Finance Committee on April 20th, 2023

[Gabriel Ste-Marie, Bloc, Joliette, QC]

I believe the Liberals didn't get their turn to ask Ms. Bergeron questions. If Mr. MacDonald would like to take a few minutes to do so, I can give him my time. Otherwise I can ask my questions.

[The Chair, Liberal, Peter Fonseca]

You're correct. Yes, Mr. MacDonald does have three minutes. We will run over, members. I think we're okay for resources. We will run over our time.

[Heath MacDonald, Liberal, Malpeque, PE]

Okay, thank you.

Ms. Bergeron, thank you for being here today.

Last June, Vancity announced 2025 financed emissions reduction targets. In doing so, it was the first Canadian financial institution to set those targets pertaining to commercial and residential real estate. Now, we're just shy of a year.

I'm wondering whether you can give us an update on those targets and how they impacted your overall portfolio.

[Christine Bergeron]

Certainly. Thank you.

We are continuing to do our work to build out the plans to get to our 2025 targets. Part of those targets included working with small business owners on transition plans. We will be disclosing and reporting back out fairly soon. We do that with our annual report, our second set of emissions reporting in addition to that work.

I can only say there's more to come because of the timing, but certainly it has not affected our portfolio specifically.

Our intention and our work is more about working with our membership. It is not about exclusion. It is about new product solutions, different ways to work with members so they can act and make the changes we need to see, in addition to looking at how we can finance clean energy and other areas.

It is very much an inclusionary approach, not exclusionary, for our membership and what we currently fund. I did say that we don't fund specific oil and gas projects as an example, but we're not excluding members who are looking for a mortgage, as an example. We are working with them.

[Heath MacDonald, Liberal, Malpeque, PE]

Thank you.

I think you stressed how important it is for your members for your financial institution to be very progressive in the reduction of carbon emissions and climate change.

What if you were non-active? Where would your membership sit, or what detriment would it be to your portfolio, or even further investing in capital markets, and so on and so forth, as you go forward? What are the issues you would come up against?

[Christine Bergeron]

Thank you.

I think that's difficult to answer, first of all, for two reasons.

Members may say one thing, but we don't know how they will actually act after they have said something. More importantly would be that ultimately, for us, our members and our board, the vision we have is to think about transforming the economy. My assumption, which I cannot validate, would be that we would have members who would perhaps look to a different financial institution.

[Heath MacDonald, Liberal, Malpeque, PE]

Thank you.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. MacDonald.

Now we go to Mr. Ste-Marie, please, for two and a half minutes.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you, Mr. Chair.

Ms. Bergeron, I have two questions for you.

In your statement, you spoke about the need to have an energy transition plan. Can you please tell me why such a plan is necessary?

I also have a question about your green loans. Green loans are given to finance green projects. Apart from that, how are they different to traditional commercial loans, whether it be in terms of conditions or interest rates?

[Christine Bergeron]

Thank you.

In terms of aggressive transition plans, our perspective is that we need to act, and the data shows that we need to act. We think it's important to be very clear on having objectives that will collectively get us to net zero and to drop emissions.

We could put a target of 20/80 instead of 20/40. Certainly, when that is the case, people tend to work to that target. Our view is to bring it in and to do everything we can to meet that. The view is it's based on data and trying to achieve that.

With respect to green projects and how we look at terms and conditions, or pricing, again, we typically price for risk. As was said, I believe, in the previous panel, it's difficult to look forward for risks that we don't fully understand versus looking back at traditional risks that we are used to.

We haven't officially landed to say if we do this new product we will definitely drop a price or term by a certain amount, because we are still trying to understand what those broad risks are, but we are trying to make it helpful to members, because they do want to take these actions. We are working with them to understand what levers actually matter to them the most. It may or may not be pricing. It may be something else.

That's how we respond to our membership. We want to understand what levers we can pull ultimately to see more of these green projects or financing get in place.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Ste-Marie.

Mr. Blaikie, you have two and a half minutes.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Thank you very much.

It's certainly my hope, and it's typical around here at the conclusion of a study, that the committee will write a report and make recommendations to the government based on what it's heard. I'm curious to know whether there are components that you think should be added to Canada's regulatory framework and that you would like to see this committee recommend to government when it comes to managing climate risk better in our financial sector, and the role that financial institutions can play in helping to mitigate more general climate risk.

[Christine Bergeron]

I would say that the more we can continue to properly value and treat the risks of climate within financial models, which is difficult precisely because it's forward-looking, then the more we will see a true step change in our ability to meet net-zero targets and will also ensure that people are not left behind in that transition. That's very important.

I don't have a specific regulatory recommendation for you, but certainly transparency and standardization are important.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Thank you very much for your time here today and your contribution to our study.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Blaikie.

Mr. Hallan, you have five minutes, please.

[Jasraj Singh Hallan, Conservative, Calgary Forest Lawn, AB]

Thank you.

Ms. Bergeron, when we talk about emissions and how to reduce, would it be reasonable, in your opinion, to say that replacing dirty dictator oil around the world with less carbon-intensive forms of energy would help the environment?

[Christine Bergeron]

In order to help the environment.... Maybe I'll actually step back and say that the purpose of helping the environment is to help people. It's about how we can live within our environment. Hence, what the data has shown is that dropping emissions matters, so in order to drop emissions, we do need to see more renewable energy in place.

[Jasraj Singh Hallan, Conservative, Calgary Forest Lawn, AB]

When we see energy from places outside Canada, where there are no regulations on how that energy is being created, and many human rights violations are taking place for that energy to be created as well, would it be fair to say that today Canada could be a leader in replacing that with less carbon-intensive energy?

[Christine Bergeron]

I think there's a great opportunity for Canada to continue to build new technology and new innovation that is low-carbon.

[Jasraj Singh Hallan, Conservative, Calgary Forest Lawn, AB]

Would you agree that a place like Germany, which came to Canada looking for LNG, should have received less carbon-intensive LNG from Canada instead of being turned away and going to Qatar, which has lower regulations and lower human rights regulations? Do you think Canada should have been able to replace that oil and liquid natural gas with less carbon-intensive Canadian product instead?

[Christine Bergeron]

My area of expertise is really not in different international jurisdictions, so I don't have a comment on that.

[Jasraj Singh Hallan, Conservative, Calgary Forest Lawn, AB]

In regard to loans, what is the default rate on green loans compared with conventional loans?

[Christine Bergeron]

In our portfolio we have not seen higher risk, if that is also part of the question, in terms of default by green loans. We've been tracking our impact loans now for many years, and we've not seen any difference in default rates.

[Jasraj Singh Hallan, Conservative, Calgary Forest Lawn, AB]

What percentage of green loans and conventional loans do you have?

[Christine Bergeron]

The overall percentage of what we track as triple-bottom-line assets and assets under administration is approximately 30%, give or take. It depends on the moment in time. However, our portfolio is also based on doing no harm. As I said, we don't have investments in oil and gas, so it's not specifically a ratio of “clean” to “dirty”, as some might think about it. It's what we track as having a positive impact in our community versus those that are perhaps considered more neutral.