Environment Committee on May 9th, 2024

[Laurel Collins, NDP, Victoria, BC]

I'm going to pick up from there.

A February 2024 report showed that some publicly traded companies that are among the world's largest corporate GHG emitters, including some in the Pathways Alliance, aren't actually disclosing the most basic and accessible data, like “relevant quantitative assumptions and estimates (inputs) used in financial reporting.” The report finds that the members of the Pathways Alliance failed in their financial statements to demonstrate “how material climate-related matters are incorporated” into their financial statements, failed to be “consistent with the company's other reporting” and failed to “disclose...climate-related assumptions”.

How are investors going to navigate this without the key information they need to assess the risks in their portfolio?

[Andrew Chisholm]

That is exactly what we're after.

[Barbara Zvan]

It's the problem.

[Andrew Chisholm]

It's transparency, information, proper data and deciding whether things fall within an acceptable framework.

It all starts with transparency, measuring the data and communicating the data.

[Laurel Collins, NDP, Victoria, BC]

Specifically with CCUS, I think having CCUS for heavy-emitting things like cement and steel makes sense, but why would we not exclude the fossil fuel industry, which is hiding data and clearly increasing its emissions year after year?

[Barbara Zvan]

I'll go back to what SFAC today is asking in finance. Finance is the sector. What they're trying to say is that we should help them get disclosure and scientific information through a taxonomy so they can do the proper evaluation of these companies. I think we're saying the same thing. Everyone is using this, but the tools we have to measure the quality of their transition plans are not in place. Other global investors will not find them in place.

You're asking for clarity on CCUS and so are we, but without those tools, we will not have clarity and we will not have credible transition plans.

[The Chair, Liberal, Francis Scarpaleggia]

You have 10 seconds left, so we'll go to Mr. Kram.

[Michael Kram, Conservative, Regina—Wascana, SK]

Thank you very much, Mr. Chair.

Thank you to the witnesses for being here today.

Ms. Zvan, I was particularly interested in the PowerPoint presentation that you provided to us prior to the meeting. I wouldn't mind starting off with slide number 17, which has the categories of green activities. You listed SMRs as a green activity.

Can you elaborate a bit on why SMRs and nuclear energy should be considered green activities? How can nuclear energy in general be beneficial to a green economy?

[Barbara Zvan]

As most of nuclear has low emissions or no emissions, in the report we said that the key part of nuclear, including with small modular reactors, not just the big nuclear plants that we think about, is the need to work through “do no significant harm”. “Do no significant harm” is an element of all taxonomies. You cannot compromise other objectives to reduce emissions. That would be part and parcel of its inclusion. The technical expertise has to say what the standard is, from an environmental point of view, of “do no significant harm” in an industry before it meets the qualifications.

[Michael Kram, Conservative, Regina—Wascana, SK]

You're of the view then that nuclear energy is not harmful to a green economy.

[Barbara Zvan]

Nuclear plays a role because there are no emissions. Think of using SMRs to replace diesel in the north.

The challenge we have is the waste product. That is the part that needs to be solved and where people need to tell the finance industry what good looks like. It's not for us to say what good looks like.

[Michael Kram, Conservative, Regina—Wascana, SK]

Do you have any particular recommendations for the committee when it comes to nuclear energy and how we can increase investment in nuclear energy, besides the taxonomy, of course?

[Barbara Zvan]

Andy, please go ahead.

[Andrew Chisholm]

I would say two things.

One is that obviously it is going to have a very elongated process of evaluation, licensing and accreditation, and it should. Having said that, we should be introspective as to whether there is a way to do that in a faster manner, because the time frames are 10-plus years and that's hard.

Beyond that, assuming we can get through the safety part, the accreditation and the proper process of evaluation, it's about identifying where these solutions can best operate, and helping to facilitate the procurement, installation and execution of some of these projects.

[Michael Kram, Conservative, Regina—Wascana, SK]

For something like nuclear energy, why is a system of taxonomy necessary or beneficial? Doesn't everybody already know that nuclear energy doesn't produce greenhouse gases?

[Barbara Zvan]

Not everybody understands what this good, environmental, “do no significant harm” element is. A company that's trying to issue green bonds has to follow something called the International Capital Market Association's green bond principles, or ICMA principles. The first step is to say what taxonomy they are referring to. There is no taxonomy today that a Canadian nuclear company can point to and say that it meets those thresholds. They are not seen as credible and they could be subject to greenwashing complaints.

It is about the bridge between understanding what the scientists and environmentalists say good looks like and helping the finance community actually issue green bonds or say they are aligned with the transition.

[Michael Kram, Conservative, Regina—Wascana, SK]

I would like to come back to the final report from the expert panel that we were talking about a few minutes ago. When it comes to Canadian oil and gas exports, it's my understanding that they can play a vital role in displacing the burning of coal in other countries, most notably China.

Is the displacement of greenhouse gas emissions in other countries a consideration in the taxonomy system being proposed?

[Barbara Zvan]

The taxonomy deals with the region we are in and the requirements for this region. The requirements for another region are developed by that country. They will ask what good looks like. If Canada can provide the solution, there's article 6—which is a whole other issue—to get credits for those emissions reductions, but we would not, as part of the taxonomy, be specifying what their emissions reductions would look like.

[The Chair, Liberal, Francis Scarpaleggia]

Thank you.

We'll go to Mr. van Koeverden.

[Adam van Koeverden, Liberal, Milton, ON]

Thank you, Mr. Chair.

Thank you to our witnesses for being here.

Ms. Zvan, I will ask my questions of you. I think you've done a great job of pointing to your colleague whenever it's necessary, so I will let you be the quarterback.

First, something that I know my colleagues across the way and everybody here will agree with is that I am not an expert on sustainable finance by any stretch of the imagination. The first time I heard the word “taxonomy” in this context, I thought we were talking about putting large stuffed trout and ducks on the wall. Then I realized there's a difference between taxidermy and taxonomy. That was news to me at the time.

Now that I understand that we're talking about definitions and terminologies for new categories of sustainable finance that didn't exist 25 years ago, I'm starting to understand it a bit. What I know is that the grass grows where you water it, and businesses grow where you invest. With a pension fund or any large financial operation, you control a lot of money, and you have the ability—to put it into an agricultural context—to control the sunlight and the water and control where things grow.

I try to make it simple for myself. I recognize that when you deprive certain sectors or industries of money that they've relied on for a long time, you might be able to force them to grow less quickly. If it's an industry that's super emissions-intensive, with oil and gas or cement production, you're actually forcing them to innovate, and that's super powerful.

Am I getting this right?

[Barbara Zvan]

The first step for investors is to engage with companies. Climate Action 100+ has 700 investors. The Canadian equivalent has 46, at $6 trillion. We ask for very clear things. We want governance on climate. We want a strategy on climate. We want metrics that are sector-relevant. We want your lobbying to be aligned with Canada's net-zero goals. We measure all of those things and we make that public.

We also do voting. As with Woodside, we will vote against companies on their climate plans. We will vote against directors. The last step, when we don't see change, is divestment, which then increases the cost of capital for a company.

That is the typical progression. Investors are in different stages of that for oil and gas companies.

[Adam van Koeverden, Liberal, Milton, ON]

Thank you. That's super helpful.

Do pension funds and banks take a similar approach?

[Barbara Zvan]

Banks typically help companies underwrite debt that eventually gets to different asset owners. Some asset owners, like pension plans, buy more equity. Insurance companies buy more debt. They will often help facilitate the underwriting of debt to go out to other companies. They will help underwrite loans to get loans and provide those loans. They are required to keep capital against those loans.

That's where I turn to Andy as a bank director. He can talk to banks. I can talk to the pension world.

[Andrew Chisholm]

One of the important points in this realm is that banks can be a very constructive force. They are much less so in the context of inclusion or exclusion and much more so in the context of helping clients devise their transition plans and finance them once they have devised credible transition plans. They have scads of clients who are going to need help.

[Adam van Koeverden, Liberal, Milton, ON]

Thank you for that.

I know that all five of Canada's big banks control a lot of funds. They buy a lot of assets for mutual funds and different types of assets for folks, and they have all committed to achieving net zero by 2050.

I'd like to have some confidence that these institutions are living up to some of those commitments. There have been a lot of concerns and allegations about greenwashing and about convincing folks that if they want a green bank, they can count on those institutions to invest in places that will deprive organizations of water and sunlight if they are doing more harm than good, are not forcing innovation or are not talking about transition or encouraging that conversation.

Is there good evidence to suggest that some banks are doing a bit more greenwashing than others?