Environment Committee on Nov. 18th, 2024

[Laurel Collins, NDP, Victoria, BC]

I'm sorry, are you saying that stakeholders like the oil and gas sector, CEOs and lobbyists, have been delaying some of this work, or is it that the government is taking a bit longer because it wants to make sure it doesn't impact the profits of oil and gas companies?

[Clifton Lee-Sing]

Where I was going is that in the Canadian taxonomy we think there's room for transition activities to include activities that aren't necessarily green but, if we direct investments into those activities and sectors, could be helped to decarbonize. That's something that hasn't been looked at by the EU.

[The Chair, Liberal, Francis Scarpaleggia]

We're out of time, I'm sorry.

Mr. Leslie.

[Branden Leslie, Conservative, Portage—Lisgar, MB]

Thank you, Mr. Chair.

Given the short time frame, I'd like to start with you, Mr. Barbe, and please be brief.

You mentioned that your shop is not the one that deals specifically with the issue of emissions, but you did say what maybe is a throwaway comment that parrots Liberal MPs and ministers, which is that they are on track to meet the 2030 targets, despite the Auditor General's office and, more specifically, the environment commissioner saying that that is simply not true, as my colleague, Ms. Collins, mentioned.

My question is, is it the radical Liberal environment minister and his government who are misleading Canadians, or the non-partisan environment commissioner?

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

Excuse me, Mr. Chair. I have a point of order.

[The Chair, Liberal, Francis Scarpaleggia]

Yes, I don't see Mr. Barbe really being able to answer. That's not a fair question, but, Mr. Barbe, maybe you want to say something else about how we're moving towards emissions or not, whatever you want to say.

[Nicolas Barbe]

As I said earlier, if there is a question, I'm happy to take it back to my colleagues in the climate change branch.

[Branden Leslie, Conservative, Portage—Lisgar, MB]

Right.

Now, each of you, I believe, at one point or another, mentioned the real economy. Could you tell me what the real economy is, and is this system designing a fake economy?

[Clifton Lee-Sing]

I'll go first.

I used the term to make a distinction between entities that would use the taxonomy or be required to disclose versus financial intermediaries that assist in doing the transactions.

[Branden Leslie, Conservative, Portage—Lisgar, MB]

Okay. My colleagues also asked who you were consulting with. You consulted almost entirely internally. Have you consulted people who deal in the real economy, with anybody in the business community, in the banking community, in the pension fund? You talked about dealing with other levels of government, but who have you consulted with in the real economy?

[Clifton Lee-Sing]

The Sustainable Finance Action Council did a whole host of consultations across the country.

[Branden Leslie, Conservative, Portage—Lisgar, MB]

With whom?

[Clifton Lee-Sing]

I could get you a list in writing.

[The Chair, Liberal, Francis Scarpaleggia]

Yes, could you send us a list in writing, maybe? Thank you.

[Branden Leslie, Conservative, Portage—Lisgar, MB]

My question is—

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

Mr. Chair, could I ask for a point of clarification? I'm just wondering if perhaps some of our experts could explain the difference between the real economy and the financial sector to Mr. Leslie, because he doesn't seem to understand that.

[The Chair, Liberal, Francis Scarpaleggia]

You could use your time to ask that question. We know that in economics, there's the real economy, and then there's the money economy, and the money economy makes the real economy go around.

I stopped the clock. You have a minute left, Mr. Leslie.

[Branden Leslie, Conservative, Portage—Lisgar, MB]

Thank you, Mr. Chair.

Have the departments done an analysis with the new incoming U.S. president on whether or not you expect a taxonomy scheme to be developed in the United States and what competitive disadvantage that might put Canadians at?

[Clifton Lee-Sing]

The U.S. does not have a taxonomy. They did introduce the Inflation Reduction Act, which was meant to encourage capital flows to certain types of activities that are aligned with the green transition goals. I haven't heard about what the new government would do, the new president would do, but I imagine it would not go further in that direction.

[Branden Leslie, Conservative, Portage—Lisgar, MB]

Okay. I believe you're right. This is my question. You mentioned that other nations, particularly in Europe, have not seen an increase in capital due to a taxonomy scheme set up there. Where has it been done well? Where have emissions been reduced directly due to a taxonomy scheme, and/or where have capital increases actually happened? I mean anywhere in the world.

[The Chair, Liberal, Francis Scarpaleggia]

Sorry, we're out of time, unfortunately.

We'll go to Mr. van Koeverden.

[Adam van Koeverden, Liberal, Milton, ON]

Thank you very much, Mr. Chair.

Thank you to our witnesses for joining us today.

Throughout this, I've learned a lot, and I know that a lot of my colleagues have learned a lot about sustainable finance and definitions of words like “taxonomy” that we may not have known that much about. For others who might be watching, could you explain, in clear, plain language, how investors or large capital organizations like pension funds and others might choose to invest or might have the information necessary to invest in something that's green or sustainable in two scenarios, one in the absence of a taxonomy and mandatory disclosure for these companies, and one in the presence of it?

[Clifton Lee-Sing]

With a taxonomy, a borrower could want to fund a particular type of activity. The taxonomy would list the various criteria. If an activity is included among those aligned with net zero and labelled as green, that funding could essentially be labelled and sold to investors as a green product. There would be certain assurances. During the borrowing mechanism, it would give the investor assurances that the activity is green.

In the absence of a taxonomy, the borrower would go to their financial institution and seek funding. The financial institution might suggest that it be sold to particular investors who might be inclined to invest in green activities, but it couldn't make that assurance. There's a lack of credibility.

It's essentially a common set of terms and definitions that could be shared among the borrower, the financial institution and the ultimate investor.

[Adam van Koeverden, Liberal, Milton, ON]

Thank you.

We've had some witnesses, and some from the Conservative side, questioning or calling into debate the efficacy of ESG practices. They say that establishing guidelines around environmental, social and governance improvements isn't effective.

Would measures like establishing a taxonomy and requiring disclosure improve the effectiveness of ESG work in the financial sector?

[Clifton Lee-Sing]

The purpose of the taxonomy or climate disclosures is to share information among the various players in the market. It's not to drive emissions in a particular direction. It's to give information, so that everybody is talking a common language, and so that climate risks are well known by the various parties. They can then make the right decisions on whether or not they want to be involved with that type of activity.