REMARKS TO THE ASIA SECURITIES FORUM
NOVEMBER 3-5, 2019
At the Asia Securities Forum (ASF) in Istanbul held November 3-5, IIAC President and CEO Ian Russell delivered remarks on Canada’s experience in meeting the 2030 UN Sustainable Development Goals. Integrating climate change measures into national policies, strategies and planning is one of the goals.
He mentioned that the developing sustainable finance market (green bonds, in particular) in Canada will play a key role in mobilizing capital to finance much of the investment the country needs to meet its commitments for lower carbon emissions. Spending on green projects will focus primarily on clean transportation, energy efficiency (buildings) and clean energy technology.
Mr. Russell noted the federal government in 2018 created the Expert Panel on Sustainable Finance to consult with Canada’s financial market participants on issues related to sustainable finance, including climate-related disclosures. Panel members were also asked to draft a report outlining the opportunities and challenges related to sustainable finance and climate-related risk disclosure in Canada, and to develop recommendations on next steps the federal government may wish to consider within its area of jurisdiction.
Canada has already built the foundations of an active green bond market, with total issuance at $5.5 billion last year, slightly less than the all-time high of $5.6 billion in 2017. Canadian provincial governments have dominated the issuance in the marketplace. A key strategic objective is to build and deepen that marketplace.
Mr. Russell described the core recommendations of the Expert Panel report:
i. The need to map out the capital spending path on a sector-by-sector basis to achieve a low-carbon emission economy.
ii. Leverage deepened liquid markets in the country by focusing on expanding the green and sustainable marketplace through incentives in widespread information to connect savings to “climate-smart” investment.
iii. Create a Canada centre for Climate Information as the authoritative sources of climate information to assist market practitioners in green bond markets.
iv. Encourage the federal government and provincial securities regulators to build a framework for client-related disclosure to facilitate the transparency of progress in meeting client objectives through capital formation. The accounting profession should similarly develop client-related accounting and audit standards for reporting climate-related activities.
v. The federal government, Bank of Canada, and provincial governments should establish systems and approaches to monitor the exposure of financial institutions to client-related risks. Sudden changes in client conditions can seriously impact the vulnerability of assets held by financial institutions.
vi. Improve the breadth and effectiveness of the green bond market, with cumulative issuance totalling USD$20 billion at the end of 2018, roughly 3% of the global marketplace. The adaption of a common taxonomy and definitions by issuers and investors, and “second-party” opinion ratings, would promote more active market engagement and participation, and enhance investor confidence in the green bond markets.
vii. Governments should expand efforts to publicize to both issuers and investors the importance of green bond financing to achieve a more sustainable and low-carbon economy, and also to meet important social objectives. Efforts to improve transparency and information on green financing, and its impact on carbon emissions, should be undertaken. Further, governments should consider incentives to promote the issuance of green bonds and related green spending, and tax incentives to encourage investors to invest in green bonds.