Finance Committee on June 13th, 2023

[The Chair, Liberal, Peter Fonseca]

Now we have MP Blaikie, please, for two and a half minutes.

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

Thank you very much.

Ms. Bardswick, I want to come back to something that you said, because I think that a lot of Canadians who just listen to the political debate around the oil and gas sector would think that, as we hear from certain corners of the House, you can't get an oil and gas project approved in Canada and that nobody wants to invest in oil and gas in Canada anymore because it has become too difficult.

I've heard that Canadian banks are investing more than ever in oil and gas and are representing a larger share of global investment in oil and gas and that extraction of oil and gas is increasing even as employment decreases. Have I gathered those facts correctly from today's conversation? Is there anything more that you would like to add on that theme about the current state of the oil and gas sector in Canada?

[Kathy Bardswick]

No, I wouldn't refute anything that you have outlined.

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

Well, thank you very much. I think that's something that often gets missed in the political debate that has happened, and it's interesting to know that folks who are paying attention to the actual facts and figures and the money are seeing a very different picture than what is communicated to Canadians through debate in the House of Commons.

Mr. Stewart, I wanted to come back to what you were saying about the accusations of collusion against the fossil fuel industry. Are there any examples where the finance community, if we could use that term, have adopted certain kinds of goals other than the strict maximization of profit and mobilized in order to have certain kinds of outcomes, whether those are productivity gains or other things that aren't the direct pursuit of short-term profit, and were those accused of collusion?

[Keith Stewart]

I'm afraid I don't know the answer. I would say that many experts think that these cases wouldn't likely succeed, but it's a threat, and just getting tied up in court is a concern.

The European Commission issued a clarification of their interpretation of the law, saying that they don't think this would breach the law, but it's kind of like an opinion. They're not writing those laws, but there is enough concern that the European Commission felt the need to come out and say that they don't think, under these types of conditions, that this would constitute collusion, but it is that question of having rules around what finance is supposed to do in our society. I think, in light of the climate emergency, that we need to update those rules so that finance is unequivocally part of that solution and becomes part of our societal project in the way that providing a decent quality of life is part of it now.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Blaikie.

We go now to MP Chambers.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you, Mr. Chair.

Now that I have the floor, I won't take up much time on this business, but I wanted to publicly move my study motion, which was provided to the members in advance. I won't read it all out here, but I would like the committee to consider studying open banking and real payments as a way to reduce inflation and cost for consumers.

I'll turn to my questions now.

Ms. Zvan, I'm looking at the top 10 companies, by weighting, in the S&P's ESG index—

[The Chair, Liberal, Peter Fonseca]

MP Chambers, to clarify, were you moving it or were you giving notice?

[Adam Chambers, Conservative, Simcoe North, ON]

I'm sorry. It's just public notice, so it can be attached to the minutes of the meeting.

[The Chair, Liberal, Peter Fonseca]

Thank you.

[Adam Chambers, Conservative, Simcoe North, ON]

I'm looking at the top 10 holdings of S&P's ESG index. I'm very surprised to see ExxonMobil as one of the top holdings. In fact, it's eighth.

Can you explain to me why a company like ExxonMobil would be considered an ESG leader?

[Barbara Zvan]

I can't comment specifically on what the S&P work was, but in terms of the taxonomy effort, we have tried very hard to recognize that the high-emitting sectors are a part of the transition, and they need to decarbonize. That divestment is problematic, because it removes your voice from the table.

In Canada right now we have 37 Canadian financial institutions engaging with the 40 top emitters for that reason of having a dialogue with the same consistent message of “Think about your long-term strategy, your governance, your targets.”

We are trying to help them with the transition, and try to communicate what we need. That is why we thought it was a priority to include transition as part of the taxonomy work, so that we don't exclude them.

[Adam Chambers, Conservative, Simcoe North, ON]

Is there a component of ESG that is more important than the others? For example, is environment more important than sustainability? Is that more important than governance? You see some examples of companies, with some poor environmental track records, but maybe higher scores on the other measures, all of a sudden finding themselves a darling of the ESG movement.

[Barbara Zvan]

I would say that each investor chooses which area to focus on. Some investors may have put more risk management on environmental, others may have put it more on social or, over the years, on governance.

For example, the Canadian Coalition for Good Governance started, over 20 years ago, working on the governance issues in Canada, which have largely improved.

It would be hard for me to speak as an industry. Each investor would put their own weight on those factors.

[Adam Chambers, Conservative, Simcoe North, ON]

As more of an opinion, do you think it's weird that Tesla is not in the top 10 of the ESG S&P index?

[Barbara Zvan]

It would be hard for me to comment on why Tesla is excluded.

[Adam Chambers, Conservative, Simcoe North, ON]

I actually have the quote on why. Tesla was not included because of “a lack of low-carbon strategy”—it sounds kind of weird to me, because they are all about building electric vehicles—and “codes of business conduct”.

I think what we're getting at here is that ESG means a whole bunch of different things to a whole bunch of different people. The fact is, even over the last two or three years, the highest-performing funds in the ESG space all hold oil and gas companies.

If we don't get a handle on what ESG means, and we just slap it on everything, it doesn't really seem like we're going to achieve the objectives, which I think is what Mr. Stewart is also getting at.

[Barbara Zvan]

I will just comment that ESG data information is what investors have been asking for. It is their job to interpret that information. It's no different than sales, revenue, other factors. If you look at that information that comes out there, you'll see analysts, one with a buy and one with a sell recommendation based off the same information. It's no different for ESG in terms of how investors interpret that information. That is their choice and part of their responsibility.

[Adam Chambers, Conservative, Simcoe North, ON]

Finally, I hope to ask everybody this, but perhaps someone else will ask.

Do you believe in a future where there is no more oil and gas extracted in Canada?

[Barbara Zvan]

I think what we have to do in terms of aligning to the 1.5°C is to to work on the taxonomy. Again, we are one of the few countries that is actually trying to tackle the transition, including the fossil fuel sector. We've received interest from Australia, the Asian region. I think that is a clear indication of the interest to ask how we evolve change in that sector going forward.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you, Mr. Chair.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Chambers.

MP Turnbull, welcome to our committee. The floors is yours now for five minutes.

[Ryan Turnbull, Liberal, Whitby, ON]

Thanks, Chair.

Thanks to the witnesses for being here today. I appreciate all of your leadership in this space and the expertise you bring to this conversation.

This is one I feel pretty strongly and passionately about moving forward on. I'm glad that my colleagues here put this motion forward to do this study in the first place. Thank you for being here.

Maybe, Ms. Zvan, I'll start with you or Ms. Bardswick, whoever you think is most appropriate to answer.

I think what we've heard today is that financial institutions have set ambitious voluntary targets for themselves, which I think we can all agree is a good thing. We've heard from some witnesses today—and I think you haven't disputed this—that some of them are not necessarily meeting those commitments to date. What's interesting to me is that the Sustainable Finance Action Council and its membership actually bring together all of the largest financial institutions in Canada as far as I can tell. It seems almost inconsistent.

Does the fact that they have essentially developed and worked together collaboratively to develop this taxonomy and that they are saying it's needed and that we need to implement it now actually highlight the need for government intervention?

[Kathy Bardswick]

I'll take that on initially.

Look, I've been in the CEO position of a major financial institution incorporating sustainability commitments into strategy. It is not easy. It's hard work. From the experiences I have seen around the table at SFAC, these organizations have provided very senior resources. They've committed now over two years of work. None of these very senior people took time off from their day jobs to show up. I'm talking about chief legal officers and chief risk officers who have come to this table. There is a learning process. Some of them are further ahead than others are, but I think there has been a genuine concerted effort to contribute to building out a more robust and more effective, impactful and sustainable finance ecosystem in this country.

Their futures, their ability as organizations to continue to thrive and to appropriately manage risk and to align with what's going on globally—these are global players—certainly depend on their ability to embrace effectively what in their own strategies they come to the table representing.

[Ryan Turnbull, Liberal, Whitby, ON]

Thank you very much.

It seems to me there's a risk to not having a taxonomy in place. That risk may actually be greater than is the risk of not having the taxonomy perfect at this very moment. I think you've all acknowledged that there is additional work to be done on an ongoing basis in such a way that the taxonomy will be evergreen.

Can you identify for me what the real risks are of not having a taxonomy implemented ASAP?