Environment Committee on Oct. 30th, 2024

[Monique Pauzé, Bloc, Repentigny, QC]

So you're telling us that although banks rely on voluntary commitments and continue to fund fossil fuels, Bill S‑243, if passed, could require them to take climate action and be held accountable for their operations.

[Karine Péloffy]

Yes. The bill contains a number of key measures. One is to set up an annual disclosure system, somewhat like what is already being done everywhere, but on fundamental issues, so that we can really do things properly when it comes to alignment with climate commitments. With all due respect, I think it's much less complex than the other standards that are in place. The questions we have to ask ourselves, albeit difficult, fit onto a double-sided page.

Another key measure contained in the bill is the creation of a new overriding duty to act in the public interest. This means that the primary duty of a corporate executive would no longer necessarily be to maximize short-term profit for shareholders, which is the misguided way that Canadian law is often interpreted. That's what the law says in the United States. That's not really the case in Canada, but we always ape the United States. In short, from now on, an entity's main duty would be to respect the limits of the planet so as to guarantee a safe climate for everyone, and then to make profits. It would stop the destruction of land, air and water for short-term gain, as some entities are doing.

[Monique Pauzé, Bloc, Repentigny, QC]

Do I have any time left, Mr. Chair?

[The Vice-Chair, Conservative, Dan Mazier]

Madame Pauzé, the time is up. Thank you.

Ms. Collins, go ahead for six minutes.

[Laurel Collins, NDP, Victoria, BC]

Thank you to all the witnesses for being here today.

I want to start with Ms. Péloffy.

Can you talk a bit about the results we saw from the Australian model for climate-aligned finance? Do you know of it?

[Karine Péloffy]

I know of an Australian court case, but I don't think that's what you're asking about.

[Laurel Collins, NDP, Victoria, BC]

Okay.

Do you think Canada can meet its climate obligations if we don't move forward with this kind of sustainable finance legislation and switch from what seems like a voluntary approach to a more mandatory approach?

[Karine Péloffy]

It's possible we might achieve our goals. It's possible we might win the lottery. I think we need a stronger legal framework that makes this possibility a near certainty. I think that's what climate-aligned finance aims to do.

As Mr. Brooks' presentation outlined, what's going on right now is that we have Canadian financial institutions also investing in other countries, in things they're no longer allowed to invest in here. We have our own financial institutions investing against our competitive advantage.

[Laurel Collins, NDP, Victoria, BC]

On that switch between the voluntary to the more mandatory, can you talk about what you see the impacts of more robust legislative or regulatory tools being on pensions, our economy and, more broadly, jobs and affordability?

[Karine Péloffy]

It's always hard to predict how things will unfold. There are always unintended consequences, as the opponents always love to say.

I think it would address the core issues we have today. There was a study done by the Canadian Centre for Policy Alternatives showing that, in 2022, record corporate profits were responsible for 40% of the increased prices. All of those increased profits went to three main sectors. Two of them were the fossil fuel industry, and the banking and insurance industry.

We might see less wealth concentration at the top. We'll hopefully see better funding for companies like Mr. Dubey's. Hopefully, we will have better jobs for Canadians. If we finance this, they forecast 2.2 million well-paying jobs in renewable energy.

We can think of this as the next industrial revolution. If we want to decarbonize by, at the latest, 2050, the money needs to be there long before then. We need to build that infrastructure, so the investments need to be there long before then. That's why financing needs to move first. It doesn't mean turning off the tap tomorrow morning, but putting the money towards what we know has a future.

[Laurel Collins, NDP, Victoria, BC]

We saw OSFI bring forward the B-15 guidelines requiring financial institutions to improve their governance and risk management practice. However, they fall short in aligning us with Canada's climate commitments.

Can you talk a bit about how we could fill those gaps and what needs to happen when it comes to climate-related risk disclosure?

[Karine Péloffy]

Yes. It was a good move on OSFI's part to come up with those guidelines. Of course, they could go further. As you highlighted, the commissioner of the environment and sustainable development did a report on this and said that the approach in B-15 remains “short of incentivizing the transition to a net-zero emissions economy.” We understand that OSFI thinks its mandate in that regard is limited. Other regulators elsewhere have a different view of their mandates, even without legal changes. I definitely invite OSFI to have a broader interpretation.

That's something your report could recommend—that OSFI have a broader interpretation of their mandate.

What the climate-aligned finance act would do, on top of what OSFI is already doing, is mandate OSFI to look at impacts and at reducing impacts. It would anchor everything in a 1.5°C framework. It would provide a lot of details. That two-pager “climate test”, as we used to call it, provides a level of detail that is missing in the guidelines. It mentions transition plans. It doesn't go into any level of detail there. The measure most bankers absolutely hate is increased capital requirements for microprudential and macroprudential risks that investments in fossil fuels bring forward.

[Laurel Collins, NDP, Victoria, BC]

We have had a lot of conversations back and forth in this committee and we have heard about divestment, but also the inclusion of fossil fuels in the taxonomy. Can you speak a little bit to why it might be important to ensure a robust taxonomy when it comes to excluding fossil fuels and making sure they're actually sustainable investments?

[Karine Péloffy]

I think if the taxonomy is to have any usefulness for the investment community, it needs to be for a defence against greenwashing. If the taxonomy itself greenwashes by painting LNG as a solution, then it won't provide cover, I think, for investors on that front.

Most importantly, defining sustainable finance is nice, but what we're severely lacking is regulating unsustainable finance. We need to first start regulating away from the damaging practices. Once we've circumscribed what's bad and what we need to stop, then the markets can actually do what they do best, which is innovate. We first need to close the door to the problem so that the others can flourish.

[Laurel Collins, NDP, Victoria, BC]

Thank you.

[The Vice-Chair, Conservative, Dan Mazier]

Thank you, Ms. Collins.

Now we're on to our next round, starting with Mr. Kram for five minutes.

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

Thank you very much, Mr. Chair.

Thank you to all the witnesses for being here today. My questions will be for Mr. Dubey from CVW CleanTech.

Mr. Dubey, your company has developed some fascinating technologies that can extract critical minerals from tailings ponds while cleaning up the tailings ponds at the same time. That's excellent work on your part. What I find concerning, though, is that your company's business model depends on the continued existence of the oil sands.

Would you say that environmentally friendly companies such as yours run the risk of becoming collateral damage in this taxonomy system?

[Akshay Dubey]

I'd say our technology has been developed for the oil sands mining space, specifically tailings, both fresh tailings as well as tailings ponds that exist today. There is a future for our technology that goes beyond just the current production of oil sands, well into the future, dealing with this environmental liability. At the same time, the majority of the economics delivered through this technology is through, as you said, the recovery of critical minerals, but also the hydrocarbons that are sitting in those tailings ponds.

When we talk about taxonomies, I think we need to really think about it from the perspective of being flexible, in that, if you just said oil production was bad, you may not want to support our technology, because we do generate revenue from selling barrels of oil, but those barrels of oil are sitting in tailings ponds, which are a large environmental liability, potentially the largest liability in Canada. Having that flexibility to really understand what the technology delivers is important in any system, regulatory or taxonomy.

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

Generally speaking, do you feel that this proposed taxonomy system is well understood in the business community at large?

[Akshay Dubey]

I think it's a very pertinent question. I'd say, quite frankly, from my perspective, that the most I've heard about this taxonomy is when I was watching other discussions from this very committee, which gave me some background on the discussions that have been taking place. The only other forum where I've really had some exposure to the discussion on taxonomy was the Western Executive Council of the Canadian Chamber of Commerce, where I sit as one of the CEOs, and really the only CEO from a small or medium-sized enterprise, across the table from my partners, who are CEOs of very large businesses.

From my perspective, it seems like a lot of this conversation has been dominated by some of the larger players in the space. I think it's important that we get some opinions from the small and medium enterprises in Canada as well, just given the fact that businesses like ours make up close to 50% of Canada's GDP.

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

If the oil companies with which you work found it more difficult to access capital due to this taxonomy system, do you think that would make them more likely or less likely to invest in these new technologies, such as the ones that your company is developing?

[Akshay Dubey]

I'd say that anyone coming from a finance background will tell you that to invest in risky technologies, first-of-its-kind innovation or things that haven't been done before requires a cost of capital that allows money to flow into these solutions. Today, I'd say one of the bigger challenges that we have, when discussing our technology with oil sands operators, is providing that capital commitment for a first-of-its-kind deployment.

In that type of environment, again, I think it's really important that we have this partnership between innovators, public companies and the government to institute these technologies. In situations where capital is leaving that sector, every single project that we're looking at, whether it's traditional oil and gas, energy transition solutions or things to deal with their liabilities, will suffer due to the lack of capital in the space.

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

If this taxonomy system does have the desired effect of discouraging investment in oil and gas, and oil and gas development, what do you think would be the outcome for your business in particular and other businesses developing similar technologies?

[Akshay Dubey]

Again, I'd say, from my perspective, that I haven't spent as much time understanding exactly what the taxonomy has been proposing. I wouldn't want to sit here and say that it's been proposed in a way that will disadvantage oil and gas investments.

At the same time, though, what I do know is that our technology does provide a solution for a very large environmental issue here in Canada, both on the tailings pond side as well as the emission side. I think it's critical that technologies like ours get the capital they require. This is where I look to regulators and folks like you, who are thinking about policy from a public perspective, to put in the policies that will really help drive that innovation forward, solve the problems that we need to solve and have the flexibility required to be able to do that.

[The Vice-Chair, Conservative, Dan Mazier]

You have 10 seconds.