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Bank of Canada Governor Tiff Macklem arrives to a news conference in Ottawa on Sept. 10, 2020.


Tiff Macklem came into his job as Governor of the Bank of Canada with a reputation as something of a climate crusader. So as the federal government steps up its climate campaign and central banks in Europe move to embrace carbon-reduction goals, one might have thought (or even feared, depending on your vantage point) that Mr. Macklem would have designs on repainting Canada’s monetary policy in a liberal coat of green.

Not so, Mr. Macklem says.

When the central bank boss sat down (virtually) to chat with me and my colleague Mark Rendell last week, he insisted that he has no plans to pursue a more activist role for the Bank of Canada in the climate fight. He doesn’t intend to follow the lead of the European Central Bank, which is expanding its purchases of green bonds and is considering focusing its corporate-bond-purchase program on green assets, nor the Bank of England, which recently amended its formal inflation-fighting mandate to include an additional objective of supporting the transition to a net-zero-carbon economy.

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Even as the Bank of Canada undergoes a major review of its mandate as part of the process for the renewal of its five-year inflation-targeting agreement with the federal government before the end of the year, he doesn’t see a need to add a green element to the bank’s policy mandate.

“There is a clear role for the Bank of Canada in climate change within our existing mandate,” he said. “We have a mandate to foster a stable and efficient financial system. And, really, that is where we are focusing our efforts. It’s really starting with the assessment of climate risks,” he said.

While that’s not nothing, it’s certainly not what some observers envisioned when Mr. Macklem was named to the Governor’s job, exactly one year ago this week.

He was appointed by the same Prime Minister who had, just two years earlier, hired him to chair his Expert Panel on Sustainable Finance – a committee charged with coming up with ways to leverage the financial sector and market forces to help the government achieve its carbon-reduction aspirations. His subsequent appointment as the head of the Bank of Canada was viewed (enthusiastically by some, with trepidation by others) as evidence that the government was engineering a green shift in the country’s central-banking philosophy.

The climate crisis has been a topic that Mr. Macklem is happy to talk about, even with some enthusiasm, when asked; but he has generally kept it fairly low key in his formal comments about the central bank’s policies and priorities. When he has spoken at any length on the topic – notably, in a pair of speeches last fall – his focus has been in the context of managing financial system risks.

That tells you pretty much everything you need to know about Mr. Macklem’s view on the Bank of Canada’s appropriate role in climate policy. He largely sees it in terms of risk management – identifying and measuring the economic and financial-system exposure to a variety of climate-related risk, as well as the costs and benefits of carbon reduction. In short, he sees the bank’s job as helping the market accurately price climate risk.

“We have a role to play through our financial stability mandate and through our role to promote efficient financial markets, to help the financial system better manage climate risks and help accelerate the flow of investments into more sustainable investments,” he said.

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Mr. Macklem appears to have little if any appetite to get into the business of supporting the carbon reduction by buying green assets, as the ECB does. But he pointed out that last week’s federal budget introduced a new role for the central bank in support of the government’s accelerating green objectives – not as a buyer, but as a seller.

One of the bank’s jobs is to issue bonds on behalf of the federal government; the budget’s announcement that the government will launch its first-ever green bond in the 2021-22 fiscal year will mean that the Bank of Canada will help design the product and manage its introduction into the financial markets.

“What we see in the market is that there is strong demand for ESG-oriented investment products. So, I expect there will be a strong investor base for this product. A well-designed government of Canada green bond could create a helpful benchmark to expand private market in green bonds more generally,” he said.

“Look, ultimately, [carbon reduction] is up to the private sector; the private sector is generating most of the emissions. But we can be there to help them do what they need to.”

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