Tulips bloom in a park near Parliament Hill on May 10, 2021 in Ottawa.Adrian Wyld/The Canadian Press
The federal government is set to launch a public-private advisory body aimed at accelerating the adoption of sustainable-finance measures, on which Canada risks lagging behind its trading partners.
Finance Minister Chrystia Freeland and Environment Minister Jonathan Wilkinson will announce on Wednesday that the new Sustainable Finance Action Council will be chaired by Kathy Bardswick, a former chief executive officer of the Co-operators Group who currently serves as president of the Canadian Institute for Climate Choices.
It’s a belated follow-up to a recommendation by a previous expert panel on sustainable finance that was headed by Tiff Macklem, now the Governor of the Bank of Canada. In its final report nearly two years ago, that committee called for the Action Council to be established as a first step toward implementation of many other detailed proposals for new regulatory and investment-support policies, most of which have not yet been adopted.
Justin Trudeau’s government now appears to be trying to make up for lost time. Although Wednesday’s announcement will not name the rest of the new group’s members – who are to be drawn primarily from financial institutions, insurance companies and pension plans – its terms of reference include an expectation that it will produce by July “a summary of private sector perspectives” on alignment of climate-related financial disclosures with international standards.
Thereafter, the Council – which has been allocated $7.3-million over three years, and is to be supported by a cross-ministerial secretariat – is supposed to continue focusing on measures to improve climate risk disclosure. It is also to pursue aims such as building better national climate-related financial data, and both stimulating and clearly defining what qualifies as green investment.
But it very much remains to be seen how much the Council will be able to overcome an inertia around ensuring climate change is prioritized in corporate governance that could impede Canada’s ability to attract investment and meet emissions-reduction targets.
At the core of the new entity’s undertaking will be to figure out something that has seemingly bedevilled Mr. Trudeau’s Liberals to date: how to adapt green investment and accountability standards, being developed globally, to a country that is unusually reliant on its oil and gas industry. And it will also need to find a way to avoid Canada’s decentralized governance impeding its ability to move as cohesively as its allies.
Those challenges have been most obvious thus far when it comes to adopting the framework of the international Task Force on Climate-related Financial Disclosure (TCFD). While those standards for reporting on financial risks (both from climate change’s impact and from emissions-reductions imperatives) are being adopted voluntarily by some companies, countries such as Britain (and possibly soon the United States under Joe Biden) are in the process of mandating them.
In Canada, that’s more difficult because there is no single securities regulator, with every province instead having its own. The TCFD is explicitly mentioned in the Action Council’s terms of reference, and the hope seems to be that its members will be able to convince the provinces that the business community wants to see comprehensive adoption. That could still be a tough sell with subnational governments that don’t share Ottawa’s prioritization of climate policy – not least in Ontario, which has by far the country’s most important authority.
Slightly less high-profile, but no less important, is the development of a green taxonomy, which defines which assets and activities qualify as climate-friendly – a defence for investors against corporate green-washing. Among governments, the European Commission has taken the lead on that front, releasing a draft taxonomy last month that stands to be highly influential internationally. But there is a perceived need for Canada to develop its own taxonomy that would be more supportive of efforts by fossil-fuel producers to transition to more sustainable operations, which the European version largely rejects.
Complicating matters is that while Ottawa has moved relatively slowly, the CSA Group (formerly known as the Canadian Standards Association) has been developing a proposed green taxonomy to be unveiled at some point this year. The government doesn’t appear likely to start its own process from scratch, but neither does it seemingly want to just adopt whatever the business-led effort comes up with. So the Action Council will be expected to help it land somewhere in between those two paths, testing its ability to serve its intended aim as a bridge between the public and private sectors.
Fortunately, there are other potential initiatives for the Action Council where figuring out Ottawa’s jurisdiction could be less of a concern. Among the suggestions by Mr. Macklem’s panel for where the Council could play a specific role, for instance, was helping establish a new Canadian Centre for Climate Information and Analytics to enable more informed business decisions.
In addition to its proposals to improve accountability and transparency, the expert-panel report back in 2019 also included various ideas for how to support sustainable growth – including a big tax deduction to encourage Canadians to make climate-friendly investments with their savings, and new tools to spur venture capital for clean technology – where the Council could help set parameters if the Liberals want to move forward.
The question, in all these regards, is one of will.
It will come down to how much initiative the new body’s members, who will not be paid by the government for their service, are looking to take. But it will especially depend on how serious the Liberals are about the “Action” part of Sustainable Finance Action Council.
It’s not entirely surprising that the government has moved slowly in implementing the ideas it was handed by Mr. Macklem et al, since it has been busy dealing with a global pandemic. And it has managed to slide a bit of sustainable-finance policy into its COVID-19 economic response, including making improved climate-risk disclosure a requirement for large companies to receive financial aid.
But the last thing Ottawa needs now is a fresh set of recommendations to gather dust. Where it will need help is in implementing the ones it already has.
Adam Radwanski writes about climate politics and policy. Sign up for the Globe Climate newsletter today.