Good evening, everybody, and thank you for having me here.
I am actually representing the expert panel on sustainable finance this evening versus my organization.
I am here to speak about the recommendations in our report called “Mobilizing Finance For Sustainable Growth”.
We were a four-member panel, and maybe I'll just start with how we think about sustainable finance. We think about it in terms of channelling the financial sector expertise, its ingenuity, and its influence toward challenges and opportunities posed by climate change, so think of Craig's comments around floods.
It includes revisiting all aspects of finance. Think capital flows—where they need to go, how we invest. Think risk management, with the approach to which we get insurance; or my day job, risk assessment; or how we think about financial processes around what we disclose, how we value assets, and what oversight is included.
The report is really a package of 15 practical, concrete recommendations spanning the essential market activities, behaviours, and structures to make sustainable finance mainstream.
What will success look like? It is when climate-conscious investment and risk management become business as usual. It needs to become embedded in everyday financial decisions, products, and services. It is when we stop referring to “sustainable finance” because it has become synonymous with simply finance—and let's understand that today, it is not.
For clarity, finance is not going to solve climate change, but the things that are—innovation, clean electricity, energy-saving buildings and climate-resilient infrastructure—all require a lot of investment. That's where finance is critical; what gets financed gets done.
The world isn't standing still. The U.K., the EU, China and many other regions across the world have appreciated the importance of laying a strong framework for sustainable finance in their countries.
Canada can be a global leader. Canada has a world-leading financial system with a well-earned reputation for sound governance, risk management, and regulations. Our considerable strength in conventional finance will play a critical role in delivering the financial ingenuity and capital flows required to execute Canada's transition and resilient objectives.
The panel's recommendations are organized in three pillars. It's about 50 pages, so I won't go through a lot of detail, but it is classified into three buckets that I will hit briefly.
First, it is about moving the conversation from burden to opportunity, building a strong foundation and then accelerating the growth in much-needed financial markets and products.
Let's start with pillar one, which addresses the need to shift Canada's climate change conversation from burden to opportunity. What does that look like?
Recommendation one is about laying out the vision, so Canada will say that we need the pan-Canadian framework. We have a net zero, but what does that mean in terms of the investments we have? How can we take those statements and say, “Here are the things we need to do, and here are the investments for the private sector to start looking at?” How can we articulate to them where the dollars are needed, and what is the return on risk characteristics that can be found?
Recommendation two is around using tax to incentivize RRSPs into sustainable finance. This is less about the dollars that it will create, and more about the change it would create in the financial sector, where financial advisers will have to answer to clients with regard to where the products are to help solve climate change. This will reverberate into those organizations and cause the sector to start training, educating, and creating products that are useful to solve climate change.
Recommendation three is about creating a sustainable finance action council. You see this in many of the other countries that made a commitment, bringing leaders together from both government and the private sector to talk about what to prioritize, how to action and how to keep the private sector engaged in the conversation as the government works through changes with the private industry.
Those are the key things that would really create a strong signal and motivate the financial sector to start going.
In terms of pillar two, it is classified as the foundational element. Think of Craig's comment on data and the flood plan. The data and creating a data analytics hub can be something that can be done collaboratively with both government and private industry to help ease the burden. It is an effort that's required to do climate analysis and to change it into business analytics.
The next area would be things like disclosure. What should companies disclose? Are we committed to the task force on climate-related financial disclosures framework? It shows a big commitment to disclose. To be honest, investors fill in the gap when there's nothing to disclose, and they don't fill the gap on a positive side.
The third would be around a clear statement that is consistent with fiduciary duty, so, for example, we who manage money for others have to act in the best interests of others. The climate change consideration is consistent with fiduciary duty, and there are many ways to lay that foundation.
Looking to provide what we would call support for the ecosystem, a lot of financial professionals will go to their associations, which are not-for-profits, to develop it themselves, and to create training material on climate is hard.
Last, supporting the efforts that are already under way at OSFI and the Bank of Canada in terms of bringing into the regulatory framework would be a very key pillar of the foundational element.
These would be just a few examples of how you create the foundation to take sustainable finance to the mainstream.
In pillar three, it's really about developing and scaling market structures and financial products that could offer transformative economic benefit for Canada in building a low-emission climate-smart future. There are seven main recommendations and a lot of sub-recommendations. However, they all align closely with the themes of the pan-Canadian framework and focus on the financing needs of the critical sectors of the economy: clean technology, oil and gas, infrastructure, buildings, electricity generation and transmission, to name a few.
Just give you a couple of examples in this sector, one would be around the effort today to engage the fixed-income market—by far the largest market. In Europe, you would have seen the effort around building a green taxonomy. This is really shorthand for what qualifies for a green investment, so investors can bridge the gap between climate knowledge, science and investment. For Canada, it would eliminate most of our key sectors. There's a recommendation for the panel to actually focus on Canada becoming a leader in developing a transition taxonomy. How can we help our sectors like oil and gas transition and make it easy for investors to understand what qualifies? It makes the return on effort easier, making liquidity better. This is work that's already started in the private sector today.
Leveraging the Canadian Infrastructure Bank would be another key area. It's a strong establishment in terms of the idea, but, when we look at it, it could really help with bringing people together around being proactive, and looking at how you bring the private sector with a pipeline of opportunities. So that's a tweak in terms of its mandate.
I'll end perhaps where the report begins.
Canada has a strong, diversified and resource-rich economy; a world-leading financial sector; and excellent capacity for innovation. By harnessing these advantages, Canada can be among the leaders in the global transition to a low-emissions future, as a trusted source of climate-smart solutions, expertise and investment. Realizing this ambition will require a committed alliance between business, government and civil society; and determined investment.
We would support a budgetary commitment to help lay this foundation in 2020-21, through working groups and efforts around all the recommendations in the panel's report.
Thank you for having me here tonight.