Evidence of meeting #122 for Natural Resources in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was businesses.
A recording is available from Parliament.
Liberal
The Chair Liberal James Maloney
Good morning, everybody. Thank you for joining us.
We have a new room and new members. It's like a fresh start. I can see how excited everybody is by the looks on their faces.
This is our second-last meeting on this topic.
We are joined in our first hour by Anna Murray, who's the vice-president of sustainability at Bentall Kennedy. I hope you can hear us and see us.
Liberal
The Chair Liberal James Maloney
Excellent.
With us here today from the Canadian Federation of Independent Business are Monique Moreau and Emilie Hayes.
Thank you, all, for joining us.
Each group will be given up to 10 minutes to make a presentation. Following that, we're going to open the floor to questions from around the table. We do try to stick to the timelines as best we can. It's not always easy, but I may stop you if we go a little bit over. I'll apologize in advance for doing that.
All of you have translation devices available to you should you need them. I anticipate that you will be asked questions in French and English.
Ms. Hayes, I understand that you're going to be delivering remarks. Why don't we start off with you.
Emilie Hayes Policy Analyst, National and Legislative Affairs, Canadian Federation of Independent Business
Perfect.
Monique Moreau Vice-President, National Affairs, Canadian Federation of Independent Business
Just to introduce ourselves, I'm Monique Moreau, with the CFIB. Emilie will be giving our remarks, but we'll both be available to answer questions.
Policy Analyst, National and Legislative Affairs, Canadian Federation of Independent Business
Thank you for having me here today for the opportunity to speak on this topic.
You should have a slide deck in front of you. I believe an English version will be posted as well.
I'd like to walk you through this deck for the next few minutes.
As you may know, CFIB is a not-for-profit, non-partisan organization representing more than 110,000 businesses across Canada. Members from our small and medium-sized businesses represent more than 1.25 million Canadians.
Small businesses across Canada account for $75 billion, or nearly half our GDP. They represent all sectors of the economy and are found in every region of the country.
As you may be aware, CFIB takes its directions solely from our members through a variety of surveys, which makes us different from other organizations. We know that business owners are often too busy to come to committees such as these, so we go directly to them for feedback through our survey process and through our field force of around 220 district managers. These district managers knock on the doors of around 4,000 businesses every week. This gives us an opportunity to understand the realities of running a business at the grassroots level.
Today, I'm here to share our members' views on economic opportunities for energy efficiency in Canada, but first I'd like to set the stage and have a look at the state of the economy.
As you see on slide 3, one of the surveys we conduct at CFIB is our monthly business barometer. Our latest barometer from the month of November shows that small business confidence has stayed somewhat muted through the month and has stayed relatively stagnant in the past few months. Ideally, we'd like to see this index between 65 and 70, when the economy is growing at its full potential. Right now the index is at around 61.2. It's not great, but not bad.
On slide 4 you'll see that small business owners want governments to take a balanced approach when it comes to implementing environmental policies. Our survey on the environment in 2016 found that the majority of members believe that actions to protect the environment can be done alongside policies that encourage economic growth, so it is important that governments carefully consider both sides of the equation when implementing environmental policies and making decisions about the development of natural resources. These decisions have a profound impact on small businesses' ability to remain competitive and create jobs.
Moving on to the next slide, as small business owners tend to be more directly tied to their communities, their views and opinions on environmental issues may often reflect those of ordinary Canadians. However, small businesses are often overlooked by policy-makers, who tend to focus their efforts primarily on changing the behaviours and attitudes of consumers and big business. When we asked our members what motivates them to go green, the vast majority said it was their personal views. Half also said that cost savings were a motivating factor, which may indicate more education is needed about how certain changes in their business can help them save money. Only 13% of our members said the fear of additional taxes and regulations motivated them to implement environmentally friendly measures.
On slide 6 we included some of the comments we received on the survey from our members about what motivates them to become more environmentally friendly. As you can see, protecting the environment is an important personal issue for many of our members. This is why you'll see on slide 7 the majority of small businesses have already taken steps to implement environmentally friendly measures in their business. Small businesses cannot always afford to make large investments or undertake big environmental projects, but it's important to recognize they are nevertheless doing what they can to protect the environment within their means. Seventy-one per cent of our members say they recycle; 63% have reduced their electricity usage and almost 40% have made the switch to more environmentally friendly products. While fewer businesses are able to afford bigger investments, 33% of our members still were able to undertake energy efficient building upgrades and a quarter said they purchased new equipment.
On slide 8 we included some examples of the sometimes creative things that our members have done in their business to help the environment. As you can see, these efforts are not limited to certain sectors or regions, but they include businesses of all types across Canada, from farming to trucking. The first example we've listed is a hair salon in B.C. that participates in a recycling program that helps divert waste away from landfills, even the hair off people's heads. This hair is then used inside a hair boom that has helped to clean up oil spills because it absorbs up to 12 times its own weight in oil.
We also wanted to know what was preventing businesses from implementing environmentally friendly measures. On slide 9 you see the biggest barrier to going green was the fact that businesses may not be able to make changes to their building. As many of our members lease rather than own, this often ties their hands in regard to how much they're able to do.
The second biggest barrier, no surprise, is cost. With increases to CPP coming in January, minimum wage increases, a new carbon tax in many provinces, the bottom line of many small businesses is just getting tighter and tighter and they are simply not able to afford these investments.
While over the long run some of these investments may save them money, the upfront costs are sometimes prohibitive for many smaller companies. While the new accelerated depreciations announced in the fall economic update will certainly be helpful, businesses still require the upfront financing to make these investments in the first place. However, banks and financial institutions don't typically lend money for things such as green renovations, so getting financing to undertake larger projects can be difficult.
Finally, we also wanted to highlight that a lack of awareness of what businesses can do to go green came in as the third biggest barrier.
Next is slide 10. When we asked our members about what government approach they would be most supportive of, raising awareness of how they could increase their energy efficiency came out on top. This indicates that government can play a big role in helping businesses not only understand what they can do, but also what cost savings may be available to them.
The measure with the second highest support from small businesses was more research on clean technologies. For businesses in sectors such as trucking, for example, they know they are limited as to how much they can reduce their emissions since the technology simply does not exist yet that would enable them to do more.
Our members are also supportive of further financial incentives, which is no surprise as cost was the second biggest barrier to going green.
Businesses are also largely supportive of enforcing current regulations. As they do their best themselves to be in compliance, they want the playing field to remain fair.
However, where there is less support among our members is for more regulations or introducing taxes and fees, such as the carbon tax, as these can actually make it more difficult to make further investments to reduce emissions as these impact their bottom line.
On slide 11, you will see some of our recommendations.
Our first recommendation is around the cost of implementing environmentally friendly measures for smaller firms. While we understand that $1.5 billion of the revenues collected from the federal carbon backstop will be allocated to small businesses, we are concerned with how this amount will be allocated. If it is too narrow in scope, too complex and time consuming, or involves a significant amount of paperwork, many small businesses will be unable to access it or may not think it applies to them.
For example, programs that require energy audits to access financing can be complex and time consuming while providing no guarantee to a small firm that they will even get any funding at the end of the whole process. Moreover, this amount for the carbon backstop only accounts for 6% of the total revenue collected. As such, we believe that the proportion of the carbon tax revenue that will be collected from SMEs will be much more significant than the amount that will be allocated to them through the dedicated fund.
Our second recommendation is to ensure that small businesses can easily access information about what their business can do to reduce their carbon footprint. There are a currently a variety of programs available at various levels of government. However, it can be very difficult for a business to track down what would be most relevant to them. As we've seen, most government websites are little bit of a maze. This could be similar to BizPaL or maybe even the innovation platform available through the ISED website.
Last, one of the biggest barriers to going green is often that the business may not own the building in which they operate. We wanted to put forward the idea of something called a green lease. This lease would enable landlords and tenants to agree upon certain environmental targets for energy, water, air quality and recycling, and would allow landlords to execute green renovations.
I want to conclude by saying that small business owners do care about the environment. The federal government must recognize the work that they're already doing to reduce their environmental footprint. Our members know that growing the economy and protecting the environment do go hand and hand, but are understandably concerned about environmental policies that seem to place an undue burden on their business through additional costs.
Thank you for your time.
Please note that we can also answer questions in French.
Vice-President, Sustainability, Bentall Kennedy
Good morning, everyone. Thank you for having me here today.
My name is Anna Murray, and I'm the vice-president of sustainability for Bentall Kennedy. Bentall Kennedy is a Sun Life investment management company, one of the largest global real estate investment advisers, and one of North America's foremost providers of real estate services. We serve the interests of more than 550 institutional clients. Our investment management group has approximately $46 billion of assets under management.
Bentall Kennedy is a member of the United Nations Principles for Responsible Investment, and is a recognized responsible property investment leader. It has been ranked among the top firms globally for the global real estate sustainability benchmarks for over eight years.
Regarding a bit about sustainability at Bentall Kennedy, as we know, buildings account for approximately one-third of global greenhouse gas emissions and consume approximately 40% of global energy. There really is an incredible opportunity here to reduce the real estate industry's overall environmental footprint.
At Bentall Kennedy specifically, we aim to help lead the global movement for sustainability, climate action and environmental progress, which also strengthens the long-term value generation and competitiveness of commercial real estate. As physical, regulatory, reputational environmental, social and governance risks are being increasingly felt in this industry, real estate professionals, as the building owners and operators, are in a unique position to address these risks. By doing so, we're not only mitigating risk, but also safeguarding and increasing the value of the assets that we manage over the long term.
Our team's focus is to manage environmental, social and governance risks to generate long-term returns for our clients. As part of this, we look to drive green strategies, which create value by reducing the risk of building obsolescence, saving energy, decreasing costs, and driving revenue by satisfying tenant and resident demand. We focus on smart strategies and designs to keep buildings at the forefront of technology through our culture of continuous innovation and entrepreneurship.
We also have a wellness-focused strategy that contributes to the retention of tenants and residents and sustained investor return over a long period. Specifically, our initiatives include green building certifications; energy efficiency training; energy, water and waste audits; data management benchmarking; target setting; and external reporting amongst others.
I also want to take a minute to talk about a few additional initiatives that Bentall Kennedy is involved in that are contributing directly toward the Canadian Paris climate change commitments.
As part of the United Nations Environment Programme's finance initiative, or UNEP FI, we are on their investment committee as a member. UNEP FI is a partnership between the United Nations Environment Programme and the global financial sector, which includes insurance, investment and banking. We work with UN Environment to understand today's challenges, why they matter to finance, and how we can actively participate to address them.
As a committee member, we have a global mandate to drive adoption of sustainability in real estate investment and property management. We share responsibility for developing and monitoring the UNEP FI sustainability strategy for the investment industry while engaging with leading global investors to address pressing sustainability issues.
Last year, we were elected as co-chair of their property working group. The property working group's objective is to address the most imminent challenges in the field of sustainable real estate investment. I was in Paris last week for a round table with our global counterparts to discuss our current strategy as well as our long-term strategy.
As part of this group, and in our role as co-chair, Bentall Kennedy drives innovation in responsible property investment by facilitating access to relevant information and best practice, and collaboratively developing the necessary tools to enable property investors and professionals to systematically apply and integrate ESG criteria into investment and lending decisions. We also collaborate, as I mentioned, with our global counterparts.
Of note for the committee today is that, as part of my role as co-chair, I've undertaken a global survey representative of over one trillion dollars' worth of assets under management in Asia, Europe and the Americas. The survey is focused on global investor focus on sustainable real estate, and the results will be available in the new year. It will not only dictate our strategy as part of the property working group, but will also help to inform global investors as to market-competitive strategies.
Finally, in terms of the task force on climate-related financial disclosures, Bentall Kennedy is one of the original participants in the real estate pilot group. We're currently undergoing this pilot as one of 13 other global participants, and the results will be available in the new year. For those of you who are unaware of this pilot, approximately 20 asset managers worldwide joined UNEP FI's pilot project to implement the recommendations of the task force on climate-related disclosures. The pilot will specifically develop scenarios, models, metrics and, ultimately, a risk assessment tool that will enable investors to assess climate risk across their portfolios. Upon the conclusion of this pilot, the results will be made publicly available in an open-sourced format. We're looking forward to seeing those results also in the new year.
Thank you very much.
Liberal
Kent Hehr Calgary Centre, Lib.
Mr. Chair, I want to thank both presenters for being here today and for bringing forward their compelling testimony.
Yesterday, I was just reading that Microsoft, Mr. Chair, actually has an internal carbon-pricing mechanism that it uses in its company. It allows Microsoft to not only look towards greener solutions, but also save money within the company.
I was very interested in what Bentall Kennedy has done. Is that the basis of a lot of your programming? Are you guys trying to be part of a proactive move to be more energy conscious, while also seeing some practical savings from going green? Can I surmise that from your testimony?
Vice-President, Sustainability, Bentall Kennedy
Yes, absolutely.
Of course, our role is as a fiduciary, and as part of that, our responsibility is to generate long-term returns for our clients. Our credo is to invest soundly and sustainably, so we do see the two as inextricably linked.
Bentall Kennedy commissioned a study that has since been published in The Journal of Portfolio Management. It indicated that, for example, green-certified buildings are, on average, valued at 8% to 10% more compared to their non-certified peers. It kind of works in both ways for us, and we're always making sure that there is a business case associated with a greener and thriving real estate portfolio.
Calgary Centre, Lib.
Part of our pan-Canadian framework on clean growth and climate change is the adoption of carbon pricing instead of having mechanisms like regulations and subsidies do the work for climate change reduction. Does Bentall Kennedy recognize carbon pricing as a legitimate means to moving forward on impacting a more green, clean future for businesses and communities?
Vice-President, Sustainability, Bentall Kennedy
I typically don't respond in terms of political strategies, but I'm very happy to get back to you in terms of what our company's stance is on those types of issues.
Calgary Centre, Lib.
Okay.
My next question is for the CFIB.
It sounds like you were talking about how businesses preferred to have more incentives up front because there were often some costs associated and the like.
Are there any best practices out there that other jurisdictions are doing that we should be adopting here in Canada? Are there any examples around the world that you could point us to?
Vice-President, National Affairs, Canadian Federation of Independent Business
We haven't looked internationally in our research, but we are working closely, for example, with Minister McKenna's office and Minister Mary Ng's office as they go forward with the development of how the backstop money will get transferred to small businesses.
As my colleague pointed out in our presentation, our advice is really that it needs to be simple. We're looking at situations where, as they did in Ontario, you apply, and then you have an energy auditor come in and then you are told that you need a new boiler, for example. Then you need to find, in some cases, the thousands of dollars to purchase that new boiler and install it. Then you have to have the energy auditor come back to certify that you installed it correctly, that it is the right boiler. Then you reduce your overall energy audit by x%, and then the cheque will hopefully be in the mail at some point several months after that.
For many small businesses, that's not a sustainable way of getting that funding to help them move forward in terms of energy improvement. We're suggesting something that is much more simplified than that.
Calgary Centre, Lib.
I was very intrigued by your green lease, and I think it has a way to move forward.
Is this one of those projects that you're working on with our government or with your members and landlords to try to assist in better shaping buildings and the like?
Vice-President, National Affairs, Canadian Federation of Independent Business
We certainly have raised it with Minister McKenna's office as one of the, essentially, biggest barriers that many small business owners have.
At this point, it's tricky for a business owner to negotiate that kind of an agreement with their landlord, so we would welcome opportunities to simplify that process. I think that would require more than just the federal government's involvement. It may be as small as a municipal initiative. That is certainly something that we think presents some opportunities, but at this point, policies need to be designed keeping those intricacies of improvements for small businesses in mind, and that is one of the biggest barriers.
Calgary Centre, Lib.
My final question is for Bentall Kennedy.
Can you point to other examples around the world or otherwise that we should be looking at to institute here in Canada?
Vice-President, Sustainability, Bentall Kennedy
Yes, definitely. Having just returned from Paris and spoken with my counterparts in Europe and Asia, there are some great examples coming out in terms of guidance on positive impact in the real estate sector to move beyond solely looking at the environment to also understanding additional impacts, positive impacts in particular, that certain strategies can have as they relate to the social element.
There's something called the positive impact framework that the property working group is just launching now that can be used as a great example.
In terms of some of the initiatives that my counterparts in Japan are focused on, they are also things like green leases, green building certifications and trying to look at the implications among the investment industry, the banking industry, as well as insurance in particular as they relate to climate change elements.
Calgary Centre, Lib.
I think the last time we were questioning a group, we heard that there was an Ontario government program that went in and analyzed buildings to assess energy efficiency. Has your organization been working with them, and did you find that program works?
Vice-President, Sustainability, Bentall Kennedy
What specific program is that one?
Vice-President, Sustainability, Bentall Kennedy
That's okay.
We have quite a robust energy management system as well as a proprietary data management system. We have the ability at some of our buildings to analyze our consumption patterns down to the 15-minute interval level. We are very focused for our investment community as well as our tenants to make sure that our buildings operate as efficiently as possible. We are very keen on that.
Internally, we do an annual benchmark survey so that we have the ability to benchmark an individual asset against either its own asset class or whatever portfolio it's in, in a specific region or across North America, to get down to very minute points to understand exactly how they are functioning in terms of their environmental, social and governance risks.