Environment Committee on Oct. 28th, 2024

[François Delorme]

That is an extremely important question. All the empirical studies have shown that doing nothing is going to cost more than doing something. We can have a carbon tax that might cut economic activity by 0.1% or 0.2% in the short term. However, since 2006, studies have shown that the costs of doing nothing could amount to 5% to 15% of GDP over the medium term.

To come back to what I said earlier, we can buy time, but time will catch up with us and cost us more. It's like doing preventive medicine versus treating someone to fix a medical problem. We can tell ourselves for a long time that we are not going to go to the doctor, but at some point, we are going to see the doctor and the doctor is going to tell us we should have come in a year ago.

[Monique Pauzé, Bloc, Repentigny, QC]

Is—

[The Chair, Liberal, Francis Scarpaleggia]

Your time is up, Ms. Pauzé. You even had an extra ten seconds.

Ms. Collins, the floor is yours.

[Laurel Collins, NDP, Victoria, BC]

I'd like to direct my question to Mr. Delorme.

You talked a bit about your support for the climate-aligned finance act. This has had endorsements from hundreds of academics, civil society groups and climate experts. It hits on a lot of the themes you've been talking about when it comes to holding corporate directors to account for climate action, mandating climate action plans at financial institutions and ensuring there are no climate-related conflicts of interest on boards.

Can you talk a bit about why it's important for this bill to go forward with this kind of legislation?

[François Delorme]

I think this is important, because we are talking here about a concerted effort to ensure that the fight against climate change succeeds. Isolated initiatives alone are not enough to solve the problem. Given the current situation, from where we are, I will say for a fourth time that 2030 really is the beginning of the countdown for us, so it is important to combine all our initiatives. Everything you have said regarding green finance tells us that we need to take joint aim when it comes to efforts to mitigate global warming.

[The Chair, Liberal, Francis Scarpaleggia]

Thank you. That's the end of your time.

Mr. Deltell, the floor is yours for three minutes.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Thank you, Mr. Chair.

My question is for Mr. Hannah, from the Canadian Bankers Association.

A little earlier, today at noon, in this committee, Julien Beaulieu, a lawyer from the Centre québécois du droit de l'environnement, questioned the proposal for voluntary reporting. He believed that mandatory reporting would be preferable so it would be possible to determine exactly what efforts were being made from one company to another and whether the targets were being met.

Just now, however, someone said that voluntary reporting was just as effective, and pointed out that people were more committed when they were acting voluntarily rather than being forced to do it.

I would like to know what you think about voluntary reporting of measures taken to reduce emissions and to invest in green businesses, which do not prevent anyone from investing in other businesses.

[Darren Hannah, Senior Vice-President, Financial Stability and Banking Policy, Canadian Bankers Association]

For your question about disclosure, I'm going to pass it over to my colleague Mr. Radeczy, who is our lead witness for speaking about that.

[Bryan Radeczy]

I would answer that the banks are setting net-zero targets and have to track progress against those targets. It has been voluntary up until this point. Our largest banks have adopted the task force and climate-related financial disclosure recommendations, which include that scope. Now they will also be mandated, under OSFI's guideline B-15, to disclose that information.

They're doing it on a voluntary basis already. It will become mandated for all banks in Canada, as I said in my opening remarks, starting at the 2024 fiscal year-end for the largest banks and the 2025 fiscal year-end for the small and medium-sized banks.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

What do you have to say to people who believe exactly the same assessment should be applied to investments? How is it possible to precisely determine whether things are green investments, whether very dark green or lighter green, but without necessarily keeping an exact count of the reduction in their environmental footprint?

[Bryan Radeczy]

That's where I would go back to the Sustainable Finance Action Council. We look forward to the government's further progress in their work. The initial taxonomy road map delineated between green and transitional-eligible investments in Canada. I think it's a bit different in other jurisdictions, such as Europe, which has a green taxonomy.

Obviously, Canada is a resource-based economy, so the addition of a transitional-eligible component is also an important and innovative step it has made as part of its participation on that action council.

[The Chair, Liberal, Francis Scarpaleggia]

Thank you. Your time is up.

We'll go to Ms. Taylor Roy.

[Leah Taylor Roy, Liberal, Aurora—Oak Ridges—Richmond Hill, ON]

Thank you, Mr. Chair.

Thank you to all the witnesses for being here.

Professor Edmans, I have a question for you.

You have been repeating, often in response to questions, the need to leave it up to the consumer or client to make choices about where they invest. To that end, a taxonomy or a reporting and disclosure requirement provides information to consumers and investors, as well as some consistency and simplicity, because not all investors can read through the reports and figure this all out.

If people are going to make true and clear choices about what they want to invest in, do you believe this kind of transparency disclosure or taxonomy, which simplifies how an investor can look at these companies' investments, is necessary?

[Prof. Alex Edmans]

Thanks very much for the question.

Yes, I agree that it simplifies it, but I think it makes it too simplistic. For example, if you're an investor, you'd like to invest with good CEOs and not invest with bad CEOs. Should we have a taxonomy saying which CEOs are good or bad or which companies are good or bad—

[Leah Taylor Roy, Liberal, Aurora—Oak Ridges—Richmond Hill, ON]

Could I just interrupt for a moment?

I realize there are many issues other than simply climate change, but I'm focused on climate change. If I'm an investor and one of my priorities is to ensure that my investments are made in “green”, however it's defined by the taxonomy companies, shouldn't we be able to have some way that I and other investors could actually determine if these investments are green?

[Prof. Alex Edmans]

Yes, I understand the original question. I gave that analogy because, just as it's very difficult to understand whether the CEO is good or bad, it's really difficult to classify a company as green or not green. There are a lot of second- and third-order effects here. It may well be that consumers go with this particular label because they think something is green when actually there are lots of second- and third-order effects which mean that it's not green.

Yes, it does make things simple, and this is why there's a lot of attraction. It means that you can simply—

[Leah Taylor Roy, Liberal, Aurora—Oak Ridges—Richmond Hill, ON]

I'm sorry, but I have only three minutes, because it's the last round. I don't mean to interrupt, but I just wanted to understand.

It is complex. It is difficult to do. Are you suggesting then that we not do anything, that we just let consumers do the best they can to figure it out?

[Prof. Alex Edmans]

No, we don't. There's already a big incentive for companies and asset managers to disclose information, because these are things that consumers think are relevant. However, what is complicated is that the information that is relevant will vary from company to company. The problem with standards is that they will be generally quite generic, whereas the particular way in which one company impacts on climate change will be different from company to company—

[Leah Taylor Roy, Liberal, Aurora—Oak Ridges—Richmond Hill, ON]

Excuse me again. This is something you've been saying, but I just don't understand. If we're leaving it voluntary and we're letting companies do it the way they want—

[Prof. Alex Edmans]

It's not the way they want; it's the way that people want companies to disclose, because companies respond—

[Leah Taylor Roy, Liberal, Aurora—Oak Ridges—Richmond Hill, ON]

Oh, I see. Okay.

[The Chair, Liberal, Francis Scarpaleggia]

Unfortunately, we're going to have to suspend this debate. The time is up.

Committee members, we will be reaching out to the two ministers, and hopefully we'll have an answer by tomorrow. We'll be able to report back on Wednesday.

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

Mr. Chair, I have a point of order.

[The Chair, Liberal, Francis Scarpaleggia]

Go ahead. .

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

Have we heard anything from Mr. Carney about coming as a witness?