B.C. Environment Minister George Heyman’s recently announced Climate Solutions and Clean Growth Advisory Council is a welcome step towards bringing climate action in British Columbia back into alignment with legislated decarbonisation targets. As the the Advisory Council puts its mind to delivering a ‘just transition’ away from hydrocarbons in the energy and transport sectors, it could consider the following suggestions for delivering a timely transformation of the economy.
1. Be ambitious.
Removing fossil fuel subsidies, introducing a meaningful price on carbon and effectively enforcing environmental regulations will be critical for progress on climate targets. Fierce lobbying by the fossil fuel sector has largely meant that British Columbia and Canada have stood still on climate action since the Paris Agreement came into force in November 2016.
The Advisory Council will have to carefully consider how fiscal policy and private sector investment can be leveraged in order to make rapid progress toward the agreed upon net zero carbon target by 2050. This could include simple adjustments to the corporate tax code in order to follow through on Canada’s commitment to first phase out all fossil fuel subsidies, and then phase out hydrocarbon-based energy entirely, as per our G7 commitments. This process will necessarily require a legally mandated zero carbon homes standard, and a plan to phase out internal combustion engine vehicles alongside the use of natural gas in home heating, among other challenging topics. But the rest of the world is behind you, including our neighbours in California, where all new homes are to be net zero carbon by 2020.
2. Bring in the CFOs.
Chief financial officers (CFOs) wield significant power over corporate investment decision-making. If investment capital is to flow out of emissions intensive sectors and into climate solutions, corporate accountants and risk managers are key stakeholders. Embedded within a company’s management system, the CFO assesses corporate financial risks and is deeply engaged in financial planning around business strategy and investment. This includes climate change-related investment decisions. Canada already has a cohort of CFO’s committed to sustainability and climate action, the CFO Leadership Network, a project of the Chartered Professional Accountants professional body and the Prince of Wales' Accounting for Sustainability Project (A4S).
According to CFO Leadership Network member Steve Roder, CFO at Manulife, who control over $700 billion in assets, the project is "about finance leaders coming together to make a tangible contribution to the continued sustainability of our economy, society and environment, and by doing so, to the profitability of business and investment.” B.C.-based CFOs in the Leadership Network include Lawrence Davis at the British Columbia Investment Management Corporation, who manage over $135 billion in public sector pension savings.
Another member is Patrice Impey at the City of Vancouver, which spends almost half a billion dollars every year on that goods and services that keep the city running. These people understand how private and public investment capital and debt instruments can be deployed in ways that support the low-carbon transition, economic growth, and job creation.
If British Columbia wants to finance the transition away from fossil fuels and build out clean energy infrastructure, then the province’s largest holders of capital must be on board. This includes management team CFO leaders from the corporate treasuries at private companies like Telus and Teck, and Crown corporation behemoths like BC Hydro and the Canadian Mortgage and Housing Corporation. Bringing CFOs into the dialogue early on is one way to ensure that financial flows move in line with policy targets.
3. Call the bankers.
Peter Ladner’s annual Business in Vancouver ranking of B.C.’s largest banks and asset managers makes clear that the province is swimming in investment capital. Community credit unions like Vancity and Coast Capital Savings have guiding principles that already align with climate action, but they are not handling the vast sums of money that their flow through the hands of corporate bankers and private wealth managers at the Big Six chartered banks. Vancity holds around $17 billion in customer deposits, while the Royal Bank of Canada has over $1.2 trillion in assets across its national business. And the Big Six are now coming round the to the reality of climate-related investment risks and opportunities.
According to the Bank of Montreal’s Global Asset Management arm, “the scientific, technological, economic and social drivers in favour of tackling climate change are unstoppable.” In the same research note, the investment manager with $300 billion in assets under management concludes that “there is a pressing need to shift the balance of new investment towards the infrastructure needed to support cleaner development pathways, which is where we believe our funds should focus.”
If the Advisory Council wants to see money move to support its policy aspirations they will have to find genuinely committed allies in the asset management and banking community. Action on climate change is a great economic opportunity for British Columbia and Canada. The financial sector must be brought into the discussion in order to accelerate the transition to a low-carbon energy system.