Sustainable finance experts have launched a new initiative to encourage Canadian financial institutions and companies to develop and follow through on credible climate transition plans, measures they say will ensure Canada’s competitiveness and resilience in the global economy.
Announced Tuesday, the new finance-led initiative is called Business Future Pathways.
It will aim to provide clear, practical and internationally aligned guidance on how financial institutions and corporations in the country can boost their climate readiness to attract global capital and build investor confidence, said Barb Zvan, president and CEO of the University Pension Plan Ontario (UPP), who’s spearheading the initiative.
This guidance will draw on examples such as the International Sustainability Standards Board’s sustainability disclosure standards, the U.K. Transition Plan Task Force and Australia’s sustainable finance taxonomy, Zvan noted.
“What this initiative will focus on is not creating new standards or new frameworks, … but really making it accessible and understanding what good looks like when you piece all these different frameworks and standards together,” she said.
“It’s now perhaps even more important as we think about broadening out even further our trade partners. Many of those [countries] are tackling climate in these transition plans quite actively, and so for us to be seen competitive with others, this is something that we need to start addressing.”
The launch of Business Future Pathways comes at a moment when addressing climate risks has fallen down the priority lists of many Canadian financial institutions, corporations and securities regulators as they look to navigate economic uncertainty spurred by the ongoing trade war.
In late April, the Canadian Securities Administrators announced it would pause its work on new rules to mandate climate disclosures, citing a need “to make Canadian markets more competitive, efficient and resilient.”
There has also been a recent pullback in sustainable finance commitments from Canada’s major banks, including Royal Bank of Canada, which abandoned its pledge to facilitate $500 billion in sustainable finance by 2025. RBC cited the impact of new regulatory changes, specifically amendments to Canada’s Competition Act, for the move.
The new initiative seeks to build on the momentum of other sustainable finance efforts such as the Sustainable Finance Action Council, which was created by the federal government to guide Canada’s road to net zero, said Zvan, who was a member of the council. Several recommendations from SFAC have yet to be adopted by the federal government, including establishing a green and transition taxonomy for Canada.
Voluntary initiative
Business Future Pathways, however, is a non-partisan effort and depends on voluntary buy-in from financial institutions and companies.
So far, senior leaders from major Canadian financial institutions, pension funds and asset managers, including UPP, Addenda Capital Inc., Mackenzie Investments, Desjardins Group and Vancity Investment Management Ltd. have joined Business Future Pathways’ financial advisory committee.
There is also representation from environmental non-governmental organizations, academics and climate scientists from the Institute for Sustainable Finance, Shift, Environmental Defence, University of British Columbia and SHARE, among others on the technical advisory committee.
“We’re trying to create a more inclusive, robust governance structure that not just has the buy-in of financial institutions but also has a gut check from civil society more broadly,” said Jonathan Arnold, director of sustainable finance with the Canadian Climate Institute, who’s leading the research for the new initiative.
“By creating such a large constituency, we’re really trying to ensure that guidance that we’re offering has that buy-in and is durable and can really start to mainstream some of these ideas.”
Business Future Pathways will release several reports in the coming months. Its initial report, slated for this fall, will make “the case for why transition planning matters for Canada, particularly in this moment in time,” Arnold said.
It will later roll out guidance on what credible transition planning looks like, taking a sector-based approach where possible, he noted.
“What’s different about this group is that we’re not actually looking to develop anything new,” Arnold said.
“We recognize that there’s a ton of really great research and information and effort that’s already been put into this internationally. It’s really about trying to hear from investors what matters most to them out of this alphabet soup of guidance and standards and metrics, and boil it down to what matters most for Canada — focus on the sectors that matter most for the Canadian economy.”