The COVID-19 crisis has heightened global focus on the risks associated with climate change, and Canadian business and finance will have to act quickly to stay on top of this “competitiveness issue,” Bank of Canada Governor Tiff Macklem said.
“These issues are taking on increased urgency,” Mr. Macklem said in prepared remarks for a video-conference panel discussion organized by the Public Policy Forum, an Ottawa-based think tank.
“Today’s pandemic seems to have focused the public’s attention on extreme global risks and the value of resilience,” he said.
“How well we address climate change is becoming a competitiveness issue for Canadian businesses. Consumers, workers and investors increasingly care about the environmental footprint of the products they buy, of the companies they work for and of the businesses they invest in. As a result, climate change is becoming an immediate bottom-line business issue.”
Mr. Macklem, who took over as the head of Canada’s central bank in June, came to the job with a reputation as something of an advocate for climate-change policy. He chaired the Expert Panel on Sustainable Finance, which was set up by Prime Minister Justin Trudeau to make recommendations on how the financial sector could help foster a smoother transition to a greener economy. In his role as Bank of Canada governor, he has talked about the importance that the central bank account for the potential economic effects associated with climate change, and better understand the risks to financial stability.
“Finance is not going to solve climate change, but many of the investments and innovations that will are very capital-intensive. That’s why it’s so important for the financial system to steer capital to the most-promising sustainable investments,” Mr. Macklem said.
“By accelerating climate-smart capital flows, the financial system can reduce the risk of an abrupt and destabilizing adjustment. And by identifying, measuring and managing physical and transition risks, the financial system will improve the allocation of capital,” he said.
“The Bank of Canada is accelerating its work to understand the implications of climate change and promote a climate-ready financial system,” he said. “This is a significant priority for us, and will continue to be so.”
On Monday, the Bank of Canada unveiled a joint pilot project with the Office of the Superintendent of Financial Institutions, to develop a series of climate-change scenarios that several large Canadian financial institutions will test-drive to better understand their potential risk exposure.
“We are committed to working with the financial sector to promote resilience to climate change and a smooth transition to low-carbon growth,” he said.
“Our financial system proved to be resilient during the global financial crisis and has been a key shock absorber so far through the COVID-19 pandemic. We need to ensure the financial system is just as resilient in the face of climate change,” Mr. Macklem said. “And in doing so, we need to position Canada to seize the climate-smart opportunities that consumers, workers and investors are looking for.”
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