What is Sustainable Finance?

The transition to a more sustainable, lower-carbon economy is increasingly viewed as critical to the long-term success of businesses, economies and society. Global financial centres such as Toronto are viewing “sustainable or green finance” as a strategic priority and a critical element for the growth and competitiveness of the financial sector and the broader economy. According to global investment giant BlackRock, in 2012 global sustainable investment was US$13.3 trillion. By 2018, it had grown to US$30.7 trillion. Canada’s Expert Panel on Sustainable Finance defined sustainable finance as follows: “Sustainable finance is viewed as capital flows (as reflected in lending and investment), risk management activities (such as insurance and risk assessment), and financial processes (including disclosure, valuations, and oversight) that assimilate environmental and social factors as a means of promoting sustainable economic growth and the long-term stability of the financial system."

Corporate directors, executives and management professionals are increasingly expected to understand the need for sustainable finance initiatives and the spectrum of elements that need to be considered in order to assess the risk and opportunities of the transition to more sustainable economies. The pace of growth in sustainable finance research, education, training, regulatory, and policy initiatives has been significant in recent months. The following list provides some of the key resources regarding sustainable finance both in Canada and globally to help individuals and businesses navigate this fast evolving area of economic development.

Key Sustainable Finance Announcements in Canada

Effective climate-related financial disclosures from businesses and investors is a key element in developing the market for sustainable finance. Policy and economic decision-making requires accurate, consistent and timely information, putting a premium on disclosure and transparency.

Green/Sustainability Bonds

Green Bonds are a type of bond designed to raise funds to invest in environmental or climate change mitigation projects. Green bond issuers commit to provide investors with detailed on-going information on the projects and infrastructure supported with the green bond proceeds.

Sustainability Ratings/Indexes

According to the Global Initiative for Sustainability Ratings, there were over 125 providers of ESG data by 2016. While the categories and methods of establishing these ratings typically differ from one provider to another, they all strive to measure a company’s performance along the three measures of environment, social and governance (ESG). Some of the most commonly used providers include:

Climate Data

The need for quality climate data is an important component in developing a strong ecosystem for sustainable finance. Access to reliable and consistent climate data - and the ability to turn that data into relevant financial insight - is essential for sustainable business decisions.

Sustainable Finance Initiatives by Canadian Banks

Canada’s five largest banks alone are investing almost $2 trillion in sustainable finance over the long-term.

Sustainable Finance Reports by Canadian Pension Funds

Canadian pension funds have been global leaders in areas such as sustainable investing and climate-related disclosures.

Role of Sustainable Finance in Economic Recovery