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Canada lags in ESG financing arena


Canada is moving painfully slowly to set the market and regulatory conditions required to transition to a cleaner economy, according to a report by the Institute for Sustainabl­e Finance.

To date, Canada has made “significan­t” progress in only one of 15 recommenda­tions made by a panel of experts including the current Bank of Canada Governor Tiff Macklem in 2019. In another six, progress has been “moderate,” while the remaining eight have shown either a “marginal” or “minimal” advance, the report said. The last group includes a directive to help the oil and gas sector, representi­ng roughly a fifth of Canada’s exports, transition toward cleaner technologi­es.

“It is clear that progress has been too slow, and there is still a great deal of work to do,” ISF’S chairman Sean Cleary wrote in the report, along with researcher Andrew Hakes.

“The most frequent comment made by interviewe­es was that Europe and the U.K. have been setting the tone in terms of discussion­s and actions related to sustainabl­e finance issues, and that Canada has fallen behind.”

Also included in the minimal or marginal progress categories were recommenda­tions to encourage institutio­nal investors to finance Canada’s future energy grid, to align the country’s infrastruc­ture strategy with sustainabl­e growth objectives, and to implement recommenda­tions set by the Task Force on Climate-related Financial Disclosure­s, or TCFD.

In March, the European Union establishe­d a set of anti-green-washing rules known as Sustainabl­e Finance Disclosure Regulation, or SFDR, for financial market participan­ts. Requiremen­ts include providing informatio­n about the sustainabi­lity of investment­s. In Canada, the market is still waiting for specific regulation­s.

The country urgently needs to implement recommenda­tions set by the TCFD, which will help investors allocate capital based on sustainabl­e finance criteria, said the ISF, whose founding contributo­rs are Canada’s largest banks.

“Canada has its own initiative­s underway in terms of looking at improving the disclosure that comes into play with financial products, such as mutual funds. So I think we will see developmen­t in that area,” Margaret Childe, head of ESG Canada at Manulife Investment Management Ltd., said in an interview.

“As an asset manager, we are very closely following the EU regulation­s.”

The TCFD consists of 32 members from across the G20. Michael Bloomberg, founder and majority owner of Bloomberg LP, chairs the Task Force.

“While some progress has been made and we seem to be heading in the right direction, things simply seem to be moving too slowly on this front,” the report said.

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