Kevin Carmichael: Expert Panel on Sustainable Finance did the hard work, now it’s up to politicians to find consensus

The three members of the Expert Panel on Sustainable Finance had already spent about 50 minutes talking about their 57-page, 15-recommendation, 34-sub-recommendation final report. Still, the moderator asked if any of them had anything else to say to the journalists on the call.

“I just want to make sure people don’t see this as an environmental report,” said Barbara Zvan, chief risk and strategy officer at the Ontario Teachers’ Pension Plan. “It’s much more about the economy and about jobs.”

Indeed. Bloomberg News reported on June 7 that the value of green assets under management last year was about US$31 trillion, a 34 per cent increase from 2016. That’s trillion with a “t,” in strong dollars. Converted to loonies, the figure is about $41 trillion at the current exchange rate. Real money.

And yet Zvan was worried that the painstaking work of four representatives of the financial elite — herself; the chair, Tiff Macklem, dean of the University of Toronto’s Rotman Business School; Andrew Chisholm, a member of Royal Bank of Canada’s board of directors; and Kim Thomassin, an executive at Caisse de dépôt et placement du Québec — could be dismissed as, well, an environmental report.

Can you blame her? There is a real risk that the people who will be running the country in 2019 won’t even read the committee’s report. When Macklem assembled his group 14 months ago, there appeared to be a consensus around what to do about climate change. Not now. The politicians with swagger these days are the ones who diminish green finance as a fad concocted by activists, Europeans and out-of-touch billionaires. Segments of the Canadian business establishment cling to an economy that made them rich, grumping about pipelines and taxes rather than investing in clean technology and green bonds.

Andrew Scheer, who will be prime minister come November, according to’s analysis of the latest polls, says he would remove the price on carbon. The expert panel endorsed the carbon tax and urged the federal government to clarify what the price will be beyond 2023 to remove uncertainty as a reason to hold back investment.

Jason Kenney, the Alberta premier, accuses London-based HSBC Holdings Plc of “boycotting” the province by deciding it would no longer back oilsands development, when all it was doing was responding to the same forces that have allowed global portfolio managers to raise $41 trillion and counting. The expert panel indicated that it thinks some Canadians need to stop stomping their feet, accept where the world is headed, and take advantage of the opportunities in the shift away from carbon presents. “We can shape our future or risk the international community doing it for us,” the final report said.

Closer to Zvan’s Bay Street neighbourhood, Joe Oliver, the former Conservative finance minister who now is chairman of Echelon Wealth Partners, a wealth management firm that promises its clients “unbiased investment solutions,” last month savaged the whole notion of sustainable finance as an attack on capitalism. Writing in the Financial Post, Oliver said the suggestion that companies have a fiduciary responsibility to disclose how climate change could affect profits “would undermine a fundamental underpinning of the market economy, with negative consequences for profitability capital formation, and wealth creation.”

Oliver’s vitriol was inspired by the expert panel’s interim report. Macklem said that document and the new one should be read as two-volume set. The final report calls on Ottawa and the provinces to require companies to either disclose their exposure to climate change or explain why they are unaffected; the Finance Department to state clearly that executives have a fiduciary responsibility to make climate disclosures; and the federal banking regulator to issue guidance on how it expects financial institutions to protect themselves from climate-related risks.

The expert panel … thinks some Canadians need to stop stomping their feet, accept where the world is headed, and take advantage of the opportunities

The response to the Macklem committee’s recommendations will tell us whether the Canadian political system has become too polarized to accomplish anything big. There is nothing in the report that Conservatives should oppose, assuming they are sincere when they say they want to do something about climate change. That includes the carbon tax, which is the cheapest, most efficient way to offset the various costs associated with consumption of fossil fuels. To be sure, they have whipped up so much anger over the policy, there will be no going back. But that needn’t stop them from incorporating much of the rest of the expert panel’s work into their own climate proposals.

Macklem and the other panelists clearly put a lot of work into thinking about how an economy built on resources could lower greenhouse emissions without destroying a lot of wealth. Macklem, a former senior deputy governor at the Bank of Canada, said there would be global demand for oil for decades and that more pipeline capacity would be necessary to encourage oil companies to invest in technology and innovation that would lower emissions. The committee endorsed “transition bonds,” a variation of green bonds, which oil companies and miners could issue to pay for technology that would allow them to pollute less. But the panel’s support might not be enough. Macklem said Canadians will need to get involved in the discussions that will set the international standards for sustainable finance to ensure such assets make the list of what qualifies as green funding.

The other idea that should bridge the partisan divide is allowing Canadians to lower their tax bills by investing in green assets. The expert panel proposes a “super deduction” of more than 100 per cent for every dollar invested as a way to marshal private funds to the cause of reversing climate change. The promise of a tax break could offset the reluctance of more traditional investors to spend their money on products they associate with charity. “If making money is primary, and doing good is secondary, then that should resonate,” said Raj Lala, chief executive of Toronto-based Evolve Funds Group Inc., a provider of exchange traded funds with about $500 million under management.

And sustainable finance should resonate across the political spectrum. It’s not a fad, it’s a chance to make money while fighting an existential threat. Surely Conservatives and Liberals can find common cause around that.

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