Canada must move quickly on climate change risks, opportunities: BoC's Macklem

FILE PHOTO: Bank of Canada Governor Tiff Macklem speaks during a news conference in Ottawa, Ontario, Canada October 28, 2020. REUTERS/Blair Gable/File Photo

OTTAWA (Reuters) – Climate change will have a profound impact on Canada’s economy and the country must mobilize quickly to mitigate the threat as well as capitalize on opportunities, the Governor of the Bank of Canada said on Tuesday.

Part of that effort includes ensuring the financial system is well-positioned to help businesses and households manage risks, both in terms of extreme weather and the transition to low-carbon growth, Tiff Macklem said in remarks to a public policy group.

“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,” Macklem said. “We need to ensure the financial system is just as resilient in the face of climate change.”

Macklem noted that transition risks are often mispriced and physical risks underappreciated, and said the longer that persists, the greater the potential for substantial losses that could threaten stability.

With the world facing more frequent and more intense severe weather events, and scientists warning that temperatures will continue to warm, the need to address climate change is becoming more urgent, Macklem said.

“We need to position Canada to seize the climate-smart opportunities that consumers, workers and investors are looking for,” he said. “But to mitigate the threat and capitalize on the opportunity, we all need to mobilize. And we need to do it quickly.”

Indeed, climate change is becoming “an immediate bottom-line business issue” for Canadian companies, Macklem said, with consumers increasingly concerned about the footprints of the products they buy and the enterprises in which they invest.

To that point, he said demand for environmental, social and governance (ESG) bonds has exploded in recent years, with Canadian ESG issuances jumping from less than C$2 billion ($1.53 billion) in 2017 to almost C$13 billion so far this year.

“It’s crucial that Canadian companies can capitalize on these opportunities,” Macklem said.

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