Environment Committee on May 23rd, 2024

[Dan Mazier, Conservative, Dauphin—Swan River—Neepawa, MB]

You've stated:

Committing to a net-zero portfolio target today is somewhat like agreeing to a gluten-free diet before knowing which foods contain gluten or what nutrients one might be sacrificing in the process.

Can you explain what you mean by this?

[Terrence Keeley]

Thank you for reading my book. At least somebody has.

It's very clear that we don't know what these divestiture movements will actually create. That $45 trillion I spoke about is largely based upon divestiture, and many individuals have adopted these ESG indices that MSCI and others are coming out with.

They're basically signing up for investing in less than one-half of the investable market. Of the 500 corporations in the S&P 500, only 230 are currently fully aligned with net-zero 2050. Why would anybody decide that they're going to invest in only those companies when in fact it is the browner ones that have the chance of becoming better corporations and outperforming over time?

[Dan Mazier, Conservative, Dauphin—Swan River—Neepawa, MB]

If pension investment funds adopt net-zero portfolios, would this do anything to achieve a net-zero world?

[Terrence Keeley]

Clearly not—a green portfolio does not create a green world. If it did, we would have gotten rid of smoking, gambling, alcohol, tobacco and firearms. All of these have been divested from over decades, yet you can still grab a pack of cigarettes and have a beer. Divestiture has not worked to solve the underlying problems.

[Dan Mazier, Conservative, Dauphin—Swan River—Neepawa, MB]

Bill Gates has said, and I quote, that ESG investing so far has probably not removed one ton of carbon out of the air.

Do you agree with this statement? If so, what are the implications of allocating trillions of dollars in capital to ESG portfolios that do not reduce a quantifiable amount of emissions?

[Terrence Keeley]

I think Bill Gates just summarized, as we have been discussing, the limited efficacy of divestiture as a tool for changing the world and changing industry. That's what Bill Gates was referring to in that quote. I obviously agree with him. I quoted him in my book.

[The Chair, Liberal, Francis Scarpaleggia]

Thank you.

We'll go to Mr. van Koeverden now.

[Adam van Koeverden, Liberal, Milton, ON]

Thank you very much, Mr. Chair.

Thanks to all the witnesses for being here and sharing your vast expertise with us.

Many of us, including me, are just learning about terms. We've googled what a “sustainable finance taxonomy” is in the last couple of weeks, and we're just getting off the ground here. I say that about myself. There are people here who know more about this than I do, but these meetings have been really helpful in learning more about it.

My first question is for you, Mr. Clark.

I've read that Canada's insured losses over the last couple of years due to wildfires and other natural disaster events that are fuelled by climate change—not always caused by climate change, which causes a little bit of consternation sometimes in this committee—have increased markedly and so have the insured losses. Can you talk a bit about why that's the case and, if it is, the degree to which it's true?

[Jason Clark]

Sure. Thank you for the question.

I think the trend line in Canada is pretty clear. We're seeing an increase in frequency and severity of extreme weather events as a result of climate change.

We're seeing.... I mentioned in my remarks the comparison to 2016 and the Fort McMurray fires, also noting that it's a community that has had evacuation orders to neighbourhoods just days ago, actually. What we've seen over the past number of years, and in particular, whether it's 2022 or 2023, is $3.4 billion in insured losses alone. That doesn't capture the full loss we're seeing as a result of these events or these activities. There's also infrastructure loss. There are losses to productivity, and there's business loss, not to mention homeowner loss.

A big part of our work has been to work with the federal government on a low-cost national flood insurance program to help ensure Canadians are better protected.

[Adam van Koeverden, Liberal, Milton, ON]

Thank you for that.

I have a follow-up question. I've read recently that upwards of half of the world's people displaced last year due to wildfires were Canadian. Canada has 0.5% of the world's population but accounted for almost half of the world's displaced people due to wildfires. Do you think it stands to say that Canada actually has more to lose with respect to the impacts of climate change? I've heard that Canada is warming more quickly than other countries.

Would you say that's the case?

[Jason Clark]

We are exceptionally concerned about this trend line. We are exceptionally concerned about the conditions we're seeing. Even just today, the Canadian hurricane centre released its expectations of the forthcoming hurricane season, which they noted would be “significant” or “very active”, and that aligns with what we've seen out of the U.S., as announced just days ago.

Whether it's multiperil—wildfire, flooding or extreme heat, another very significant threat to Canadian communities across the country—we are exceptionally concerned. Currently, the Canadian property and casualty insurance industry is very well placed, and we are seeing full coverage, with the exception of high-risk flooding. However, there's an opportunity to work together on that.

[Adam van Koeverden, Liberal, Milton, ON]

Thank you very much.

Given that Canada seems to be more vulnerable because we're a large country and sometimes it takes more time for emergency services, because we have a lot of forests so we're vulnerable to things like forest fires, and because we tend to have seasons and with that comes seasonal weather, this is a bit personal, perhaps, but do you think it would be irresponsible, given our vulnerability, to not be one of the leaders lowering our emissions and demonstrating a commitment to fighting climate change globally?

[Jason Clark]

If I look at what we have worked on with respect to the green taxonomy, as an example, we think it's important both to reduce emissions and to ensure we are adapting to climate change. The way we put it is that, because the country is becoming riskier, we need to play offence and we need to play defence.

We think the work that was done to establish the country's first national adaptation strategy was incredibly important. We've seen $1.6 billion invested so far. I would suggest that more needs to be done there. There are additional opportunities. We need to make sure that we're doing things like ensuring we're not building homes in high-risk zones, that we're building in the right way so that they're low-carbon homes but also that we're not putting them in, say, high-risk flood or wildfire zones.

[Adam van Koeverden, Liberal, Milton, ON]

Very briefly, does disclosure equal divestment?

It seems like there's been a little bit of a direct line drawn on this at the committee today.

[Jason Clark]

I couldn't speak to divestment on behalf of our members. The property and casualty insurance industry has worked very closely with OSFI, our federal regulator, on B-15 guidelines to ensure that we are appropriately prepared for climate-related risks, in particular, physical risks. Our concern is very much to ensure the soundness of our industry as it relates to this increasing trend line, which we've talked about.

[Adam van Koeverden, Liberal, Milton, ON]

Thank you very much.

Mr. Keeley, with the remaining time I have available, I have a question for you, and it begins with a quote:

We have a grave responsibility: to ensure that [children] not be denied their future.

...The climate, run amok, is crying out to us to halt this illusion of omnipotence....

[We need] a turning point, demonstrating a clear and tangible political will that can lead to a decisive acceleration of ecological transition....

Do you know who said that?

[Terrence Keeley]

I do not know who said it. Disclosure is a good thing. I think that was directed towards me. Disclosures are a good thing. They're not equated with divestment. I wanted to make that point.

[Adam van Koeverden, Liberal, Milton, ON]

I'm glad to hear that. Thank you.

The person who said that was the Pope. It seemed as though in your opening statement, you characterized some of the Pope's positioning as not being a climate activist. He is actually quite a climate activist.

[Terrence Keeley]

He's very much so. He endorsed my book, by the way, on the cover.

[Adam van Koeverden, Liberal, Milton, ON]

That's fabulous. Congratulations.

[The Chair, Liberal, Francis Scarpaleggia]

Unfortunately, we're going to have to—

[Adam van Koeverden, Liberal, Milton, ON]

I have one last question.

[The Chair, Liberal, Francis Scarpaleggia]

Go ahead, very quickly.

[Adam van Koeverden, Liberal, Milton, ON]

Mr. Keeley, do you feel that emissions ought to be measured per capita, per person or by flag?

[Terrence Keeley]

I don't know what good any of those would do, but we should all be examining our carbon footprints, individually, if that's the question.