Canadian investment leaders at Davos set timelines for climate-friendly economy

Two Canadian investment leaders endorsed a transition to clean energy at a virtual Davos World Economic Forum on Wednesday as more investors worldwide push for concrete sustainability commitments.

Former Bank of Canada governor Mark Carney said that politicians can help markets finance the transition to zero-emission economies by setting credible forward commitments.

Canada’s carbon pricing plan is an example of a forward commitment, Carney said, since it would hike the federal tax to $170 a tonne by 2030 from $30 currently.

"I think we're reaching the tipping point. The question is execution. How is that political will channelled?" said Carney, who was speaking in his capacity as United Nations Special Envoy for Climate Action and Finance.

He pointed to recent COVID-19 vaccine purchase agreements as an example of the power of putting political will behind contracts.

Carney, who is also vice-chairman at Brookfield Asset Management, said that financial and economic markets will adjust to future goals, such as upcoming bans of internal combustion engines in Europe. Carney pointed to his research with U.S. Treasury Secretary and former Federal Reserve chairwoman Janet Yellen, which suggested that markets will "smooth" out the carbon price hikes.

"That's what markets do best. And by the time you get to the point where the price is high, the economy has adjusted," said Carney.

In a separate session, Ontario Teachers’ Pension Plan chief executive Jo Taylor said the pension plan tries to push its portfolio companies toward sustainability, rather than immediately divesting in carbon-intensive companies. The pension plan said last week it would commit to reaching net-zero greenhouse gas emissions by 2050.

"Through that engagement, rather than divestment, I think we can particularly push these companies to do a better job and actually provide some additional help and services in and around the world where they may not be immediately available," said Taylor.

Carney and Taylor's comments at Davos came as 61 global business leaders said at the forum they would begin using a standardized set of environmental, social and governance metrics and disclosures.

Global investment firm BlackRock Inc. also said this week it would start giving "heightened scrutiny" to investments that posed a climate-change risk, calling for more company disclosures not only on climate change but also social goals such as equity, diversity and inclusion. In his letter to CEOs, BlackRock chief executive Laurence Fink said that between January and November 2020 there was a 96 per cent year-over-year increase in sustainable asset investments in mutual funds and exchange traded funds.

Carney said that as more governments sign on to net-zero pledges, it is "cascading down" to large pension funds, insurance companies and sovereign wealth funds.

"We don't often invest on our own, so what we need to do is also persuade other investors," said Taylor. "Some of the investors we work with have a much more short-term view of what they're trying to achieve."

At a separate event at the Canadian Club of Toronto on Wednesday, business leaders made a similar case for businesses to boost diversity within their companies and support clean energy.

"The pain points today are revolving around climate change, and we see what's happening. It's real. Sheets of ice are melting, the ocean water levels are rising, investors are paying more attention this," said CIBC chief executive Victor Dodig.

"If we want to make sure that capital comes to Canada, we need to make sure that companies, the private sector — publicly traded companies and private companies — are focused on that. Because capital won't come here otherwise."

Dodig said that Canadian companies have among the strongest technology offerings worldwide for renewable energy, pointing to companies working in uranium and agriculture. But Rola Dagher, global channel chief at Dell Technologies, said business leaders must also do more in general to ease the anxieties that technology will be used the wrong way and cause job losses.

Richard Manley, head of sustainable investing at CPP Investments, said that while the energy industry has been "in a permanent state of innovation for a century," it has yet to reach its full potential in confronting carbon emissions.

"We clearly are investing in technologies that will shape the greening of energy," said Manley. "But at the same time, I think we're very keen to support companies that are identifying the challenges of the transition, and a commitment to decarbonize and transition their businesses, to provide them the capital they require."

This report by The Canadian Press was first published Jan. 27, 2021.