Canada is jeopardizing its competitive position by dragging its feet on major climate-related financial policies as allies quickly adopt global standards and green investing rule books, former Bank of Canada governor Mark Carney said on Wednesday.
Mr. Carney, who is also the former governor of the Bank of England, told a Senate banking committee that corporate sustainability standards published last year have already been endorsed by the international umbrella group for securities regulators and the global Financial Stability Board. Countries around the world are busy putting those disclosure standards into force, and coverage is expected to extend to more than 100,000 companies.
“In contrast, Canadian climate disclosure efforts have been patchwork, delivered late and falling short of international standards,” said Mr. Carney, who co-chairs a global alliance of financial institutions that have pledged to direct investments to furthering the transition to a low-carbon economy.
Canada’s slow progress in building a sustainable financial system puts it at risk of losing investment and the job creation it fuels, he said.
In the past, Canadian securities regulators have consulted with companies and investors on recommendations to just require disclosure on a “comply or explain” basis, and to only report Scope 1 emissions – those from companies’ own manufacturing plants, he pointed out.
He said this falls short of guidelines developed by the International Sustainability Standards Board (ISSB), which also require disclosure of Scope 2 emissions – those from the emissions produced by energy that companies buy – and Scope 3 – indirect emissions stemming from consumer use of their products.
Now, the Canadian Sustainability Standards Board, or CSSB, is in consultations about how to adapt the ISSB standards to the Canadian economy. Mr. Carney said the CSSB is discussing extending an ISSB-recommended phase-in period for reporting Scope 3 emissions, the most difficult to tabulate, from one to two years. That would mean “Canada would lag the EU by two years for no apparent reason,” he said.
Canadian Securities Administrators, the umbrella group for the country’s securities commissions, has said it will conduct another consultation when the CSSB completes it work.
Mr. Carney, often touted as a future federal Liberal leader, appeared before the committee to discuss the Climate-Aligned Finance Act, which was introduced by Quebec Senator Rosa Galvez. The proposed legislation is aimed at mandating federally regulated institutions, such as banks and pension funds, as well as government agencies, to reduce economic risk by prioritizing climate-related objectives.
He lamented slow progress by the government of Prime Minister Justin Trudeau in putting a green-investment framework into force. In 2022, the government-appointed Sustainable Finance Action Council delivered a taxonomy for climate-focused investments, which would categorize them as either “green” or “transitionary” depending upon the greenhouse-gas emissions they produce and whether they are likely to continue to be used well into the future.
The council said such a document would go a long way in helping to attract the $115-billion in investment a year that is estimated to be needed for Canada to achieve net-zero emissions by 2050.
The expert panel ended its mandate in April, frustrated that the project did not advance further, as other countries adopted their own taxonomies, some of them having used the Canadian work as a guide.
“Canada should adopt, in my view, a transition-planning requirement and associated taxonomy for all firms in line with the [Glasgow Financial Alliance for Net Zero] framework,” Mr. Carney said.
Jeffrey Jones