Industry group notes pause amid COVID-19 uncertainty, highlights need to overcome challenges
While progress on sustainable-finance appears to have encountered a speed bump amid the COVID-19 pandemic, Canada must work to overcome hurdles to this positive trajectory, according to the Investment Industry Association of Canada (IIAC).
“The momentum for sustainable finance has continued in recent years, but the Covid-19 pandemic has resulted in some pause in activity,” Todd Evans, managing director of IIAC said in a recent letter.
In a chart based on data from the Climate Bonds Initiative, it showed that March green-bond issuance exceeded US$15 billion in both 2018 and 2019, issuances for March 2020 collapsed below US$5 billion. Momentum appeared to recover in April as issuances went back above US$15 billion.
“There is undeniable evidence that climate change is a problem of global proportions,” Evans said. “Canada is in fact warming at twice the rate of the worldwide average.”
While the need to channel capital into efforts against climate change is clear, he said many still view sustainable finance as an additional cost rather than an opportunity that addresses grave medium- and long-term risks.
“The opportunities and benefits of sustainable finance need to be articulated and the hurdles identified and overcome to encourage unified engagement,” Evans said.
He noted that the move toward a lower-carbon, climate-friendly economy will require substantial amounts of capital investment and risk-management expertise across many sectors including renewable energy, clean building technology, transportation, water, and food production.
“Projects from these sectors will need to be attractive investments to a diverse group of investors with varied investment goals and expectations,” Evans said.
The need for globally aligned sustainable-finance standards was also cited. An agreed-upon taxonomy, labels, and standards for green financial products, he said, is critical among many factors to provide direction to the rapidly growing green bond market. In line with that, it highlighted the Canadian Standards Association Group’s (CSA Group) efforts, which focuses on three major tasks:
- The development of a transition finance taxonomy as a national standard for transition finance in Canada;
- To play an active leadership role in creating a global transition-finance taxonomy that’s relevant for Canada; and
- To ensure Canada’s participation on ISO Technical Committee (TC) 322 Sustainable Finance.