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opinion

Kathy Bardswick is president and CEO of The Co-operators Group. She is a member of the advisory council of the United Nations Environment Program's Inquiry into the Design of a Sustainable Financial System, a leader with Smart Prosperity and a founding member of the Council for Clean Capitalism.

Does Canada's financial system still deserve to be envied?

In the immediate aftermath of the 2008 global financial crisis, our financial sector was lauded as strong and resilient. In the words of the International Monetary Fund, "Canada's financial system successfully navigated the global financial crisis, and stress tests suggest that major financial institutions would continue to be resilient to credit, liquidity and contagion risks."

It is reassuring that our system is seen as able to survive adversity. But should our aim be mere survival? Or, given our current position of strength, should we seek to thrive and lead?

Much has changed in the world since 2008. The crisis accelerated global momentum behind sustainable finance, seeking to address challenges related to sustainable development and climate change. As the report of the United Nations Environment Program's (UNEP) Inquiry into the Design of a Sustainable Financial System has noted, "recognition has grown that the financial system must be not only sound and stable, but also sustainable in the way it enables the transition to a low-carbon, green economy."

The report makes clear that in many parts of the world, this transition is in progress: "A 'quiet revolution' is under way as financial policy makers and regulators take steps to integrate sustainable development considerations into financial systems to make them fit for the 21st century … Momentum is building and is largely driven by developing and emerging nations including Bangladesh, Brazil, China, Kenya and Peru, with developed-country champions including France and the U.K."

Innovations such as green bonds, green infrastructure investment, carbon-efficient and sustainable indexes and exchange-traded funds are growing to provide the capital needed for a low-carbon economy. The financial economy needs to embrace sustainable development to keep up with changes in the real economy.

In today's world, it is not a question of choosing between the environment and the economy. That is a false proposition. The choice we face is whether we will take action to allow Canada to better position ourselves to manage the risks and leverage the opportunities associated with 21st-century challenges. How can we ensure that we are masters of our own destiny?

To start, we need to define a vision of a sustainable Canadian financial system. Such an undertaking should be led by the federal government, working with key federal and provincial officials, as well as the banking, asset management and insurance sectors. The leadership we need exists. A number of Canadian initiatives led by organizations such as the Ivey Foundation, Smart Prosperity and the Council for Clean Capitalism can be leveraged.

On Friday, Bank of England Governor Mark Carney is in Toronto meeting with Canadian Environment Minister Catherine McKenna and business leaders to discuss climate change and financial markets. The same morning, a number of Canadian companies are expected to join an initiative launched by the World Bank and the Carbon Pricing Leadership Coalition.

The UNEP Inquiry into the Design of a Sustainable Financial System has researched financial and monetary policies, regulations, standards, disclosure requirements, credit ratings, listing requirements and indices, analyzing the effectiveness of each in aligning financial systems with sustainable development. Canada can benefit from this work to assess the policies best suited to support federal and provincial governments' mandates to meet our climate commitments.

The goal cannot simply be the survival and stability of the financial system. The system must be assessed and modernized to adjust to complex global pressures, so it can promote more forward-looking investment, innovation and sustainable prosperity.

The federal government has committed to integrating the economy and the environment, and ensuring that the financial system serves the needs of Canadians – goals shared by leaders within the financial services sector. We now need to bring together a small group of key government, business and sustainable-finance leaders to explore the development of a road map for Canada as a necessary first step. This step could help ensure our financial system remains deserving of envy.