Why Canada Risks Being Left Behind In Low-Carbon Economy

Why Canada Risks Being Left Behind In Low-Carbon Economy Global investors are already mobilizing capital to take advantage of investment opportunities in climate-smart infrastructure, emissions-reducing technology and updated electricity grids. (Shutterstock)

Earlier this spring, the most in-depth analysis to date on Canada’s changing climate provided clear evidence that Canada is warming twice as fast as the global average. As we increasingly experience the physical impacts (flooding, extreme weather, forest fires), we will experience the financial impacts as well in the form of both increasing market risks and unprecedented investment opportunities.

For the financial sector, this is a pivotal moment where it can realign its structures to ensure global capital flows toward solutions that will protect Canada’s economy and our prosperity, more broadly. However, Canada’s financial community has yet to fully grasp the numerous challenges and opportunities that climate change presents for us in the transition to a low-carbon economy.

On June 14, an independent panel of experts released recommendations on what Canada’s financial system needs to do to support this transition. The key message: we must empower our financial sector to design a made-in-Canada sustainable finance system so that Canadian firms can compete successfully among their global peers over the long term.

In its simplest definition, sustainable finance means aligning all of our financial systems and services to promote long-term environmental sustainability and economic prosperity. That includes channelling investments toward climate solutions and managing climate-related financial risks.

Canada has the talent, resources and institutional muscle to define sustainable finance for our economy. We need to grow and harness that capacity now, if we want to captain our own ship through one of the most significant global economic transitions in history.

Much to lose, but more to gain

According to the Economist Intelligence Unit, a 2C global warming scenario will trigger global financial losses of roughly US$4.2 trillion. With 6C of warming, those losses balloon to $13.8 trillion. That represents about 10 per cent of the global assets currently under management.

Losses at this scale will have wide-reaching implications for investors and the asset-management industry. Everyday people who are depending on investment income for their retirement will find themselves in dire straits. That includes every Canadian counting on the Canada Pension Plan.

Why Canada Risks Being Left Behind In Low-Carbon Economy Climate change is expected to trigger global financial losses in the trillions, but there are also opportunities for investment. (Shutterstock)

On the flip side, there is tremendous value — some $26 trillion worth — to be gained by shifting economies to avoid worst-case climate scenarios. This represents massive and economy-wide investments in climate-smart infrastructure, emissions-reducing technology, updated electricity grids, to name just a few examples. Global investors are already mobilizing capital to take advantage of these opportunities.

The question for Canada is: how do we attract global investment while, at the same time, protecting Canadian assets, investors and firms from risk?

In essence, this is what sustainable finance is about — harnessing our financial systems to help accelerate the activities, decisions and structures that will put Canadian industries and our economy ahead of the curve without ignoring the environment.

We can’t afford to fall behind

Other global players are already acting. The European Commission has spent the past two years mobilizing expertise to build a financial system that supports sustainable growth. It has made significant progress in establishing disclosure rules for climate-related financial risk and creating unified definitions (a taxonomy) on what can be considered environmentally sustainable economic activity.

For example, this includes defining the labels and criteria for green financial products, which will, among other things, significantly shape the direction of the rapidly expanding green bond market.

The problem is these rules and definitions are being pioneered elsewhere and are unlikely to benefit Canada. They may even penalize us, because they are designed for economies significantly different from our own.

For example, there is a current gap, and huge opportunity, to pioneer financial mechanisms and incentives could be created to expedite the sustainable transition of higher-emitting sectors like oil and gas and agriculture.

This requires our leadership.

If we allow others to direct the innovations in sustainable finance, we will find ourselves without the financial tools and structures that Canada’s resource-rich economy needs to determine its own path through a global transition.

The expert panel’s report is our wake-up call. It is time to catch up and get ourselves to the table. Our financial sector — and the broader ecosystem including our accountants, lawyers and actuaries — needs to start answering some big questions.

What does meaningful, responsible and consistent disclosure look like in a Canadian context? How do we create incentives and opportunities to draw in private capital to boost clean tech innovation across our economy and to invest in climate-resilient infrastructure? How do we better assess risk and the value of assets through a climate-smart lens?

We must, and we can, build the knowledge, understanding and capacity of our financial system to rise to these challenges. We can do this by investing in the research, education, professional training and the collaboration necessary to lift our current generation of professionals to the next level, while preparing an emerging generation to lead.

For those of us in the financial sector, this is about the future of our industry. For all Canadians, it’s about the future of our economy and well-being. Let’s get started now.The Conversation

About The Author

Sean Cleary, BMO Professor of Finance, CFA, ICD.D, Queen's University, Ontario and Ryan Riordan, Associate Professor & Distinguished Professor of Finance, Queen's University, Ontario

Related Books

Drawdown: The Most Comprehensive Plan Ever Proposed to Reverse Global Warming

by Paul Hawken and Tom Steyer
9780143130444In the face of widespread fear and apathy, an international coalition of researchers, professionals, and scientists have come together to offer a set of realistic and bold solutions to climate change. One hundred techniques and practices are described here—some are well known; some you may have never heard of. They range from clean energy to educating girls in lower-income countries to land use practices that pull carbon out of the air. The solutions exist, are economically viable, and communities throughout the world are currently enacting them with skill and determination. Available On Amazon

Designing Climate Solutions: A Policy Guide for Low-Carbon Energy

by Hal Harvey, Robbie Orvis, Jeffrey Rissman
1610919564With the effects of climate change already upon us, the need to cut global greenhouse gas emissions is nothing less than urgent. It’s a daunting challenge, but the technologies and strategies to meet it exist today. A small set of energy policies, designed and implemented well, can put us on the path to a low carbon future. Energy systems are large and complex, so energy policy must be focused and cost-effective. One-size-fits-all approaches simply won’t get the job done. Policymakers need a clear, comprehensive resource that outlines the energy policies that will have the biggest impact on our climate future, and describes how to design these policies well. Available On Amazon

This Changes Everything: Capitalism vs. The Climate

by Naomi Klein
1451697392In This Changes Everything Naomi Klein argues that climate change isn’t just another issue to be neatly filed between taxes and health care. It’s an alarm that calls us to fix an economic system that is already failing us in many ways. Klein meticulously builds the case for how massively reducing our greenhouse emissions is our best chance to simultaneously reduce gaping inequalities, re-imagine our broken democracies, and rebuild our gutted local economies. She exposes the ideological desperation of the climate-change deniers, the messianic delusions of the would-be geoengineers, and the tragic defeatism of too many mainstream green initiatives. And she demonstrates precisely why the market has not—and cannot—fix the climate crisis but will instead make things worse, with ever more extreme and ecologically damaging extraction methods, accompanied by rampant disaster capitalism. Available On Amazon

From The Publisher:
Purchases on Amazon go to defray the cost of bringing you InnerSelf.comelf.com, MightyNatural.com, and ClimateImpactNews.com at no cost and without advertisers that track your browsing habits. Even if you click on a link but don't buy these selected products, anything else you buy in that same visit on Amazon pays us a small commission. There is no additional cost to you, so please contribute to the effort. You can also use this link to use to Amazon at any time so you can help support our efforts.

 

This article is republished from The Conversation under a Creative Commons license. Read the original article.

enafarzh-CNzh-TWdanltlfifrdeiwhihuiditjakomsnofaplptruesswsvthtrukurvi

follow InnerSelf on

facebook icontwitter iconyoutube iconinstagram iconpintrest iconrss icon

 Get The Latest By Email

Weekly Magazine Daily Inspiration

LATEST VIDEOS

The Great Climate Migration Has Begun
The Great Climate Migration Has Begun
by Super User
The climate crisis is forcing thousands around the world to flee as their homes become increasingly uninhabitable.
The Last Ice Age Tells Us Why We Need To Care About A 2℃ Change In Temperature
The Last Ice Age Tells Us Why We Need To Care About A 2℃ Change In Temperature
by Alan N Williams, et al
The latest report from the Intergovernmental Panel on Climate Change (IPCC) states that without a substantial decrease…
Earth Has Stayed Habitable For Billions Of Years – Exactly How Lucky Did We Get?
Earth Has Stayed Habitable For Billions Of Years – Exactly How Lucky Did We Get?
by Toby Tyrrell
It took evolution 3 or 4 billion years to produce Homo sapiens. If the climate had completely failed just once in that…
How Mapping The Weather 12,000 Years Ago Can Help Predict Future Climate Change
How Mapping The Weather 12,000 Years Ago Can Help Predict Future Climate Change
by Brice Rea
The end of the last ice age, around 12,000 years ago, was characterised by a final cold phase called the Younger Dryas.…
The Caspian Sea Is Set To Fall By 9 Metres Or More This Century
The Caspian Sea Is Set To Fall By 9 Metres Or More This Century
by Frank Wesselingh and Matteo Lattuada
Imagine you are on the coast, looking out to sea. In front of you lies 100 metres of barren sand that looks like a…
Venus Was Once More Earth-like, But Climate Change Made It Uninhabitable
Venus Was Once More Earth-like, But Climate Change Made It Uninhabitable
by Richard Ernst
We can learn a lot about climate change from Venus, our sister planet. Venus currently has a surface temperature of…
Five Climate Disbeliefs: A Crash Course In Climate Misinformation
The Five Climate Disbeliefs: A Crash Course In Climate Misinformation
by John Cook
This video is a crash course in climate misinformation, summarizing the key arguments used to cast doubt on the reality…
The Arctic Hasn't Been This Warm For 3 Million Years and That Means Big Changes For The Planet
The Arctic Hasn't Been This Warm For 3 Million Years and That Means Big Changes For The Planet
by Julie Brigham-Grette and Steve Petsch
Every year, sea ice cover in the Arctic Ocean shrinks to a low point in mid-September. This year it measures just 1.44…

LATEST ARTICLES

trees to plant for climate2
Plant These Trees To Improve City Life
by Mike Williams-Rice
A new study establishes live oaks and American sycamores as champions among 17 “super trees” that will help make cities…
north sea sea bed
Why We Must Understand Seabed Geology To Harness The Winds
by Natasha Barlow, Associate Professor of Quaternary Environmental Change, University of Leeds
For any country blessed with easy access to the shallow and windy North Sea, offshore wind will be key to meeting net…
3 wildfire lessons for forest towns as Dixie Fire destroys historic Greenville, California
3 wildfire lessons for forest towns as Dixie Fire destroys historic Greenville, California
by Bart Johnson, Professor of Landscape Architecture, University of Oregon
A wildfire burning in hot, dry mountain forest swept through the Gold Rush town of Greenville, California, on Aug. 4,…
China Can Meet Energy and Climate Goals Capping Coal Power
China Can Meet Energy and Climate Goals Capping Coal Power
by Alvin Lin
At the Leader’s Climate Summit in April, Xi Jinping pledged that China will “strictly control coal-fired power…
Blue water surrounded by dead white grass
Map tracks 30 years of extreme snowmelt across US
by Mikayla Mace-Arizona
A new map of extreme snowmelt events over the last 30 years clarifies the processes that drive rapid melting.
A plane drops red fire retardant on to a forest fire as firefighters parked along a road look up into the orange sky
Model predicts 10-year burst of wildfire, then gradual decline
by Hannah Hickey-U. Washington
A look at the long-term future of wildfires predicts an initial roughly decade-long burst of wildfire activity,…
White sea ice in blue water with the sun setting reflected in the water
Earth’s frozen areas are shrinking 33K square miles a year
by Texas A&M University
The Earth’s cryosphere is shrinking by 33,000 square miles (87,000 square kilometers) per year.
A row of male and female speakers at microphones
234 scientists read 14,000+ research papers to write the upcoming IPCC climate report
by Stephanie Spera, Assistant Professor of Geography and the Environment, University of Richmond
This week, hundreds of scientists from around the world are finalizing a report that assesses the state of the global…

 Get The Latest By Email

Weekly Magazine Daily Inspiration

New Attitudes - New Possibilities

InnerSelf.comClimateImpactNews.com | InnerPower.net
MightyNatural.com | WholisticPolitics.com | InnerSelf Market
Copyright ©1985 - 2021 InnerSelf Publications. All Rights Reserved.