Statement from Shift on the 2023 Fall Economic Statement’s updates on sustainable finance, climate change and pensions
SHIFT ACTION FOR PENSION WEALTH & PLANET HEALTH
For Immediate Release: November 22, 2023
Toronto, ON | Traditional territories of the Huron-Wendat, Anishnaabeg, Haudenosaunee, Chippewa and Mississaugas of the Credit First Nation
Yesterday's Fall Economic Statement (FES) from the Government of Canada included several noteworthy updates in the world of sustainable finance, climate change and pensions:
Green and transition finance taxonomy. Canada is finally moving forward with the development of a green and transition taxonomy that ‘aligns Canada's financial sector with its climate commitments,’ allocating $1.5 million to the Department of Finance to support this work (p.63). Canada's financial sector has been under-regulated on climate to date, which increases financial risk, while undermining our ability to reduce emissions and build an affordable clean economy. To be credible, the taxonomy must be informed by independent climate experts, distinguish between greenwashing and real climate solutions, and prohibit green or transition labeling for financing of oil, gas, or coal related projects.
Climate risk disclosure by private companies. The Department of Finance; Innovation, Science and Economic Development Canada; and Environment and Climate Change Canada will also develop options for making climate disclosures mandatory for private companies (p.63). Disclosure can help hold financial institutions accountable for climate action, but must focus on ensuring companies set credible plans to chart a path to zero emissions, in addition to counting emissions and disclosing climate-related risks.
Canada Growth Fund. The FES reported that the $15-billion Canada Growth Fund (an arm's length public investment vehicle managed by PSP Investments that's meant to attract and de-risk private capital to decarbonize the Canadian economy) "has already met with more than 150 market participants and has developed a pipeline of projects across leading clean economy sectors, including carbon capture, utilization, and storage (CCUS); hydrogen; biofuels; critical minerals; and clean tech" (p.58). As Shift has written before, Canada must ensure that the CGF doesn't become a slush fund for the oil and gas industry to delay the energy transition with unproven, uneconomical, unscalable, ineffective CCUS and fossil-derived hydrogen technologies.
Carbon contracts for difference. The FES also announced that the CGF will be the principal federal entity issuing all carbon contracts for difference (CCfDs) (emphasis added by Shift). The CGF will allocate, on a priority basis, up to $7 billion of its current $15 billion in capital to issue CCfDs, which are contracts that backstop the future price of carbon and provide predictability to high-carbon companies to help de-risk important emission-reducing projects (p.58). We assume, given public statements made by PSP last month, that the biggest potential CCUS projects in the fossil fuel industry, such as those proposed by the Pathways Alliance of oil sands companies, are not currently being considered by the CGF because they're so big that the projects could consume too much of the CGF's budget. However, this was not made clear in the FES. CCfDs for oil sands companies could be yet another public subsidy for oil sands companies to build multi-billion-dollar CCUS projects which would only serve to lock in stranded assets and delay the required transition away from fossil fuels. It is troubling that the Pathways Alliance is assuming its uneconomical oil sands CCUS projects are eligible for this public subsidy, saying that “we’re encouraged the government has allocated more resources for carbon contracts for differences, and we look forward to working with the government and the Canada Growth Fund to see how they may be implemented for carbon capture and storage projects.”
Canadian pension fund investment in Canada. The FES also announced that the federal government will "create an environment that encourages and identifies more opportunities for investments in Canada by pension funds." The government will "explore removing" the "30 per cent rule" that restricts federally-regulated pension funds from holding more than 30% of the voting shares of most corporations and proposes to require large federally-regulated pension plans to disclose the distribution of their investments by jurisdiction and asset-type per jurisdiction (p.61).
PSPIB governance. Finally, the FES proposed to amend the Public Sector Pension Investment Board Act to increase the size of the board of directors of the Public Sector Pension Investment Board (PSP) (p.105). This announcement was first made in the 2022 federal budget and included the intent to expand the board from 11 to 13 members, with the additional seats to be filled by representatives of federal public service unions (p.105).