Thank you very much, Mr. Chair. I'm Lorraine Becker, the co-founder and Executive Director for the Canadian Coalition for Green Finance.
Meeting the Paris agreement and economic growth are not mutually exclusive. Canada's transition to a low-carbon economy will require unprecedented investment in our energy, building, and transportation systems. Building low-carbon and climate-resilient infrastructure is how we will both address the climate crisis and ignite the economy.
A green investment bank for Canada is a bold idea for both our economy and for our performance on climate change. A type of national development bank, the OECD defines a green investment bank as “a publicly capitalized entity established specifically to facilitate private investment into domestic low carbon, climate resilient...infrastructure and other green sectors such as water and waste management.”
The model is already being leveraged by more than 13 other governments worldwide to deploy mature low-carbon technologies that result in emission reductions, amplify the impacts of public funds by leveraging them with private investment, and create mature liquid markets for low-carbon investments.
There is no shortage of capital to invest in low-carbon infrastructure. However, low-carbon product developers cannot access that capital because of problems of risk and scale. Green investment banks were designed to solve this mismatch. They de-risk low-carbon investments through mechanisms such as co-investing, insurance, loan loss guarantees, and debt subordination. Green investment banks overcome the problem of scale by aggregating transactions via mechanisms such as warehousing and securitization.
Green investment banks do not invest in early-stage technology but rather deploy mature technologies such as energy efficiency, renewable energy, and public transportation. However, they do play a particular role in the innovation bucket brigade by exerting a pull on the innovation system towards a commercialization of mature technologies.
Green banks typically crowd in three to four dollars of private capital for every public dollar invested. They act on commercial or near-commercial terms, thus avoiding the potential market distortions typically associated with grants and subsidies. Rather than subsidizing low-carbon projects, green banks create markets that stand on their own.
Finally, green banks are profitable and create returns on the public funds used for capitalization and for their private sector partners.
We recommend that the Department of Finance set up a new public financial institution, a crown corporation, based on the green investment bank model, in 2017. It should operate with a high degree of independence, together with a high degree of accountability. The high level of independence would reduce the potential for moral hazard or undue political influence, and ensure that the organization will have the commercial nimbleness it will require to remain efficient and relevant.
Deploying the funding allocated for the low-carbon economy fund, $2 billion, to capitalize a green investment bank for Canada over four years would be an efficient and fiscally responsible method of supporting the provinces and territories as they undertake incremental greenhouse gas emission reductions.
The possibility of redirecting some funds from grants and subsidies to green investment bank capitalization should be explored, as should the idea of capitalizing a green bank through a bond issuance. Through the leverage that a green bank can create, a $2-billion capitalization over four years, for example, would be leveraged up to $10 billion invested in our clean growth economy.
The window for achieving meaningful action on climate change is narrowing so fast that we should capitalize a green investment bank in the 2017 budget. We don't have to wait. We can put people to work right now with technologies that are proven but just need to be implemented at a commercial and investable scale.
We need jobs, emission reductions, and protection from the effects of climate change, and a green bank is a tool, one that will create assets, not deficits, that will help us accomplish all three. Let's invest for our future by investing in a green investment bank in budget 2017. Thank you very much.