Earlier this year, Change Course, Stand.earth and Canada’s National Observer launched the first annual Climate Finance Scholarship Contest, an opportunity for young people across Canada to showcase and share visionary, solutions-oriented essays that reimagined the role of Canada's Big Six banks and other powerful financial institutions in our communities. Each of the two contest winners won $2,500 scholarships for written or multimedia submissions. Mimi O’Handley used her winning essay to challenge financial institutions to reinvest in solutions to help combat the climate crisis. Our second winner, Diana Yoon, proposed an innovative model that financial institutions could consider.

We are also featuring three other top entries, beginning with Annabelle Liao, who argued institutions must work harder to make their investments more sustainable. In her essay, Mariam Kapanadze weighed in with specific suggestions financial institutions could heed to reduce their carbon footprints. In the final essay, Inderjit Dhiman focuses on housing and its connection to climate change.

Democratic economies are often discussed in the context of power over economic vehicles and production. However, an often-ignored aspect of democratized economies is the ability of the public to engage in these power structures.

Canada’s housing shortage is resulting in a crisis where people are unable to participate in a democratic economy. The unaffordability of the housing market is driven by a lack of supply and growing demand and further exacerbated by climate change. Forced migration due to environmental degradation will become more frequent, creating a strain on the already lagging housing market. To meet the demand, more than three million homes are required to be built, which will increase greenhouse gas emissions from housing development.

Traditional approaches to the climate change issue have centered around production limitations and alternative technology. Housing construction and the impact of city planning are often neglected in discussions about creating a climate-safe economy. The housing crisis must be addressed with sustainability as a key consideration.

Sustainable Financing

Financing is required to quell the housing problem within Canada. Canadian banks have a unique opportunity to spur development with sustainability and solutions that centre climate impact. Banks must factor the external cost of carbon into financing housing projects. The project's emission profile, efficiency and social housing credentials should be key factors for obtaining concessional financing.

Banks must adopt and comply with best practices in sustainability aligned due diligence. Key factors such as energy efficiency, transportation and density efficiency and housing equity must be disclosed.

Effectiveness and Equity of Sustainable Housing Finance

Sustainable-focused financing has been shown to create significant changes in the carbon footprint of the recipient. Disclosure requirements, coupled with the decrease in financial barriers to exploring sustainable options, allow projects to succeed without being hindered by the economic cost of implementing sustainable changes.

For a climate-safe, democratized economy, the housing crisis must be addressed with sustainability as a key consideration, writes Inderjit Dhiman @RBC @TD_Canada @scotiabank @BMO, @cibc, and @nationalbank

Globally, heating and electricity are two of the largest emitting sectors in the world. Energy-efficient homes are needed to decouple consumption emissions of the housing sector to ensure a climate-safe economy is realized.

Sustainable housing has the potential to reduce emissions footprints by 40 per cent in Canada, where heating is essential and city density is comparatively low.

Furthermore, the green standard may spur the development of more environmentally friendly communities. Road vehicle emissions are a significant cause of greenhouse gas emissions within Canada. Disclosures on how the development of housing projects to decrease commute times and increase alternative travel bolster Canada’s commitment to net zero by 2050 by creating denser communities while also decreasing the reliance on personal vehicle transport.

The increase in affordable housing will also help to democratize the economy by allowing more Canadians to participate in the marketplace. Canadians are spending over 40 per cent of their income on housing — more when transportation costs are included.

Solving the housing shortage with sustainable, dense options will initially increase the available capital for the average person, allowing them to participate in the market. This will also synergize with green investment products currently offered by Canadian banks, resulting in a knock-on effect furthering innovation toward a climate-safe economy.

Sustainable housing will also lessen the impact of climate damage on Canada’s most vulnerable. Unhoused persons are disproportionately affected by climate change through increased weather extremes and a lack of protection.

Addressing this must be a key consideration for concessional financing for housing projects. Enhanced availability and stability of housing play pivotal roles in the rehabilitation of homeless individuals. Shelter, protection and stability are essential components in ensuring proper care and support for this demographic.

The Greenwashing Dilemma

With a sustainable requirement for initial financing comes the potential for developers to overestimate the sustainability of a project while underestimating its negative impacts. The Canadian Securities Administration presented a study on disclosure of environmental, social and governance claims, noting precautions needed when evaluating sustainability disclosures, asserting that projections must be fact-based and not simply estimations on impact.

These estimates must be backed with thorough plans, with continuous disclosure of milestones the banks should expect throughout the project. Further, the report cautions on promotional language in disclosure. Banks must ensure claims are not unqualified remarks on the technology used and effects of different project methods. As a precaution, banks may consider requiring third-party auditing of disclosures to ensure accuracy before concessional financing is approved.

The intersection between housing and climate change requires urgent action. The housing shortage jeopardizes democratic participation in the economy and increases climate vulnerabilities. Banks can address the issue by offering concessional financing with requirements for sustainability and equitable access.

When implementing standards, banks must also be wary of greenwashing. Addressing these issues is essential for progress towards a democratized, climate-safe economy.

Inderjit Dhiman is an articling student at Prowse Chowne LLP.

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Who picks these images? The one shown is a school covered with a living wall, which looks “green” but isn’t. There is so much wonderful sustainable housing around, surely you can do better than this.