Canada as a Hub for Sustainable Finance

Daniel Malik

Posted by Daniel Malik on February 27, 2019

What is Sustainable Finance?

Sustainable Finance can be defined as capital flows, risk management activities, and financial processes that assimilate environmental and social factors as a means of promoting sustainable economic growth and the long-term stability of the financial system. 

A number of countries have established sustainable finance strategies

Currently there is a concerted focus by several countries around the world to translate climate goals into transformative economic policies and practices. These jurisdictions are working with financial industries and businesses to accelerate sustainable finance in an aggressive bid to stake out a competitive advantage and Canada cannot afford to simply stand by. A number of countries have established sustainable finance strategies and initiatives including China, the EU, the UK, Italy, France, Australia, New Zealand, the Netherlands, Norway, Singapore, and Sweden.

The Federal Government has showed leadership with the establishment of the Expert Panel on Sustainable Finance and it should work with the financial sector and other stakeholders on a national strategy to develop Canada into a global hub for sustainable finance. The Ontario Government and the financial sector are also showing leadership with the Ontario Government issuing $4 billion in green bonds while CPPIB and Manulife were the first pension fund and insurance firm to issue a green bond globally.

The financial sector has as important role to play in Canada meeting its climate change objectives

Globally, it is estimated that the Paris Agreement on climate change will require over $100 trillion in global investment over the next decade. The total necessary investment for Canada in that time could be more than $2 trillion. Thus, the financial sector has as important role to play in Canada meeting its climate change objectives. Canada has one of the healthiest financial systems in the world with a well-earned reputation for good governance, risk management, and sound regulation. This system has a critical role to play in delivering the financing ingenuity and capital flows required to execute Canada’s climate change objectives. In fact, the financial sector could benefit significantly from achieving these objectives. For example, a report by TFI estimates that, by 2025, the annual revenue attributable to the sustainable finance opportunity for Canada’s financial sector could be between $27 billion and $110 billion. Also, a recent survey by a UK think-tank noted that Toronto was only a handful of centres whose green finance offerings were expected to improve significantly over the next two to three years.

It is also important that Canada’s views and perspectives be represented in international discussions and forums on sustainable finance. Hence, TFI joined the International Network of Financial Centres for Sustainability (FC4S), which was launched in September 2017 with a vision of facilitating “…rapid global growth of green and sustainable finance across the world’s financial centres, supported by strengthened international connectivity and a framework for common approaches.”

The EU has been leading on the development of a taxonomy for sustainable finance

One of the priority areas that the FC4S has identified is the need for the global community to develop a shared language or taxonomy to help accelerate the pace of green and sustainable finance. To date the EU has been leading on the development of a taxonomy for sustainable finance but Canada needs to be part of these international discussions. Canada needs to ensure that its views, on issues such as transition-oriented activities being incorporated in a global taxonomy, are represented. That is why in January, TFI hosted a roundtable with members of the EU committee that are working on taxonomy and we are helping coordinate stakeholder input on the issue.

TFI and the financial sector look forward to continuing to build momentum and working with governments and stakeholders to capitalize on the important opportunity of establishing Canada as a global hub for sustainable finance.
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