Governor of the Bank of Canada Tiff Macklem holds a press conference at the Bank of Canada in Ottawa on Wednesday, Oct. 28, 2020. Canada's top central banker is making a plea for the country to more quickly address the impacts of climate change to avoid any economic ripple effects on households and businesses. THE CANADIAN PRESS/Sean Kilpatrick

Bank of Canada governor says country needs to pick up pace on tackling climate change

Bank of Canada governor says country needs to pick up pace on tackling climate change

OTTAWA — Canada’s top central banker is making a plea for the country to more quickly address the impacts of climate change to avoid any economic ripple effects on households and businesses.

Tiff Macklem made the case in a speech Tuesday that Canada’s financial system needs to become as resilient to climate change as it has been during the pandemic.

The governor of the Bank of Canada said that will require financial institutions to better gauge what risks they face from extreme weather, or rough transitions to a low-carbon economy.

Failing to do so could throw a wrench into central banks’ ability to support households and businesses in their hour of need, Macklem said, or threaten the stability of the financial system in the worst case.

As a result, the central bank is picking up the pace on its plans to study the implications of climate change on the financial system.

And, he said, the pandemic seems to have sharpened public interest in climate change issues.

A decade ago, in the wake of the global financial crisis, climate change issues faded from the forefront of the public conscious, Macklem said in the speech to the Public Policy Forum.

The situation, he said, is far different today as the pandemic appears to have put public attention on “extreme global risks and the value of resilience.”

“We need to position Canada to seize the climate-smart opportunities that consumers, workers and investors are looking for,” Macklem said in the prepared text of his speech.

“But to mitigate the threat and capitalize on the opportunity, we all need to mobilize. And we need to do it quickly.”

Climate change has been an interest for Macklem since before his time as head of the central bank, having helmed an expert panel on sustainable finance.

It recommended a suite of options to the federal Liberals, which asked for the report, including tax credits to encourage Canadians to put their retirement savings into climate-conscious investments.

On Tuesday, just as he did last year when he was still in academia, Macklem said finance won’t alone solve climate change, but it can help with the needed investments to smoothly transition to a low-carbon economy.

In his speech, Macklem noted that the issuance in Canada of “green” bonds has jumped in the past three years from just under $2 billion in 2017 to almost $13 billion so far this year.

Bank officials earlier this year released a research paper, which isn’t official Bank of Canada policy, that calculated economic risks related to various public policy scenarios.

The timing and impact of some of those changes varied depending on how slow or sudden the policy shifts, with risks affecting the central bank, governments, financial institutions and the resource sector.

This week, the central bank built on that research to launch a pilot project with the federal banking regulator, the Office of the Superintendent of Financial Institutions, to help a handful of banks and insurance companies develop climate change risk scenarios.

Macklem said the risks from more extreme and more frequent weather events are often underappreciated, while risks linked to future earnings or asset evaluations are mispriced in the context of climate change.

“The longer that persists, the greater the risk of a sharp repricing, with the potential for substantial losses for financial institutions,” he said.

“At a minimum, this would impair the ability of the financial system to support the real economy and could even threaten the stability of our financial system.”

Speaking earlier at a separate event, Macklem’s predecessor said the process to properly price risk is not easy, describing the need to think about upstream and downstream effects, suppliers and who uses a company’s product.

Stephen Poloz told a digital conference held by the Portfolio Management Association of Canada that investors are demanding it, but companies should be allowed to do it themselves rather than be regulated into it.

“There’s no question it’s a reality today, and we can’t be the last to do this,” he said.

This report by The Canadian Press was first published Nov. 17, 2020.

Jordan Press, The Canadian Press

Climate change

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

FILE - A firefighter wears a mask as he drives his truck. THE CANADIAN PRESS/Jonathan Hayward, File
Flames rip through Edmonton-area seniors complex, but no fatalities

ST. ALBERT, Alta. — Fire has destroyed part of a retirement complex… Continue reading

FILE - This file photo provided by Leonid Volkov and Russian opposition leader Alexei Navalny, right, are seen in Germany in a Sunday, Jan. 17, 2021, handout photo published to social media. The chief of staff to the imprisoned Russian president critic Alexei Navalny is calling on Ottawa to impose new sanctions on who he descripted as “Vladimir Putin’s oligarchs.” THE CANADIAN PRESS/AP-HO, Leonid Volkov
Canada must sanction Vladimir Putin’s oligarchs: Alexei Navalny’s chief of staff

Navalny was arrested on Jan. 17 upon returning from Germany

Alberta Health Services locked the Whistle Stop Cafe in Mirror on Wednesday morning after owner Christopher Scott refused to comply with health orders. (Photo by Paul Cowley/Advocate staff)
UPDATED: AHS shuts down Whistle Stop Cafe for defying health orders

Justice minister promises to get tough with those ignoring public health orders

Max Parrot of Canada competes in the men’s snowboard big air final at the 2018 Winter Olympic Games in Pyeongchang, South Korea, Saturday, Feb. 24, 2018. Parrot has won the Comeback of the Year honour at the Laureus World Sports Awards. THE CANADIAN PRESS/Jonathan Hayward
Canadian snowboarder Max Parrot wins Laureus World Sports Award for comeback

Parrot beat out former Washington Football Team quarterback Alex Smith

This Nov. 22, 2015 file photo shows Justin Bieber at the American Music Awards in Los Angeles. Bieber’s world tour is facing another setback as the COVID-19 pandemic rages on. The Stratford, Ont.-raised pop singer is pushing dozens of tour dates including stops in three Canadian cities.	THE CANADIAN PRESS/AP-Photo by Jordan Strauss/Invision/AP, File
Justin Bieber postpones Canadian summer tour dates until 2022

52-date world tour will now kick off Feb. 18, 2022

LtE bug
Letter: Security company can help with shelter

Why don’t we leave Safe Harbour temporary shelter where it is and… Continue reading

LtE bug
Letter: Good job on K-6 curriculum

Many are questioning the quality of the draft K-6 curriculum. It amazes… Continue reading

Treena Mielke
COVID becomes all too real when someone you love is ‘positive’

The third wave of the pandemic is hitting us hard. It is… Continue reading

Wizards beat Raptors in OT, Toronto playoff bid nearly over

Wizards beat Raptors in OT, Toronto playoff bid nearly over

Most Read