Burning lessons from afar: the Canada experience

Barbara Svan. Photo / Supplied

Barbara Zvan, chief risk and strategy officer of the Ontario Teachers' Pension Plan — a large investment fund — is from a country which is warming at double the global average. It is estimated that climate change will cost Canada between C$21 billion (NZ$25b) and C$43b a year by 2050, around 1 per cent of forecast GDP for that year.

Since 2009, Canadian insurers have paid out an average of over C$1.8b per year in claims, compared to an average C$400 million through the 1990s.

Over the past six fiscal years, the federal government spent more on recovering from large-scale natural disasters than in the previous 39 fiscal years combined.

Zvan is a member of the Canadian government's Expert Panel on Sustainable Finance which published a final report, Mobilizing Finance for Sustainable Growth, in June.

The report looked at "connecting the dots" between Canada's climate objectives, economic ambitions and investment imperative to leverage Canada's financial nous to facilitate and accelerate market activities, behaviours and structures.

Zvan laid out some of Canada's own challenges as the world's fourth largest oil and gas producer, and a country with the second highest greenhouse gas emissions in the G7 at the recent Climate Change and Business 2019 conference in Auckland.

One of the pluses about Canada's financial sector was its relatively small number of players with the bulk of Canada's financial sector run by around 25 financial institutions.

From more than 200 bilateral consultations and 57 roundtables it was clear climate change was perceived as a distant issue and there was confusion around data and information, as well as confusion around companies' fiduciary duties and they lack of expertise. "What we decided was that Canada needs to put in much more investment."

Climate change is being taken very seriously with the Bank of Canada listing it as one of its six major vulnerabilities in its 2019 Financial System review.

Many companies had significant environmental assets and were operating in industries which were slowing down, partly to due to climate change transition aspects.

For people alarmed or wary of the idea of green or sustainable finance, Zvan says: "The goals of sustainable finance just mean to co-finance. It means to get integrated into the method process, insurance process, the credit process in everyday business. Finance won't solve climate change, but it will finance the things that need to be done to solve climate change."

The panel's most important recommendation was the need to change the conversation, especially at the beginning. People worried it was all about risk, they were going to have to change their ways, they wouldn't have such good returns, she says.

"The finance community and big industry should be asking how they could get mainstream investors at the table, how to get the large banks and financiers to the table and make sustainable finance bigger," says Svan.

Having Canadian citizens more engaged as investors was also important. And rather than providing the finance sector with what looks like an environmental report, it worked better to have it look like a finance report for a business audience.

There would also be a big need to include the country's First Nations population, their impacts and rights, she added.

Another lesson was to keep recommendations specific and practical rather than multi-pronged and complicated. "When framed that way, it resonated with folks much better."

Canada — Hot facts

• World's 4th largest natural gas producer and 4th largest oil producer
• Largest export — oil & gas — two-thirds bigger than second largest (autos)
• 2nd highest GHG emitter per capita in the G7

Read the Sustainable Finance Report here.