Good afternoon. Thank you very much for inviting me to participate in the session today.
My name is Andy Chisholm. I was a member of the expert panel with Barb and others.
For 30 years, my career was as an investment banker in New York and London. More recently, however, I have been involved in the sustainable finance arena in various ways. Among other activities, I am an adviser to ArcTern Ventures, one of Canada's leading clean-tech venture capital companies, and I am an investor myself in early-stage private companies that are involved in the clean-tech space. I am also on the board of RBC, and advisory boards of sustainability initiatives at two leading business schools.
My comments or observations today follow from the original work on the panel and represent high-level reflections that are coming, as Barb said, five years later.
My first observation is that the main tenets of the 2019 report still hold true. Specifically, if Canada wishes to succeed in its emissions reduction commitments in a timely manner, at the same time as taking advantage of the economic opportunities that arise from innovation in the face of climate change, it's essential that finance flows in an aligned manner. Furthermore, the amount of investment required to adjust energy systems, materials and industrial processes and to commercialize new technologies is well beyond the reach of the public sector, and in any case ideally would be the purview of private sector actors.
Hence, there is a need to create the conditions for the private sector to act in the context of our market-based economy. These conditions involve implementing new rules, regulations and standards, a number of which Barb has just referred to, in parallel with investing in infrastructure, supporting innovation and timely commercial adjustment, and easing implementation challenges.
My second observation is that approximately five years have passed since we published our report. That period represents something close to half of the available time to the year 2030, which is, as you know, widely used internationally as an important waypoint for measuring progress on emissions reduction.
While there has been significant progress made in sustainable finance on a number of fronts, and investment flows have grown significantly in very recent times, we're still falling well short on delivering emissions reductions. In part, this is because such capital flows and corporate investment are still meaningfully less than commentators suggest is necessary to reach the stated objectives.
Meanwhile, the important foundations for success in sustainable finance, which were outlined in the 2019 report, are still to be finalized in a Canadian context. Most notably, they include adjustments to corporate disclosure guidelines and the taxonomy that Barb referred to, with one aspect of the taxonomy, transition alignment, being something of particular interest to the Canadian economy, which is relatively carbon-intense.
Why are these things so important? Markets operate more efficiently with better, more observable information; consistency and clarity facilitate scale in financial activity; and in the face of uncertainty, many actors develop a go-slow bias, waiting for information to become more clear. It's for this reason that we must make more decisions more quickly, even if they are imperfect at the start.
Success in achieving an orderly path towards a decarbonization of the economy requires sufficient continuous progress; otherwise, the gap widens and available time compresses, thereby increasing the likelihood of a disorderly transition and/or undershooting on the delivery of the original goals and commitments. Within both society and government, it's evident that we do not have a singular point of view. Therefore, a degree of pragmatism will be required to get to decisions faster in the interest of gaining ground and not losing more time. Such decisions should also consider interoperability with provinces, territories and commercial partners, notably the U.S. and Europe.
My third observation is that to date, a high percentage of climate spending has come from government sources. Over time, the vast majority of capital investment activity will need to be initiated by the private sector. The private sector, both domestically and internationally, responds to signals that may intersect with but are not identical to those of government. As a result, to crowd in private market-based finance, especially in the context of the largest and most impactful projects, it's important that the interface between business, private sector finance and government be as efficient and effective as possible to ensure that both public sector and private sector objectives are met.
It's for this reason the relevant government departments would be well served by having a more coordinated approach to the sustainable finance file. Furthermore, it would be beneficial for individuals involved in that file to have strong senior business or market experience and relationships, allowing them to identify when and how best to employ blended finance techniques.
