The Big Read

Canada’s largest companies are changing how they invest because of climate change

Laura Zizzo recalls a time when sustainable finance was a fringe concept—something that, to companies and investors, implied sacrificing returns for virtue.

The risk-management consultant was studying environmental science at the University of Waterloo about 20 years ago, shortly after the Kyoto Protocol was adopted, advising countries to dramatically reduce carbon emissions by 2050—something they have largely failed to do. “I did the math and said, ‘By 2050, I’ll be in my late 60s,’” said Zizzo. “This is my working life. I’m just gonna work on this challenge.” Back then, people thought Zizzo’s passion around climate change was “cute,” she says. Now, she says she counts some of the country’s biggest financial institutions among her clients.

In the last two decades, the narrative around sustainable finance—that is, how companies assess and limit their impact on the environment and society—and its relation to the economy has flipped. Rather than it being a risk to the bottom line, it’s increasingly seen as vital to it.

But there’s still confusion around how to quantify sustainable finance, why organizations should pay attention to it and what difference it would make for those that do.

That’s why, in spring 2018, the federal government assembled the four-person Expert Panel on Sustainable Finance, tasked with finding ways to make sure money in Canada was flowing to companies that are transitioning Canada’s resource-heavy economy to a low-carbon one. In a press release announcing the initiative, the government warned of “more intense forest fires, storms, and floods” hitting the financial sector if nothing was done.

On Friday, the panel will publish its final report, more than a year after launching a consultation of stakeholders in Canada’s business and financial communities on the economic threats of climate change.

The Logic has learned the report will offer recommendations on standards for tracking and reporting how climate change could impact businesses, making climate considerations part of companies’ routine disclosures to investors, and how taking action on environment, sustainability and governance (ESG) is part of, rather than antithetical to, companies’ fiduciary duty.

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