

4:10 p.m.

Liberal

Joyce Murray Vancouver Quadra, BC

Do I have time still?

4:10 p.m.

Conservative

The Chair Dean Allison

You have 20 seconds. Do you have a comment?

4:10 p.m.

Liberal

Joyce Murray Vancouver Quadra, BC

Okay.

In this total accounting approach, an important approach, what are we doing in Canada? If we are saying we should be helping a total accounting approach in another country, do we not need to start actually developing and using that in Canada first?

4:10 p.m.

Conservative

The Chair Dean Allison

Mr. Heaps, just a quick response.

4:10 p.m.

Chief Executive Officer and Co-Founder, Corporate Knights Inc.

Toby A.A. Heaps

We have the best data set in the world on natural capital. There's a gentleman named Rob Smith at Stats Canada who's been tracking all these data series. It's not presently integrated into any system of national accounts, and there are some initiatives trying to get that done, but there's a massive potential for us to lead.

4:10 p.m.

Conservative

The Chair Dean Allison

Thank you very much.

That completes our first round.

I think we have time for a second round, so why don't we start with Mr. Dechert for five minutes.

May 28th, 2012 / 4:10 p.m.

Conservative

Bob Dechert Mississauga—Erindale, ON

Thank you, Mr. Chair.

Gentlemen, thank you for being here today and sharing this information with us.

My first question is for Mr. Reilly-King. You are probably aware that coming out of the G-8 conference a little over a week ago at Camp David, President Obama launched the new alliance for food security and nutrition. As part of that initiative many multinational companies have been pledging their contributions. As such, I understand the pledges currently stand at about $3 billion.

Some of these companies have committed to more than handouts, and they're providing their expertise in various areas. For example, Vodafone intends to establish the connected farmer alliance in Tanzania, Mozambique, and Kenya, to increase the productivity, incomes, and resilience of over 500,000 smallholder farmers by strengthening the communications between the farmers and the agribusinesses they deal with—I guess to sell their produce—thereby decreasing their cost of doing business.

Can you comment on that initiative and how you feel about it?