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Canada lagging movement to include carbon footprint in risk analysis, says expert

Last Updated Jan 18, 2018 at 3:20 pm PDT

OTTAWA – A $700-million investment to help clean technology firms expand and develop new products won’t turn Canada’s clean-tech industry into the “trillion dollar opportunity” the government keeps touting until we get out of our fossil-fuel comfort zone, an industry consultant says.

Celine Bak is the president of Analytica Advisors, a consulting firm that monitors the sector.

She described Thursday’s $700-million, five-year investment as a good thing, since it will allow the Business Development Bank of Canada to take on more risk to help clean-tech firms expand, hire new staff, and scale up operations.

Last year, Analytica’s analysis of the Canadian clean-tech industry concluded growth was being stymied by investment rules that prevent companies that aren’t yet profitable from accessing capital, and by a mindset that does not consider the risks of climate change and impact of emissions when determining where to invest.

The BDC investments — part of a package of $2.3 billion in clean-tech spending announced in the 2017 federal budget — are designed to help address the lack of access many companies have to capital, particularly when it comes to scaling up from the research stage to being commercially viable.

But Canada needs to be bolder about forcing investment decision-makers to consider impact on climate, the risks posed by climate change to industries, and a project or company’s carbon footprint as part of the risk portfolio, Bak said.

Doing so would make investments in traditional industries less attractive and help clean-tech companies compete, especially as Canada continues to subsidize fossil fuels, despite promises to eliminate such incentives.

There are places in the world where investors are open to new options — but Canada is not one of them, she said.

“We have such a premium on low risk approaches in Canada that our innovative firms are very busy around the world and much less busy here in Canada,” said Bak.

There are a number of new international partnerships and strategies to push the issue of adding climate risk to investment decisions, including the international Task Force on Climate Related Financial Disclosures and, more recently, a network of central banks formed in December to look at “greening the financial system.”

Central banks from Britain, France, Germany, Mexico, Singapore, the Netherlands, and China are in the network. The Bank of Canada is not.

“Our central bank is absent from the discussions, which is of grave concern,” said Bak. Climate change is overtaking inflation as the prime concern for other banks, she added.

The Bank of Canada declined an interview request Thursday, pointing instead to a March 2017 speech given by deputy governor Timothy Laine about the bank’s work on climate change. In it, Laine says that unlike some other central banks, the Bank of Canada does not regulate financial institutions, and has no role to play in deciding how banks, insurance companies and others should adapt to climate change risks.

Inflation, said Laine, remains one of the key considerations, including how climate change may impact inflation.

Adding climate risk to investment portfolios and corporate financial disclosures is a necessary step, Environment Minister Catherine McKenna said Thursday.

“I think everyone needs to be looking at climate risk,” McKenna said in an interview.

It will be a priority as Canada takes on the G7 presidency this year, she added.

— Follow @mrabson on Twitter