Canadians push climate at Davos

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 vicechair at Brookfield Asset Management, said 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 chair 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 fund 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.

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.