Strategies for Integrating the Canadian Financial Sector into Financing the Transition to a Low-carbon Economy

CIGI Paper No. 217

June 19, 2019

This paper presents policy alternatives that could incentivize the Canadian financial sector to invest in the transition to a low-carbon economy. The results and recommendations are based on an inductive analysis, which summarized the existing regulatory landscape on climate finance, and a practitioner survey, which ranked a collection of regulatory strategies based on their feasibility in the Canadian context.

Canada’s expert panel on sustainable finance suggests that climate change is a significant risk for financial sector stability and that Canada’s financial sector could benefit from more effective and consistent regulation on climate-related financial issues. The results of this study suggest that practitioners from the Canadian financial industry perceive all 13 regulatory measures as feasible and favourable. Public guarantee funds are perceived to be the most favourable, followed by enhanced fiduciary duty requirements in asset management, green bond issuance, standardized reporting and enabling incentive mechanisms. There is some evidence that practitioners are less in favour of top-down regulatory policies or working with public institutions through shared climate funds or partnerships. This suggests that financiers prefer to maintain autonomy in finding and utilizing business opportunities, yet value regulation that reduces their own risk.

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CIGI Papers Series

CIGI Papers present in-depth analysis and discussion on governance-related subjects. They include policy papers that present CIGI experts' positions or contributions to policy debates, and background papers that contain research findings, insights and data that contribute to the development of policy positions.

About the Authors

Olaf Weber is a CIGI senior fellow and an expert on sustainability and the banking sector. He is currently a professor in the School of Environment, Enterprise and Development at the University of Waterloo and a University of Waterloo Research Chair in Sustainable Finance.

Truzaar Dordi is a doctoral candidate in sustainability management at the University of Waterloo, working in the fields of sustainable finance, climate policy and risk management.

Vasundhara Saravade is a Ph.D. student at the University of Waterloos School of Environment, Enterprise and Development, where she also completed her master of environmental studies in 2019.