10×10 Takes: Getting Down to Business at GxC with MaRS Discovery District’s Tyler Hamilton
Our upcoming event, GLOBExCHANGE (Feb. 27-Mar. 1, 2023) builds on our recently published 10×10 Matrix, which identifies the 10 areas where we need to take action in the next 10 years to get to net zero.
In our 10×10 Takes video series we’re talking with climate leaders who are working to advance these action areas. First up, let’s get down to business on Unlocking Innovation with MaRS Discovery District’s Senior Director of Cleantech, Tyler Hamilton.
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GLOBE Advance 2021: Scaling Cleantech in Canada – Summary Report
As Canadian governments and corporations commit to net zero by 2050 targets, accelerating market deployment of clean solutions has become an increasingly urgent imperative. Building on insights gained from GLOBE Advance 2020, the Scaling Cleantech in Canada session hosted at GLOBE Capital 2021 focused on the barriers impeding cleantech deployment, solutions, and leadership.
In partnership with Emissions Reduction Alberta (ERA) and sponsored by Foresight Cleantech Accelerator Canada (Foresight) and the Natural Gas Innovation Fund (NGIF), GLOBE Series and The Delphi Group engaged 70 workshop participants and speakers from Tourmaline, Intelligent City, Foresight, and ERA to discuss key barriers, best practices, and lessons learned in deploying and scaling cleantech in Canada.
The partners and sponsors involved in this initiative hope that this summary supports advancing scaling and deployment of cleantech in Canada and welcome any stakeholder feedback. Stay tuned for the next outcomes-oriented installment of Scaling Cleantech in Canada at GLOBE Forum 2022!
Q&A with Andrea Brecka, GM Retail, Director & Vice President, Shell Canada
With over 1,300 Shell stations in Canada, filling up under that bright red and yellow sign is a weekly ritual for many Canadians. It’s also one of the activities that generates the most carbon emissions—a quarter of Canada’s carbon footprint is attributed to transportation. Consumers know this and they’re continuing to demand new solutions to reduce their emissions. As GM of Shell’s retail fuels division in Canada, Andrea Brecka leads the company’s efforts to put the customer first. We caught up with her to learn more about how Shell is investing in innovation to transform what it means to “fill ‘er up”.
You have joined the Canadian government, 100 other countries and many of the world’s largest corporations in committing to net-zero emissions by 2050. To achieve this target on a global scale, the latest International Energy Agency report recommends no new oil and gas developments. What does a net-zero future mean for Shell?
Climate change is a very urgent challenge and tackling it requires a fundamental transformation of the global economy, including the energy system. That’s why Shell has stepped forward to set a net-zero-by-2050 target in lockstep with society’s progress and the Paris Agreement.
How will we do that? We’ve identified six levers to help Shell and our customers decarbonize:
- Reducing emissions in our operations.
- Shifting to natural gas.
- Growing a low-carbon power business to provide more renewable electricity and electric vehicle charging points.
- Providing low-carbon fuels, such as biofuels or hydrogen.
- Developing carbon capture and storage, which we’ve already started in Canada.
- Using natural carbon sinks like forests to absorb greenhouse gas emissions.
In terms of the IEA conclusions, they’re based on scenarios and, therefore the demand and supply modeling varies. Shell’s oil production peaked in 2019. Further, we don’t foresee any frontier explorations beyond 2025. All to say, this net-zero commitment is critical for Shell.
I understand Shell Canada has taken steps to reduce Scope 3 emissions. Could you share more about this strategy and why it’s important?
Absolutely. I think it’s fundamentally important that everybody understands what we mean by Scope 1, 2, and 3. We define Scope 1 and 2 as the emissions generated from the extraction and production of the energy products we sell. Scope 3 emissions are generated by the end use of these products. Many people are surprised that more than 90% of Shell’s emissions are Scope 3. The other element that people may not know is that Shell sells many products from other companies, including energy products. In fact, we sell more than three times the energy we produce ourselves. This is why it’s significant that Shell has chosen a commitment to reduce Scope 3 emissions.
I’ll share an example of how we’re helping our customers reduce emissions. Last year, we were the very first fuels retailer in Canada to launch a Drive Carbon Neutral program for our customers to help offset emissions from fuel purchases. Most recently, we’ve announced that carbon-neutral lubricants will be available to customers in key markets, including Canada. This program will offset approximately 700,000 tonnes of CO2 emissions per year.
Tell us more about your new carbon-neutral driving offer.
For a number of years, many customers have been telling us they’re interested in reducing their carbon footprint, but an electric vehicle (EV) is not an option at this time. The Drive Carbon Neutral program helps them have an impact even if they don’t own an EV. It’s very simple to participate: from now until Sept. 7, when customers opt in via the Shell EasyPay app, Shell will offset the emissions from their fuel purchase. It’s a great experience and I highly encourage all our customers to participate.
Alternatively, customers can come inside the store at participating locations and pay 2 cents per litre to offset their emissions. What happens after that? Shell purchases independently verified carbon credits that are generated from either Canadian or international projects designed to protect or restore the natural landscape.
I’m happy to say that, since the launch of this program, we have offset approximately 15 million litres of fuel. The customer feedback is overwhelmingly positive. We’re continuing to evolve the offer and there will be more to come later this year. Stay tuned!
Consumer demand for alternative fuels is growing. How is Shell supporting innovation to meet that demand?
As I referenced earlier, it’s important to be in lockstep with customer demands. In Canada, I’m proud to say that we’ve not only embraced, but I feel like we embody the energy transition. In the last five years, we have transitioned our business from heavy oil to natural gas, we’ve implemented carbon capture and storage here in Alberta, and we continue to do more and more with respect to lower-carbon fuels and renewables. We’re also making a much wider range of lower-carbon products available, such as biofuels and hydrogen, while also increasing the number of charge points for battery electric vehicles.
To give a hydrogen example, Shell has partnered with a hydrogen technology and energy company called HTEC to build two hydrogen refueling stations in the greater Vancouver area. On the biofuels side, there are a couple of innovation examples. We have a 40% interest in the $875 million commercial-scale Varennes carbon recycling plant—the first ever waste-to-low-carbon-fuels plant in Quebec. Secondly, Shell Ventures has made an equity investment in Forge Hydrocarbons Corporation to build a first-of-its-kind $30 million commercial-scale biofuel production plant in Ontario. We’ve also acquired Greenlots, an EV solutions provider, and we will be building EV charging stations across Canada and in the U.S. These are just a few examples of investments Shell has made to advance innovation and accelerate progress.
It’s 2030. I pull into a Shell station. What does it look like?
I think the future retail station will have a mosaic of solutions. Certainly, when you think about the kinds of fueling offers, EV, hydrogen, and biofuels will be standard. We will build future retail stations to be carbon neutral, perhaps taking advantage of solar panels or geothermal power. Lastly, I think about our customers. We have a vision to provide an oasis within the store. In 2030, we’ll have great lounge areas with wifi for people to connect or catch up on some work. In addition to the foods and beverages we have now, we’ll also offer healthier solutions for our customers. We think of our retail stations as not just fueling vehicles, but fueling bodies and minds.
How is Shell addressing calls for a just transition? And as a former president of Shell Canada’s Women’s Network, what role do you see for diversity and inclusion as we transition to a clean economy?
I’m proud to say that when Shell looks at projects like LNG in new areas, we work hard to get to know the communities. That means understanding the community’s wants, meeting its workforce, and addressing local partnerships in a way that’s fair, just, and inclusive.
In my work in the retail business last year, we launched the Fuel Service app. For most of us, fueling your car is a seamless experience, but for some individuals with disabilities, it can be daunting. To address that challenge, we partnered with Fuel Service. Now, individuals have the ability to call ahead and see if a retail station is able to assist them in their fueling.
I’ve worked with Shell for almost three decades. One of the reasons I’ve been here as long as I have is because Shell believes in and takes action on diversity, inclusion, and equity. Even in the last year, Shell is going through a major reorganization and we’ve made a very intentional effort to ensure our leadership team is diverse. This has been wonderful. Everybody wants role models to look up to. Diversity means better quality decisions and better business outcomes.
If you could invite three people, either alive today or no longer with us, to a conversation about the future of energy in Canada, who would they be?
I love this question. I thought long and hard about it. One would be Brian Mulroney. I saw him speak at a Pollution Probe gala last year and in his speech, he said “Successful leaders do not impose unpopular ideas on the public. They make unpopular ideas acceptable to the nation, and that takes courage.” When I think about his legacy of really tackling tough environmental challenges and what he’s been able to accomplish, it’s very inspiring. I would love to ask him how he managed the many challenges and different stakeholders to ultimately make progress.
I also thought about Generation Z and my two young adult daughters. When I think about that generation and what’s important to them, I would love to start a conversation about what they think about companies like Shell. How do they see us playing a role in tackling climate change? I’d love to just listen to their perspectives and have a debate.
Lastly, Elon Musk is a pioneer and a visionary. He’s courageous, bold, and willing to fail fast to make progress. Wow. For a company like Shell that’s undertaking transformational changes, learning from someone who is willing to take a risk to commercialize ideas would be fascinating.
GLOBE Capital Q&A: Jonathan Fowlie, Chief External Relations Officer, Vancity Credit Union
“We must work towards a climate transition that puts people at its centre and leaves no one behind,” Vancity proclaims as part of its commitment to net-zero by 2040. After a year when our environment and social safety nets were tested like never before, this approach seems very timely. Jonathan Fowlie, Chief External Relations Officer, Vancity Credit Union, joined No One Left Behind: How We Build a Just Transition to the Net-Zero Economy at GLOBE Capital to discuss the role of financial institutions in supporting a just transition. We caught up with Mr. Fowlie to learn more about how Vancity has integrated an equity lens into its climate commitments.
Tell us more about Vancity’s net-zero commitments.
We’ve recently released five commitments on climate action and climate justice that take a holistic approach to how we as a financial institution can respond to the climate emergency. It starts with decarbonization and getting our lending portfolio to net-zero. We’re also working to enable responsible investments that create a clean and fair future. This past year has exemplified how a global event can widen the systemic gaps in our economy. The climate emergency is having and could have a similar impact. We’re applying this systemic view to climate change to anticipate community and economic impacts.
Earlier this year, Vancity became the first financial institution in Canada to make a commitment to net-zero emissions by 2040 across your full lending portfolio. To ensure success, you’ve gone one step further by also committing to regular targets on the road to 2040—the first of which will be in 2025. How will you set that 2025 target?
In its most basic form, Vancity was carbon neutral across our operations in 2008. We know we can have a much greater impact on reducing emissions by extending this commitment to what we finance, i.e. the loans we give people to buy homes or start businesses. Our 2025 target will aim to reduce these finance-related emissions.
The first step is understanding the carbon footprint of our loans. If you have a Vancity mortgage on your house, what are your emissions and how do we record that? Our most recent annual report discloses the emissions that we estimate to be associated with our loans. The next step, which we’re undertaking right now, is a rigorous science-based process to understand Vancity’s pathway to net zero with that inclusive lens in mind. Once we identify that pathway, we’ll engage government to ensure we’re aligning with current regulations. Then, we’ll be ready to publicly commit to targets that are aggressive, achievable, and science-based.
What actions is Vancity taking to incorporate equity into its climate work and why do you think it’s important that we include equity in climate finance conversations?
Getting to net zero is important. How we get there is essential. As I mentioned earlier, the pandemic has shown us the impact a global event can have on marginalized communities. We also saw how a financial institution like Vancity can immediately meet those needs. We have a history of financial inclusion—of trying to serve the underserved. That approach has become all the more relevant during the pandemic.
For example, on Vancouver’s Downtown Eastside, health restrictions have interrupted a lot of the services that residents rely on. In the first months of the pandemic, various levels of government introduced new and increased benefits to support the safety and well-being of vulnerable and hard-hit individuals. As a financial institution, our role is to form a bridge between the resources being made available and the people who need to access them.
Our Pigeon Park Savings branch was the only financial institution in the Downtown Eastside that stayed open during the height of the pandemic. We see this as an illustration of financial inclusion and how it can ensure systemic gaps aren’t widened in extreme situations.
We’re taking the same approach to the climate emergency with a view to ensuring the transition to a clean economy will be equitable and just. That means talking a little bit less about decarbonization and climate and more about understanding existing inequities and of course, including marginalized communities in that conversation.
When it comes to the just transition, what do you think is the biggest opportunity and the biggest challenge?
The biggest challenge is ensuring the transition is just. What do I mean by that? We’re at a place where we look ahead to the effects of climate change and we’re still not entirely clear on the questions we need to ask, the things we need to measure, and the actions we need to take. Some are apparent, but some, as we saw during the pandemic, emerge as secondary and tertiary issues. How do we ensure we can adjust and be flexible?
Conversely, the biggest opportunity is to re-imagine our economy. How can we shift, innovate, create leaders, and form the jobs of tomorrow? We’ll need to consider the skillsets of people across our economy. Part of that is considering the workforce that will need to transition from a job that might not exist 10 years from now into a job that is driving innovation. It’s also about creating opportunities that make our economy more equitable and inclusive.
When you ask people: do you think there needs to be a fundamental change towards an economy that is cleaner and fairer? Unanimously, you get a yes. It’s not at all clear exactly what that future looks like, but that consensus creates an opportunity to chart a new path.
How can financial institutions take a leadership role in the just transition?
Financial institutions like credit unions and banks make crucial decisions every day about where money goes, what gets funded, and who benefits. So, we have a crucial role to play in determining the future economy and frankly the future of our planet. Accordingly, there are a number of questions that all financial institutions should be asking: Are we just offsetting climate impacts? Are we working to avoid them in the first place? How are we measuring the changes to our balance sheet in a rigorous way that ensures transparency? Finally, how do we ensure that the actions we are taking are leading towards an economy that is both clean and fair? I strongly believe that we have an obligation to understand the impacts of our decisions on where to allocate capital, because those who have the least to do with causing climate change in the first place are those who will be impacted the most and who will have the least available resources to adapt. We have a unique opportunity right now to learn from the past and explore what it means to truly build back better.
If you could ask the GLOBE Capital community to take one action, what would it be?
I’d ask the GLOBE Capital community to bring an equity lens to every action they take on climate. For example, when you’re looking at climate risk across a portfolio of buildings, consider the demographics of the locations and local people’s ability to adapt. Considering equity means asking: are there choices that we can make today to ensure we’re not only protecting our investments against climate risk, but we’re also fostering equity and resilience? It goes back to the premise that yes, we need to decarbonize. We could do that overnight by just stopping funding a variety of activities, but that’s neither practical nor will it lead to an equitable economy and society. So, we need to ensure we’re inviting everyone into the conversation and framing that conversation in a way where everyone, particularly marginalized communities, can see themselves reflected.
GLOBE Capital Q&A: Bryan Gilvesy, Chief Executive Officer, ALUS
The Canadian countryside conjures up images of both vast wilderness and plaid-clan farmers in bright red tractors. The first is a symbol of conservation and nature; the second a symbol of economy and production. ALUS is blurring those lines to bring us an innovative approach to nature-based solutions. Its New Acre Project helps corporations exceed sustainability objectives by supporting farmers and ranchers to build nature on their land one acre at a time. Bryan Gilvesy, Chief Executive Officer, ALUS, joined Not Your Grandpa’s Farm: Welcome to the NEW Bioeconomy at GLOBE Capital to discuss the financial, environmental, and social opportunities of a bioeconomy. We caught up with Mr. Gilvesy to learn about the great potential for ecosystem services through agriculture.
Was there a Eureka moment for you in terms of understanding the role for agriculture in fighting climate change?
Yes, there was. I was the third participant farmer to enroll in the ALUS program in 2006. The project that intrigued me at the time was the restoration of the native tall grass prairie here on my ranch in Norfolk County, Ontario. As I learned more about the grass, I realized it had extraordinarily long roots—12-16 feet—with a root ball that replenished itself every two years making it highly effective at sequestering carbon into the soil.
And then, because of the technical support offered by ALUS, my learning only grew. I realized that the grass prairie supports a whole suite of grassland birds like the meadow lark, and it was an important habitat for endangered species, like the American badger. My land became home to a whole suite of native pollinators that I didn’t even know existed. On top of that, those deep roots meant these grasses were extremely drought tolerant and could form part of my drought season feed for my cattle.
This was an ‘aha’ moment for me. I realized how effective native ecotypes can be at sequestering carbon and supporting biodiversity.
What makes an ALUS farmer different from the farmer down the road?
ALUS farmers come to view their farm as multifunctional. They don’t just see it as a means of producing food and fibre, but they also see that they can build natural capital, sequester carbon, increase biodiversity, foster climate resilience, and support wetlands and water. We’re all beginning to recognize that these things have value in the marketplace. ALUS farmers have come to the realization that their farm can be productive beyond the one thing they’ve typically been paid to produce.
What are some common misconceptions about farmers and ranchers and climate change?
Traditionally, we haven’t seen farmers as solution providers for climate change, but I think that notion is disappearing.
One misconception that’s still common is: we often interpret climate action as only the reduction of greenhouse gas emissions. It’s so much more than that. When farmers take climate action through nature, it creates a tremendous amount of leverage. You get a whole suite of co-benefits for biodiversity, resilience, water filtration, and more. Further, sequestering carbon effectively means improving soil, which makes our food stores more resilient as well.
ALUS’ New Acre Project captures the full suite of benefits that come from climate action on a farm and makes those benefits available through a marketplace.
Nature-based solutions have exploded in popularity in recent years. For professionals who are new to this space, where do you recommend they start?
I think they should start at the beginning by understanding how native plants function. Plants are part of the carbon cycle. They are energized by the sun and by breathing in carbon dioxide, which they then deposit into the soil through their roots. To reduce greenhouse gas emissions, we need more of this carbon cycle in the world. Native plants established in the correct locations using the correct ecotypes provide the ideal solution. These native plants don’t just absorb carbon, but they also serve as habitat for pollinators, water filtration devices, and habitat for endangered species. With all of this in mind, the advantages of nature-based solutions over mechanical solutions for carbon capture become more obvious.
Could you tell me more about your recent announcement with A&W Canada and Cargill and how it will help us achieve a net-zero future?
Sure. We’re really pleased that A&W Canada and Cargill have collaborated with us to create the Grazing Forward program, which is an extension of the New Acre Project at ALUS. This program will accelerate and enhance rancher-led grazing projects that mitigate climate change. A&W Canada and Cargill have generously committed $1.8 million over three years to support ranchers in Alberta, Saskatchewan, and Manitoba as they continue to scale regenerative agriculture practices. The program is expected to sequester up to 12,578 MT greenhouse gas emissions per year, equivalent to more than 50 million kilometres driven by the average passenger vehicle. ALUS will take a hands-on, local approach, working with interested Canadian beef ranchers to plan and implement practices that contribute to environmental outcomes. This effort will impact more than 6,000 acres and engage ranchers in 20 communities, extending the New Acre Project’s current reach by 233%. Needless to say, we’re very excited about it!
What was your biggest takeaway from GLOBE Capital?
Well, it was a pleasant experience for us, because our session included a poll asking attendees for their opinion on the greatest opportunity in the bioeconomy. Obviously, we thought emission reductions would be number one, but biodiversity rose to the top as a very important issue for the attendees, which is mostly a business audience. I would not have that expected that. It’s a pleasant surprise for us, because we believe biodiversity is the apex indicator of environmental health, and economic prosperity. If biodiversity shows up, we’ve put the right plants in the right places and managed them correctly. Biodiversity is a sign of a more resilient climate.
GLOBE Capital Q et R : Stéphane Villemain, Vice-président Responsabilité sociale d’entreprise, Ivanhoé Cambridge
Stéphane Villemain, Vice-président Responsabilité sociale d’entreprise, Ivanhoé Cambridge, s’est joint au panel Reimagining our Infrastructure de GLOBE Capital afin d’échanger sur sa vision d’une infrastructure mondiale favorisant la résilience et matérialisant un avenir net-zéro. Nous avons fait un suivi avec M. Villemain pour en savoir plus sur le récent engagement net-zéro d’Ivanhoé Cambridge et ses plans concrétiser ce projet.
Que retenez-vous principalement de GLOBE Capital ?
L’intérêt du secteur financier pour l’ESG et en particulier pour le changement climatique est en pleine croissance, c’est fascinant. Il y a à peine 3-4 ans, seule une poignée d’institutions financières au Canada avait pris des engagements dans ce domaine. Le changement climatique est maintenant largement reconnu comme un risque et une opportunité d’investissement et Globe Capital est un excellent lieu pour apprendre de ses pairs sur la meilleure façon d’aborder ce défi.
Le mois dernier, Ivanhoé Cambridge a annoncé son engagement à atteindre la neutralité carbone pour son portefeuille international d’ici 2040. Qu’est-ce qui a motivé cet objectif ?
Chez Ivanhoé Cambridge, nous avons la conviction qu’il est de notre devoir d’avoir un impact positif sur l’environnement. L’urgence climatique nous pousse à aller plus vite, et plus loin.
Notre secteur (l’immobilier et la construction) est responsable d’une grande part des émissions de gaz à effet de serre (40%) et en même temps en subit les risques. Le changement climatique menace nos actifs au travers d’événements climatiques extrêmes dont on anticipe qu’ils seront plus nombreux et sévères. D’un autre côté, une transition vers une économie propre ouvre beaucoup d’opportunités et renforcera la résilience de nos actifs. Nous savons aussi que les investissements durables sont plus profitables sur le long terme. Ne rien faire sera nécessairement plus coûteux.
En fixant une cible net-zéro carbone, notre objectif est à la fois ambitieux et réaliste. Nous nous appuyons sur une approche scientifique en ligne avec l’Accord de Paris de 2015 et nous considérons notre performance carbone actuelle, notre stratégie d’investissement, les cibles carbone des pays dans lesquels nous investissons, et les outils récemment développés dans notre industrie, comme le Carbon Risk Real Estate Monitor (CRREM).
J’ajoute que pour atteindre sa cible net-zéro carbone d’ici 2040 Ivanhoé Cambridge a fixé des jalons. Nous nous sommes engagés à réduire notre intensité carbone de 35% d’ici 2025 par rapport à 2017, à augmenter nos investissement sobres en carbone de plus de $6B (€4M) d’ici 2025 (par rapport à 2020), et à rendre tous nos développements net-zéro carbone à partir de 2025. Ces nouvelles cibles carbone portent sur la portion de notre portefeuille en exploitation et en détention directe (i.e. la majeure partie de notre portefeuille, là où nous pouvons avoir le plus d’impact).
Quels sont les moyens que vous allez employer pour atteindre cet objectif ?
Concrètement, nous utiliserons trois principaux leviers : l’efficacité énergétique, l’énergie décarbonée, et de nouveaux développements.
L’énergie la plus propre est celle qu’on ne consomme pas. Ainsi, l’amélioration de la performance énergétique de nos principaux actifs devrait contribuer à plus de 20% de notre objectif. Nous travaillons également sur la consommation d’eau, la gestion des déchets et des ressources.
Deuxièmement, nous visons à réduire significativement l’utilisation des énergies fossiles dans nos propriétés, et accroître au maximum la part des énergies renouvelables, soit en la produisant sur site (panneaux solaires par exemple), soit en s’assurant que l’énergie acheminée est renouvelable. Cela devrait contribuer également à plus de 25% de notre objectif. Nous estimons également à 30% la part de notre objectif qui sera atteinte grâce aux efforts de transition énergétique des fournisseurs d’électricité, qui décarbonent leurs réseaux.
Troisièmement, 20% de notre cible sera atteinte grâce à la construction de propriétés bas-carbone, à partir de 2025).
En ligne avec le World Green Building Council, nous définissons un bâtiment net zéro carbone opérationnel comme un bâtiment à haute efficacité énergétique et entièrement alimenté par des énergies renouvelables sur site ou hors site, incluant en dernière priorité la compensation des émissions opérationnelles carbone restante).
La partie résiduelle de notre objectif net-zéro carbone pourra être atteinte via une stratégie de compensation carbone, en dernière priorité.
Pour favoriser notre réussite, nous lions une partie de la rémunération de nos employés à l’atteinte de nos cibles carbone, parmi d’autres tactiques.
Quelle partie du chemin avez-vous déjà parcourue ?
En 2017, Ivanhoé Cambridge avait pris l’engagement de réduire son intensité carbone de 25% d’ici 2025. Nous avions déjà atteint une réduction de près de 20% en 2019. C’est pourquoi cette cible a été relevée à 35%. Depuis 2017, Ivanhoé Cambridge a augmenté de près de 200% ses investissements sobres en carbone, soit 14,6B CAD (au 31 décembre 2020).
Comment la durabilité se traduit-elle économiquement chez Ivanhoé Cambridge ?
Nous souhaitons opérer un alignement plus qu’une opposition entre performance durable et performance financière.
La pérennité de notre portefeuille nous aidera à bien performer dans les années à venir et saisir ces occasions nécessite d’intégrer le climat dans notre analyse d’investissement et dans la gestion de nos actifs.
Nous considérons que ces engagements constituent une stratégie de création de valeur. Promouvoir l’efficacité énergétique et l’innovation dans l’opération de nos bâtiments, c’est contribuer à prolonger leur durée de vie (« future-proofing »), réduire les risques d’obsolescence et anticiper de futures règlementations et coûts liés au carbone.
Nos bons résultats en matière de décarbonation nous permettent d’augmenter nos financements verts, dont les conditions sont en partie liées à notre intensité carbone. Par exemple, plus l’intensité carbone de notre portefeuille est faible, moindre est le coût de notre dette. Notre ambition est d’accroitre et de diversifier ces financements.
Comment intégrez-vous le climat dans vos investissements ?
Le climat est systématiquement intégré dans notre analyse d’investissement pour toutes nos nouvelles transactions, ainsi que notre gestion d’actifs : chaque transaction est évaluée en fonction des risques climatiques et de son impact sur l’empreinte carbone de notre portefeuille et sur nos cibles.
La majorité de nos quelques 1,100 propriétés est également évaluée en fonction de son exposition aux risques climatiques actuels et futurs.
Les changements climatiques ont et auront un impact sur le risque et les rendements de notre portefeuille. Nous évaluons ces impacts selon 2 dimensions : 1) l’atténuation des changements climatiques (efficacité énergétique, énergie propre, matériaux de construction comme le bois (CLT) qui entraînent des réductions d’émissions de carbone liées à la construction et à l’exploitation de nos propriétés ; 2) l’adaptation climatique, c’est-à-dire l’optimisation de la résilience de nos propriétés dans un contexte de changements climatiques, par exemple à l’image des risques d’inondation dans certaines régions.
Un sacré défi vous attend. Quelles sont les prochaines étapes ?
Nous voyons tout cela comme une progression.
Aujourd’hui, notre stratégie est principalement axée sur le carbone opérationnel lié à la consommation énergétique de nos propriétés. D’ici les deux prochaines années, nous travaillerons également sur le carbone associé à la construction, particulièrement au regard des matériaux utilisés.
Nous fixons un cap : nous ne prétendons pas avoir toutes les réponses aujourd’hui, mais nous croyons que nos récentes réalisations et cette cible ambitieuse et réaliste nous donnent un bon départ.
GLOBE Capital Q&A: Stéphane Villemain, VP Corporate Social Responsibility, Ivanhoé Cambridge
Stéphane Villemain, VP Corporate Social Responsibility, Ivanhoé Cambridge joined Reimagining our Infrastructure at GLOBE Capital to discuss a vision for global infrastructure that fosters resilience and activates a net-zero future. We followed up with Mr. Villemain to learn more about Ivanhoé Cambridge’s recent net-zero commitment and plans to make it a reality.
What was your top takeaway from GLOBE Capital?
I’m amazed by the increased level of interest from the finance sector on ESG and in particular on climate change. Just 3-4 years ago only a handful of financial institutions in Canada had made commitments in this area. Climate change is now widely recognized as an investment risk and opportunity and GLOBE Capital is a great venue to learn from peers on how to best approach this challenge.
Just last month, Ivanhoé Cambridge announced a commitment to net-zero carbon emissions for its international portfolio by 2040. What prompted this target?
We at Ivanhoé Cambridge believe it is our duty to make a positive impact on the environment. The climate emergency is pushing us to do so more quickly. And to go further.
Our sector (real estate and construction) is both responsible for a huge share of global greenhouse gas emissions (40%) and at great risk. Climate change threatens our assets through extreme weather events that are expected to be more frequent and severe. On the flip side, a transition to a clean economy opens many opportunities and will strengthen the resilience of our assets. We also know that sustainable investments are more profitable in the long term. Doing nothing will inevitably cost more.
In setting the net-zero target, our goal was to be both ambitious and realistic. We took a science-based approach in line with 2015 Paris Climate Agreement and considered our current carbon performance, our investment strategy, the carbon targets of the countries in which our properties are located, and recently developed industry tools, such as the Carbon Risk Real Estate Monitor (CRREM).
I should add that to achieve net zero by 2040 Ivanhoé Cambridge has set milestones targets. We’ve committed to reduce carbon intensity by 35% by 2025 compared to 2017, increase our low-carbon investments by over $6B (€4M) by 2025 (compared with 2020), and make all our developments net-zero carbon by 2025. These new carbon targets cover the operating and directly owned portion of our portfolio (i.e., the bulk of our portfolio, where we can have the most impact).
What does Ivanhoé Cambridge’s pathway to net zero look like?
In concrete terms, we will use three main levers: energy efficiency, decarbonized energy, and new developments.
The cleanest energy is the energy we don’t consume. Accordingly, improving energy performance should contribute to more than 20% of our net-zero target. We are also working on water consumption, waste, and resource management.
Secondly, we aim to significantly reduce the use of fossil fuels at our properties, and increase the share of renewable energy as much as possible, either by producing it on site (e.g., solar panels) or by ensuring the energy source is renewable. This should contribute over 25% of our net-zero target. We also estimate that 30% of our target will be achieved through the energy transition efforts of electricity suppliers, who are decarbonizing their electricity grids.
Thirdly, 20% of our target will be achieved through the construction of net-zero carbon properties, starting in 2025. In line with the World Green Building Council, we define net-zero carbon buildings as highly energy efficient buildings, powered entirely by on- or off-site renewable energy that has all remaining operational emissions offset (as a last priority).
The remaining part of our net-zero target can be achieved through a carbon-offset strategy, as a last priority.
To ensure success, we link employee remuneration to the achievement of our carbon targets, among other tactics.
What progress have you made in reducing emissions to date?
In 2017, Ivanhoé Cambridge committed to reducing its carbon intensity by 25% by 2025. We had already achieved a reduction of nearly 20% in 2020. As a result, this target has been raised to 35%. Since 2017, Ivanhoé Cambridge has increased its low-carbon investments by more than 200% to $14.6 billion (as at December 31, 2020).
What is the economic case for sustainability at Ivanhoé Cambridge?
We want to align, rather than oppose, sustainable and financial performance.
The sustainability of our portfolio will help us to perform well in the years to come, and seizing these opportunities means integrating climate into our investment analysis and asset management.
We see these commitments as a value-creation strategy. Promoting energy efficiency and innovation in the operation of our buildings helps to extend their lifespan (“future-proofing”), reduce the risk of obsolescence, and anticipate future carbon-related regulations and costs.
Our past successes in reducing carbon are enabling us to increase our green financing, the terms of which are partly linked to our carbon intensity. For example, the lower our portfolio carbon intensity, the lower our cost of debt. Our ambition is to increase and diversify this type of financing.
How are you incorporating climate into your investments?
Climate is systematically incorporated into our investment analysis for all our new transactions, as well as our asset management: Each transaction is assessed for physical climate risks and for its impact on our portfolio’s carbon intensity and targets. The majority of our approximately 1,100 properties are also assessed for their exposure to current and future climate risks.
Climate change has, and will have, an impact on our portfolio’s risks and returns. We assess these impacts across two parameters: 1) climate-change mitigation (energy efficiency, clean energy, and building materials, e.g. cross laminated timber), which reduces carbon emissions from the construction and operation of our properties; 2) climate adaptation, i.e. maximizing the resilience of our properties in a changing climate for example in light of increased flooding risks in certain areas.
You’ve got quite a task ahead of you. What are your next steps?
We very much see this as a journey.
Today, our strategy is primarily focused on operational carbon related to our properties’ energy consumption. Over the next two years, we will also be working on the carbon associated with building construction, particularly with regard to the materials used.
We are setting a course: we don’t pretend to have all the answers today, but we believe our recent achievements and these ambitious yet realistic targets have given us a great start.
GLOBE Advance at a Glance: Activating Social Finance
In partnership with Junxion Strategy and the Social Purpose Institute at United Way
At GLOBE Capital 2021 (April 13-15), participants joined the action-oriented GLOBE Advance sessions to help us go farther and faster to address risks and capitalize on opportunities in the clean economy. To propel the conversation, we’re pleased to share this summary of the GLOBE Advance session, Activating Social Finance: Advancing Purpose and Impact. This 2021 session built on the 2020 session GLOBE Advance: Turning Social Purpose Dialogue and Vision into Action, to inspire, inform, and help you explore how purpose pays.
The COVID-19 pandemic and a historic, global movement for racial justice have amplified a conversation that’s engaging corporate boards, C-suites, entrepreneurs, and investors around the world—the role of purpose in business. As we start the work of recovery, governments, corporations, entrepreneurs, and investors have the opportunity to reimagine our economy and their role in it.
Participants at GLOBE Advance: Activating Social Finance learned from businesses and investors operating at the intersection of profit and purpose, who are delivering financial returns and societal benefits. They considered new ways of valuing and measuring impact—from ‘E’, ‘S’ and ‘G’ perspectives. And they got the tools to go from defining, to measuring, to capitalizing on being a purpose-driven organization.
Activating Social Finance Speakers:
- Mike Rowlands, President and CEO, Junxion Strategy (Moderator)
- Sandra Odendahl, Vice President of Social Impact and Sustainability, Scotiabank
- David Redfern, President and CEO, Eastern Canada, Lafarge Canada Inc.
- Mary Ellen Schaafsma, Director, Social Purpose Institute at United Way
- Joel Solomon, Co-Founder, Renewal Funds
- Coro Strandberg, President, Strandberg Consulting
What is social purpose?
Larry Fink, CEO of Blackrock—has put his money behind social purpose. “To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society… Society is demanding that companies, both public and private, serve a social purpose,” Mr. Fink wrote in his widely quoted Annual Letter to CEOs.
How did ‘social purpose’ reach the desk of the world’s largest asset manager? To understand the importance of ‘social purpose’ today, it’s helpful to examine the roots of the movement.
‘Socially responsible investing’ or ‘SRI’ first started gaining traction in the 1980s. For the first time, investments looked beyond the financial bottom line to a goal of positive social impact. In the mid-90s, ‘corporate social responsibility’ began to catch on, a self-regulating business model that invited companies to be aware of and accountable for their economic, social, and environmental impacts. Increasingly, investors began to expect this level of accountability across their portfolios. This gave rise to ESG (environmental, social and governance) investing in the mid-2000s—a set of standards that investors use to screen potential investments, protecting themselves from risk and ensuring alignment with their values. ESG investing mandates companies to move beyond philanthropic portfolios to managing their environmental and social performance.
Eventually, about five years ago, ‘social purpose’ businesses started to take off. The Social Purpose Institute at United Way (SPI) defines a social purpose business as “a company whose enduring reason for being is to create a better world.” Social purpose has brought the social conversations that began in the 1980s into the C-suite. It’s no longer a line of business. Social purpose is a reason for doing business.
David Redfern, President and CEO, Eastern Canada, Lafarge Canada Inc., worked with SPI to develop a social purpose for Lafarge Western Canada (when he was the head of its Western operations). He found it helpful to think of purpose within existing business architecture:
- Purpose is why your business exists.
- Vision is where you want to go.
- Mission is how you want to get there.
- Values are what’s going to support it.
In working to define their social purpose, the Lafarge team took the opportunity to reflect on and refine the rest of its architecture as well. “The social purpose process made us more efficient, more aligned, and more engaged,” said Mr. Redfern.
Imagine how different our economy would be if every company embraced a social purpose. That’s what Mike Rowlands, President and CEO, Junxion Strategy, calls the ‘Next Economy’. “Social purpose isn’t an HR or PR exercise,” he said, “It’s an exercise in reshaping the role of business in society.”
In short, purpose pays
Companies that operate with a social purpose outperformed other companies by 134% in the stock market in 2019. This reinforces evidence from 2008, when researchers found B Corps—the leading certification for business as a force for good—were 64% more likely to survive the recession.
SPI Director Mary Ellen Schaafsma shared the success story of one social purpose company that applied a social purpose lens to its three-year strategic planning process. In doing so, the leadership discovered about 80% of their priorities did not align with their social purpose. By dropping these priorities, they opened up space for creativity and innovation.
Social purpose is also popular with the public and with employees. The majority of Canadian consumers (89%) believe business needs to place the same weight on society’s interests as on business interests and 60% of millennials want to work for companies with a purpose. Consumer trends and talent management are each drivers of business success—and therefore valuable to investors.
Joel Solomon can testify to the rise of investor interest in social purpose. He co-founded Renewal Funds, a venture capital firm that invests in innovation to advance the sustainability of food, water, and climate. He’s watched his firm’s invested assets grow to $250 million. “Social purpose is unstoppable,” Mr. Solomon said.
For those hesitant to act, there is a real risk in failing to adopt a purpose and being left behind. Mr. Redfern shared that this past financial year was successful for Lafarge and they expected to see their stock value increase. It didn’t. Why? Investors were concerned about the high carbon footprint of cement and were reluctant to invest further. “That reinforced for me the importance of having and acting on purpose,” said Mr. Redfern.
Ahead on the path to impact
With increasing evidence that adopting and implementing a social purpose is good business, how do we measure success?
When Sandra Odendahl joined Scotiabank in 2020 as the Vice President of Social Impact and Sustainability, she spent her first year examining the bank’s impact and identifying a social area to focus on that was consistent with the bank’s social purpose. She chose economic resilience and launched ScotiaRISE, a 10-year, $500 million initiative to promote economic resilience among disadvantaged groups.
To measure success for ScotiaRISE, the bank tracks very specific markers linked to its programming, including completion of high school and post-secondary training, increase in family income, and the number of black female entrepreneurs attracting investors, for example. In the diverse world of social purpose, these tailored measures provide the best gauge of Scotiabank’s success.
But what about a measurement that allows for comparison from one social-purpose business to another? Enter SPI’s new Social Purpose Assessment tool, launched at GLOBE Capital. The tool allows stakeholders to assess social purpose companies using 25 practices across seven different areas.
It’s encouraging to see innovation and growth in the social purpose space after a year when social inequalities were exposed like never before. “The COVID-19 crisis was a reckoning on social issues that have been papered over with spit and bubble gum for years,” said Ms. Odendahl. She cited guaranteed basic income, alternatives to long-term care for seniors, racism, and childcare as key issues that the pandemic has brought into stark relief.
However, Ms. Odendahl does see a new mindset in how business is responding to the pandemic, compared to how they responded to previous economic crises. “Our CEO recently made a recommendation to top up the Canada Child Benefit and massively increase the Canada Child Tax Credit, because providing greater flexibility to families is good for the country, for women, and for communities. I can’t imagine a CEO responding to the 2008 financial crisis in the same way.” (You can read more about Scotiabank CEO Brian Porter’s recommendation here.)
Ms. Strandberg agreed that the pandemic was an inflection point. “Now people are starting to say ‘let’s create the economy we want’ instead of the economy that grew by topsy,” she said. Ms. Strandberg sees the beginnings of a social purpose for finance—a trend with the potential to provide a new lens on investing that could even become a new asset class.
Mr. Solomon said next generations will push social purpose faster and further. “Tens of billions of dollars are being inherited in North America alone over the next few decades… Young investors are increasingly concerned about what money is doing in their name.”
With such exciting trends on the horizon, we look forward to continuing the conversation at Propelling Purpose: The Road to the Purposeful Economy (November 17-18, 2021) and at GLOBE Forum (March 2022).
Until then, we’d like to leave you with a challenge: What’s one commitment you can make to accelerate the movement to purpose-based business?
Canada’s Path to Net Zero
Guest Content by David Knight Legg, Chairman of the ESG Working Group of the Province of Alberta and CEO of Invest Alberta Corporation
Canada is unique in the world: a free democracy of 38 million citizens, home to vast water supplies and forests, and seemingly endless mineral deposits and hydrocarbon reserves that hold more oil than Russia, China and the U.S. combined and make us the fourth largest gas supplier in the world. We share a border with the world’s largest consumer economy and our critical shipping and logistics trade routes connect us directly to the vast emerging growth markets in Asia.
This extraordinary strategic position and natural wealth bring tremendous opportunity and responsibility: developing our resources to provide the energy needed to lift 3 billion people out of poverty—while also leading the world in developing cleaner and greener fuels, renewables and innovative technology to ensure a better world for our children.
This balance isn’t easy and commitments to net zero need to be reconciled with results. According to data from the Government of Canada, we have removed less than 2% of emissions from our 2005 baseline, well below our 30% by 2030 target. And it’s taken us 16 years to get this far, partly due to population growth and a grid that is already 80% non-emitting.
The recent Earth Day announcement to increase that 2030 target to a 40-45% reduction means that Canada, which has reduced less than 1 megatonne (mT) a year for 16 years, will now find a way to remove over 300 mT—over 30 mT a year—in the remaining nine years.
The foreign press has quickly pointed out how unlikely this is.
There is however a path to achieve and even exceed this goal if Canada thinks globally, applies what has already worked around the world, and invests in scaling home-grown innovation.
The Net-Zero Challenge
Electricity and heating account for one quarter of all global emissions, and the world’s consumption of electricity has doubled since 2000. The growing use of coal in electricity has driven global emissions higher every year. Because coal burns at 100% higher carbon intensity per unit of energy than natural gas, the conversion of grids from coal to gas has been the largest single contributor to global decarbonization. The U.S. has led with a reduction of over 900 mT since 2000, and Europe and the U.K. are a close second, using gas imports from Russia, Algeria and Norway to drive the lion’s share of their reduction of over 700 mT.
Asia, on the other hand, accounts for the vast majority of all emissions growth globally thanks in large part to coal. Just four nations: China, India, Japan and South Korea account for two thirds of all coal-fired CO2 emissions globally. And this is increasing. In 2018, China was solely responsible for 47% of all global emissions from coal-fired power, and in 2020 the country built three times the total new coal capacity of the rest of the world combined, with planned production at five times the planned coal-fired capacity of the rest of the world.
It is critical to note that this is happening not because nations are intentionally careless about the environment but because they are relentlessly focused on supporting the long transition of over 3 billion people globally emerging from grinding poverty into the middle class. Asia is the epicentre of this historic moment. This requires critical infrastructure—including reliable electrical grid capacity—to support hundreds of millions of people every year that require new homes, hospitals, schools, transport, roads, heat, and light in thousands of rapidly expanding cities.
Energy—and our ability to harness it for light, heat, and cooling—has supported the greatest expansions of prosperity in human history. It has also driven up emissions. And Asian nations are desperate to find affordable lower-carbon solutions to meet this demand more responsibly.
Canada’s Place in a Global Opportunity
Canada has a massive abundance of the low-cost, high-quality natural gas Asia desperately needs to replace coal and reduce emissions while supporting their core anti-poverty growth agenda. By providing Asia with natural gas, Canada can remove well over our entire carbon footprint of 739 mT a year. This is an emissions reduction tactic with specific production, supply, trade and carbon reduction math applied to every country, and can happen as quickly as we can build the essential infrastructure and strategic trade to meet gas demand that has grown 12.5% to 359 million tonnes in 2019 alone, with China emerging as the third largest buyer in the world, and India and Indonesia looking to clean the air in their urban centres and reduce carbon overall.
The numbers are exceptional: when fully online in three years, Canada’s $40 billion Shell LNG project alone is estimated to remove 70-80 mT of Asian emissions. This project—the largest infrastructure investment in Canada—is sponsored by Korea and Japan, the largest buyers of LNG in the world. Our Invest Alberta seven national Asian offices are having conversations every week with dozens of investors, firms and governments intent on securing our LNG—and looking to invest heavily in Canada’s ultra low-carbon hydrogen capacity that will retrofit into LNG infrastructure in the future.
The Canadian Opportunity
Today, successfully ensuring net zero while growing the Canadian economy requires major capital investments into our LNG and hydrogen future as well as critical decarbonization infrastructure. In Alberta alone, investments of $30 billion into the large-scale deployment of carbon capture, utilization, and storage (CCUS) will help offset another 60 mT of production-related emissions. To quote the Hon. Seamus O’Regan, Minister of Natural Resources: “Carbon capture technology creates jobs, lowers emissions and increases our competitiveness. It’s how we get to net zero.”
The International Energy Agency (IEA) forecasts that the world will need approximately 1,000 CCUS facilities by 2050 to achieve net-zero ambitions. Currently only 21 are in operation, with the largest now in Alberta. Without CCUS investment, the IEA predicts that the cost of climate mitigation will increase by 138% putting many communities and countries on the brink of poverty. We can’t let that happen. Canada’s net-zero pathway demands CCUS capacity to decarbonize energy and industrial systems and set the stage for growth in the global demand for cleaner natural gas and net-zero hydrogen production.
The Paris Accord explicitly recognizes the global nature of emissions. Solving for net zero is, by its very nature a global problem requiring transnational and trade solutions because most of the world is fighting poverty and energy shortages without Canada’s advantages of low population, clean grids and a 300-year supply of natural gas. For Canada, our role can be so much greater than our current targets, or our record in hitting them suggests.
The Paris Accord Article 6 establishes a basis to negotiate credit for global trade as a principal tool of emissions reduction, and Article 9 credits the importance of technological transfer and CCUS. Canada holds a position of strategic proximity, cost and supply advantages of natural gas and hydrogen as well as global leadership on decarbonization technologies and sophisticated regulatory and incentive frameworks that are all tradeable and transferable in helping developing nations.
The global scope of the challenges we face—poverty and climate—will be solved by collaboration between nations. When I took part in the GLOBE Capital session, Destination Net Zero: Governments’ Role in Achieving Carbon Neutrality, there was a consensus on the panel that collaboration is the key to unlock a net-zero future. It will take our best entrepreneurs, scientists, investors, diplomats and dealmakers to realize Canada’s global leadership in a low carbon future. In this, as with so much else, Canada has the advantage of abundant human talent and natural resources to do something extraordinary in the world.
David Knight Legg is chairman of the ESG Working Group of the Province of Alberta and CEO of Invest Alberta Corporation. He was also a speaker at the GLOBE Capital session: Destination Net Zero: Government’s Role in Achieving Carbon Neutrality. GLOBE Capital registrants can watch the session recording here and non-registrants can purchase access here.
The Untapped Potential of Transition Finance: An Introduction
By: Emile Lavergne, Senior Consultant, ESG Strategy & Sustainable Finance, The Delphi Group
The race to net zero is off to a flying start.
Public and private commitments to reach net-zero carbon emissions by 2050 have doubled in less than a year. By the time COP26 in Glasgow rolls around in November this year, countries responsible for 78% of global GDP will have pledged to reach net zero by 2050 or, in the case of China and Brazil, 2060.
Now comes the tough part. We have a lot of work to do and we need to find a way to pay for it.
How can we mobilize capital to support net-zero ambitions?
Sustainable finance is an umbrella term for funding that supports projects and organizations delivering green, social, and climate-related impacts. While net-zero targets have grown, sustainable finance has also skyrocketed, as seen by the increase in sustainable debt issued in 2020:
In the chart above, you’ll notice four categories of sustainable finance:
Green and social finance (including bonds and loans) fund projects, assets, and activities tied to beneficial environmental or social impacts. These depend on frameworks identifying on which projects the use of proceeds (capital raised) can be spent.
Sustainability bonds is a catch-all term for bonds raising capital for sustainable projects, as defined by the use of proceeds. These could include projects that touch on both social and green topics and are therefore classified as sustainable, as opposed to specifically labeled green or social.
Sustainability-linked finance (including bonds and loans) provides an incentive for a company seeking a loan or issuing a bond to reach a pre-determined sustainability goal. For example, if a company reaches a certain key performance indicator, they may get a lower cost of capital, as agreed with the lender at closing.
The gap between the sustainable finance market and net-zero targets
The sustainable finance market was designed to finance projects defined as green, social or climate–related and it is effective in this regard. However, these types of financing are not designed to support all projects that could help companies reach carbon neutrality, especially in high–emitting sectors (e.g. oil & gas, mining, etc.). These high-emitting sectors have the most potential to move the dial to reduce global GHG emissions.
Sustainability-linked financing is relevant for corporate commitments to net zero, but is not used finance to specific projects.
Enter transition finance—a growing market where investors finance projects not considered green, social or climate-related that nevertheless advance the transition to net zero. For example, efforts to reduce the emissions intensity of energy production in the short term, including oil and gas, may be considered a transition activity but would not be considered a climate-related activity due to the narrow definition of ‘climate-related’ only including non-emitting sources of energy (i.e. excluding oil and gas). Hence the name ‘transition’ finance—it finances projects that contribute to a change in the highest-emitting sectors to enable the world to reach the goals of the Paris Agreement.
Conventional financing remains available for all projects. However, a growing number of investors are interested in growing the climate resilience of their portfolios and supporting sustainability efforts, meaning the transition finance market could enable companies in high–emitting sectors to access capital.
The challenge is that participants in the global capital markets have not agreed on a definition of ‘transition’. Without the clarity, transparency, and assurance of a definition, investors may be reluctant to invest in projects essential to reaching net zero due to concerns about the climate resilience of certain sectors, like oil and gas. The transition will be implemented differently across sectors, and ensuring investors, issuers and regulators understand what is considered eligible under a definition of ‘transition’ will reduce friction for companies in high-emitting sectors to access financing.
Defining transition finance will unlock new options for corporations
Green and social finance both have broadly accepted definitions. They are defined through industry group principles and taxonomies (the International Capital Markets Association (ICMA) definitions, for example). The European Union has stated how it defines ‘sustainable finance’, and separately, how it defines a ‘sustainable’ activity with the EU Taxonomy.
The ICMA and the Climate Bonds Initiative have both published documents to begin to build a normative definition of ’transition.’ The OECD has also published Transition Finance Guidance.
To work through how ‘transition’ might be defined in a Canadian context, the Canadian Standards Association (CSA) has assembled a Technical Committee to work to develop a private sector-led definition of ‘transition’, along with sector-specific taxonomies for natural resource sectors across Canada. The CSA work ties into the international efforts to define ‘sustainable finance’.
Other countries, including Australia and Japan, are working to define what a transition would look like for their economies. We can expect Canadian and Australian definitions to diverge from Western European definitions, given that these countries’ economies have a strong reliance on natural resource sectors.
Despite the lack of definition, a few trailblazers have taken the lead with early transition finance transactions, notably HSBC and BNP Paribas. These transactions are built on foundational frameworks established by the ICMA and other industry voices.
It is clear that transition finance can accelerate the race to net zero by filling a gap in the existing sustainable finance market. Establishing a definition in the Canadian context will activate its potential. In the meantime, I invite Canadian companies to consider how transition finance could apply to their sector and their strategies.
To explore this timely and important conversation, join us for the GLOBE Advance Transition Finance Session.
Thought leadership on the topic: