The Global 100 index (which is equally weighted) commenced on February 1, 2005. From inception to December 31, 2014, it delivered a total return of 90.76%, compared to 96.98% for its benchmark, the MSCI All Country World Index. This is the first year-end that the Global 100 Index has fallen behind its benchmark, in large part due to the rising U.S. dollar, as 81 per cent of Global 100 constituents trade in non-US denominated currencies, versus approximately 50% for the MSCI ACWI. The Global 100 is calculated by Solactive, the German index provider.  It is available on Bloomberg under the ticker <CKG100 Index> and on Reuters under the ticker <.CKG100>.

It is maintained by Corporate Knights, a Toronto-based media and investment advisory company. The investment advisory arm, Corporate Knights Capital, builds indexing solutions and market-beating portfolios for institutional clients.

To learn more how Corporate Knights Capital’s investment sub-advisory services can work for you, please contact CK Capital at capital [@] corporateknights.com.

To learn more about the Global 100 Index, sustainability research and benchmarking services, please contact Michael Yow at global100 [@] corporateknights.com

Click here to go back to the ranking landing page.

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Zandvliet is a community-relations consultant. Last spring found him in Saudi Arabia on behalf of Alcoa, one of the world’s largest aluminum producers and a minority partner in a joint venture that’s developing a bauxite mine there. Mine personnel heard rumours that Bedouins wandering through the area were upset; they believed vibrations from blasting caused their camels to stop producing milk. Zandvliet sought out the man responsible for blasting.

“He’s this big, buff Australian guy, a re­ally hardcore mining engineer,” Zandvliet recalls. “We said, okay, you have to go talk to these Bedouins and find a solution.” And so, coached by Zandvliet and accompanied by a local member of the mine’s community relations department, the engineer headed out to the desert.

Zandvliet loves that story. It represents a minor triumph for his philosophy on how corporations should interact with commu­nities. It’s also the philosophy that drives Triple R Alliance, the small consultancy he founded in 2008 to help multinational resource companies manage relationships with the communities they enter. Past cli­ents have included Barrick Gold, Newmont Mining, Statoil, Chevron and Total.

Since 2001, Zandvliet has visited more than 60 sites, mostly mining and oil and gas operations, in locations as far-flung as Sudan, Cameroon, Colombia, Suriname, Panama, Papua New Guinea, and the Dem­ocratic Republic of the Congo. Some com­munities were so remote they were reach­able only by dugout canoe. Some projects were so controversial that employees dared not venture beyond the gates wearing com­pany insignia.

As far as Zandvliet has strayed, he’s seen only a handful of sites where managers, in his view, know how to relate with surround­ing communities. “Despite thousands of Canadian companies and tens of thousands of sites, it is still very difficult to list a dozen or two good ones,” he says. “That’s tragic.”

That tragedy, he says, is explained by fundamental flaws in the traditional corpo­rate approach to engaging with communi­ties. Those flaws provoke unnecessary con­flicts and delay multibillion-dollar projects that fail to secure social licence to operate.

Managers tend to attribute such trou­bles to external factors such as pre-existing strife, corruption and poverty. Zandvliet, though, believes companies bring the vast majority of conflicts on themselves. “And the good news,” he adds, “is that companies have much more control over company-community conflict than they think.”

Zandvliet’s first corporate engagement – or rather, non-engagement – dates back 15 years. A Dutch citizen, Zandvliet worked for non-governmental organiza­tions (NGOs) such as the International Red Cross during the 1990s. The last years of that decade found him in what is now South Sudan, witnessing civil war and fam­ine while serving as a country director for Médecins Sans Frontières (MSF).

There was considerable debate among NGOs and religious groups about whether to engage with Talisman Energy, a Calgary-based energy company then operating in the country. Among other things, Talisman had been accused of complicity in human rights abuses perpetrated by the Sudanese government against civilians living in oil ex­ploration and production areas.

“At the last moment MSF said no, we don’t want to be part of it,” Zandvliet re­calls, “because Talisman is tainted and we feel uncomfortable talking to corporate actors.” Zandvliet wasn’t sure that was the right decision. “There’s no general manager or CEO who wakes up in the morning and says, ‘How can I violate human rights?’” he says. Rather, when companies ran into trouble, it’s usually because they lacked the necessary tools.

Zandvliet has been trying to remedy that ever since. After leaving MSF he attended Tufts University to acquire a Masters in Humanitarian Assistance. Then he joined a non-profit based in Cambridge, Mass., called CDA Collaborative Learning Projects, where he spearheaded an effort among more than 40 companies to develop best practices for operating in conflict-plagued areas.

That led to his 2009 book, Getting It Right: Making Corporate-Community Rela­tions Work, co-authored with a CDA col­league. “His book, people still pull it out and refer to it,” says Deanna Kemp, an as­sociate professor at Australia’s University of Queensland and deputy director of its Centre for Social Responsibility in Mining. She’s known Zandvliet professionally for years. “A lot of knowledge in this area is an­ecdotal and comes from people like Luc. He has been very influential in this space, and I do respect his work a lot.”

Zandvliet, who today lives in Wiarton, Ontario, left CDA in 2010 to focus fully on Triple R Alliance, where he continues ap­plying those lessons.

Lesson 1: You can’t buy peace

Many resource companies adopt commu­nity-development projects – new schools, hospitals, etc. – as a favoured means of making nice with local communities. That’s understandable: when asked, communities can draw shopping lists of things they’d like a company to provide. Poorly implemented, however, such projects do more harm than good.

For example, Zandvliet visited many oil and gas sites in Nigeria during the mid-2000s. Sometimes his job involves seeking out criminals, corrupt politicians, disaf­fected youths, artisanal miners, and other local parties that companies themselves, for a variety of reasons, prefer to avoid. It’s dangerous work. So as not to draw unwel­come attention, in Nigeria he declined use of company helicopters. Instead, he trav­elled in the same boats favoured by locals, and he hoped to be rained on so he would get as drenched as everyone else. He asked questions his clients couldn’t: Why are you kidnapping people? Why are you blowing up pipelines? Who is paying you?

During one tense encounter, Zandvliet persuaded some youths not to feed him “pepper soup” – a local euphemism for kidnapping, named after the unpleasant dish fed to those unfortunate enough to ex­perience it. But they still vowed, given the right opportunity, to kidnap oil company employees. Zandvliet pointed out recent improvements in local infrastructure pro­vided by the companies, and asked why they were unhappy. “They said it’s because the companies don’t care,” he recalls. “Elec­tricity poles are there, but there are no wires between the poles. The hospital is there but they never asked the government to provide doctors and nurses. So it is basically a stor­age shed.”

Failure to deliver promised community projects can be devastating to a company’s reputation, and the cause is often shoddy or uncoordinated work by subcontrac­tors. Zandvliet notes that during the last five years some of his clients have begun to supervise subcontractors more closely. “Companies have slowly woken up to the fact that they cannot say, ‘Well, it wasn’t me,’” he says. “You can build schools and clinics until the cows come home. But if you’re still seen as arrogant and uncaring, all the goodwill you think you’ve created by building these projects is just evaporat­ing immediately.”

Lesson 2: Hire locally

Ill-considered hiring practices are even more dangerous, Zandvliet believes. Nige­ria is an intensely tribal country, and Zan­dvliet’s clients wanted to remain detached from it. They attempted to maintain neu­trality by hiring on merit. But many in the Niger Delta, Zandvliet found, didn’t re­gard that practice as neutral in the slight­est. Whereas members of certain tribes are more likely to have university education, others from the Niger Delta haven’t com­pleted high school. “Community folk say, no, hiring based on merit means you are reinforcing the status quo,” says Zandvliet, “which they see as oppression.”

Companies need to appreciate such re­alities before devising hiring policies, Zand­vliet says. Whatever approach they choose, it needs to be fair and transparent. Com­panies can’t always source skilled workers from the local community, but they should source locally whenever possible. “If you’re bringing in unskilled labourers from the capital, you will have an issue. That’s true wherever you go.”

Lesson 3: Drive carefully

Here’s one thing Zandvliet sees compa­nies doing right, at least half the time. Seeking to maintain a good safety record, most companies insist employees buckle up and drive responsibly. They install sig­nage and speed bumps to help enforce it. Whether intended or not, companies do­ing this also enjoy a community relations dividend, he says, because locals are con­cerned about the safety of their children and livestock.

Where companies have poor relations with surrounding communities, he’s seen vehicles outfitted with mesh screens to defend against rock attacks. Others have tinted windows. “Driving 30 kilometres an hour with your windows rolled down, smil­ing to people, sends a completely different message than going 80 kilometres with tint­ed windows up,” he says. “It’s more powerful than we understand.”

Lesson 4: Pay your bills on time

The bean counters in accounts payable might not come to mind in discussions about community relations. But in Zandv­liet’s view, they’re on the front lines. “If you pay local contractors six months late, you will have a social problem on your hands,” he says. “Because those people typically need to borrow money from loan sharks. And these loan sharks are not going to wait until the company pays, right?”

Kemp concurs. Companies often seek to externalize risk, and one way of lowering fi­nancial risk is to pay bills only when they’re due—or even later, if possible. “They might be minimizing financial risk, but they’re exacerbating social risk,” she says. “Some of the simplest economic transactions have huge social consequences.”

Distilled, Zandvliet’s message is that few communities fundamentally oppose re­source extraction. Rather, they react nega­tively when it’s done poorly—and there are straightforward, prescriptive strategies to avoid that. That message receives warm wel­come in many corners of industry and gov­ernment. But it is not universally accepted, even among Zandvliet’s admirers. “It’s prob­ably the only point that I disagree with Luc on,” says Kemp. “He’s saying we need to sim­plify this for people. But these are complex issues. And the industry needs to get its head around that. It can’t go around thinking, there’s just a few simple things we need to get right and everything will be fine.”

Catherine Coumans is research coordi­nator at MiningWatch Canada, an activist group formed in 1999 that campaigns on public health, water and air quality, and other mining-related issues. She’s visited many of the same sites Zandvliet has, and has heard similar concerns about dust, driving practices, and delayed payments. “These are all irritants, for sure,” she ac­knowledges. “These things can lead to lo­cal demonstrations and attempts to shut down the mine. We’ve certainly seen that with communities we’re working with.”

Yet they’re not the issues of gravest con­cern, Coumans says, nor the ones derailing resource projects. She points to recent ef­forts by communities in the Philippines and Latin America seeking long-term bans on mining in their areas. “There are always texts associated with them, and they’re not about the sort of stuff he’s talking about,” she says. “They’re about really fundamental issues. It’s about not wanting to be relocated, not wanting to have rivers diverted, not wanting to have mines in mountainous areas where waste is unlikely to be contained in perpe­tuity.” Such issues lack simple remedies, she says, and are consequently often downplayed or avoided by consultants.

Less controversial is Zandvliet’s asser­tion that the prevailing approach to com­munity relations isn’t working well, which brings us to his final lesson.

Lesson 5: Broaden relations

Community relations are too important, he says, to be left just to the community relations department of a company. Kemp and a colleague published a paper last year examining the community relations depart­ment at a large mine in West Africa. They interviewed 30 department employees, many of whom said their role was to act as an intermediary between the company and the community. The department’s influence rose somewhat during times when it was able to manage conflicts that threatened to interrupt mine operations, but gener­ally it was not consulted on decisions such as building new roads or dams that were likely to affect community relations. Rather, Kemp observed “fire-fighter type patterns within and out­side the fence whereby the company identifies a sudden crisis and [the community rela­tions department] is rapidly de­ployed to de-escalate and limit the spread of the crisis.”

That’s entirely consistent with Zandvliet’s observations. “Within many companies, the community relations people are expected to keep people happy outside the fence so that the company can keep doing its work inside the fence,” he says. The problem is that virtually all company employees active in the country interact with local communities, whether they rec­ognize it or not. Just like profit and safety, social performance needs to be recognized as an objective for which all workers are responsible.

“If there’s dust in the air because of blasting, that’s a mining issue,” he says. “If the state security forces are heavy handed, that’s an issue for the security department. If there’s a lack of transparency and fair­ness in hiring, that’s an HR issue.” Com­panies failing to recognize this condemn themselves to making the same mistakes he keeps seeing around the world.

That brings us back to the camels.

When Triple-R accepted Alcoa’s request that it set up a community relations depart­ment at its Saudi joint venture, Zandvliet insisted it adopt his integrated approach. The mine’s manager endorsed the idea, and that buy-in by senior management is one reason the burly mining engineer readily agreed to venture outside the gates to speak with Bedouins. As a result, Alcoa erected signs along main desert tracks to warn pass­ersby about pending blasting. This spring it will monitor its human networks in the Saudi desert to learn whether Bedouins in the area are satisfied, or whether further measures are required.

As for whether blasting actually influenc­es lactation in camels, “the jury is still out,” Zandvliet chuckles. He confesses many en­gineers have difficulty taking such concerns seriously without empirical evidence.

But therein lies a final lesson. “If you work in the field between companies and communities, it does not matter what the facts are,” he says. “Perceptions determine people’s behaviour. If they believe blasting affects camels, from a company perspec­tive, that’s all you care about.”

The post Reducing company-community conflict abroad appeared first on Corporate Knights.

This situation is a global issue being tracked by organizations such as the Asset Owners Disclosure Project (AODP). In a 2013-14 survey of 1,000 pension funds that have roughly $75 trillion under man­agement, AODP found that 55 per cent of investments were in climate change-exposed industries, predominantly energy, steel, aluminium, cement, construction and transportation, while only 2 per cent of investments have been placed in industries with low-carbon intensities.

The funds were ranked with respect to Climate Change Best Practices, and the top 15 revealed a mix of European, Australian, and U.S. (Californian) funds. The top Ca­nadian fund, B.C. Investment Management Corporation, ranked 28th and the Canada Pension Plan ranked 52nd. Overall, there were 20 Canadian pension funds in the top 200, indicating at least some recognition of climate risks.

These risks occur in many ways. As the world urbanizes, new construction and expansion of existing cities along coastlines and within floodplains invite trouble. As we experience more severe storms, in some cases annual rainfall delivered in a single event, damage to communities and agricul­tural land can be catastrophic, and deadly.

The opposite also happens. Water shortages have had, and will continue to have, devastating effects on agribusinesses and livelihoods. Recent examples include failed rice harvests in Asia and drought in California that has caused reservoir levels in the state to drop to unprecedented levels.

Having assets become stranded is an­other risk as energy prices become more volatile over the long term and govern­ment measures to combat emissions, such as carbon taxes or GHG limits, impact the economic viability of everything from pipelines to power plants.

On the other hand, low-carbon solutions abound. They range from improved urban planning, advanced public transit systems, advanced materials applications, wider use of bio-based chemicals, to the widespread adoption of clean energy technologies.

Pension funds are somewhat unique in that they play the long game with their investments. They support many large, revenue-producing infrastructure projects ranging from energy exploration and trans­mission, power generation, roads, railways, and real estate – all assets that deliver re­turns over many decades.

As global emissions grow the likelihood of increased costs from climate change-related disasters and carbon pricing puts the long-term revenues from these investments at risk. It is not reasonable for funds to divest entirely from their fossil-fuel-tied invest­ments. The reality is that we will continue to use these valuable resources. At the same time, we should do so in a way that reduces both the environmental impact and cost, and makes the profit equation more stable.

Individual companies are increasing their use of innovative low-carbon tech­nologies, however there is frequently insuf­ficient “available” capital to scale up the products – and the companies behind them – because of their perceived novelty or risk. There are some exceptions. For example, software-based technologies that can help us use energy and resources more efficiently. Venture capitalists prefer these technologies because they are relatively inexpensive to scale up, and therefore less risky.

However, many of the most impactful clean technologies are equipment-intensive and often target regulated customers, such as utilities, which tend to be highly risk averse. These technologies require larger amounts of capital, longer investment hold periods, and often require a project finance structure to scale up that doesn’t match the limited revenues of these small, young com­panies. The resulting lack of capital, which I term the “high capex gap,” is problematic.

Pension funds have an important role to play. They have an opportunity to dovetail with the rapid growth of Canadian cleantech companies and at the same time fulfill the need to diversify assets – that is, include more low-carbon investments and still invest in infrastructure. Doing so also helps them mitigate or hedge asset expo­sure to climate risks.

Canada has the capacity to outperform in this arena. We already have an impressive array of innovative cleantech companies across the country that have demonstrated leading-edge technical solutions for increas­ing efficiency in traditional, resource-based industries. Visit the website of Sustainable Development Technology Canada for the array of investment opportunities.

To commercialize these cleantech products is a struggle. The companies be­hind them need to obtain sufficient capital to scale up, otherwise they will not be ro­bust enough to seize a larger share of the global market. This market is estimated to be in the trillions of dollars by 2020.

There could be significant mutual ben­efits if Canadian pension funds invested in these young companies and their proj­ects, which have the potential to tap into a massive export opportunity. Funding of manufacturing and production plants both at home and abroad creates jobs locally and integrates cleantech companies into global value chains, thereby diversifying the risk profile for pension funds.

Society often feels powerless to help the environment in a measurable way. How em­powering would it be if your pension fund invested in Canadian cleantech with all the attendant benefits for both economy and environment, while at the same time better securing your retirement nest egg?

The post Protect your pension and the planet appeared first on Corporate Knights.

One retired database developer in Cali­fornia culled through more than 3,800 an­nual reports of publicly traded U.S. com­panies in 2013 and discovered that just 27 per cent of them cited “global warming” or “climate change” in their most recent filing, according to an InsideClimate News report.

Julie Gorte and researchers at Ceres, meanwhile, scrutinized financial results fol­lowing some of the worst hurricanes in re­cent U.S. history and found that businesses often failed to adequately report to inves­tors about the link between a company’s greenhouse-gas emissions, climate change and superstorms that ultimately led to bil­lions of dollars in losses at those same firms.

“Investors are concerned about these is­sues,” says Gorte, who is senior vice-presi­dent of sustainable investing for Pax World Management and a board member with Ce­res, the Sustainable Investments Institute, as well as the American Sustainable Busi­ness Council. “And these are mainstream investors – not just bunny huggers,” she adds.

Indeed, more investors are pointing to greenhouse-gas emissions as a growing threat to economic stability and, therefore, their own financial portfolios. A group of them known as the Portfolio Decarbon­ization Coalition – which includes two of the largest asset managers and sovereign pension funds in Europe – aims to reduce the carbon footprint of institutional invest­ments worldwide by $100 billion before the end of 2015.

Investors could benefit from having regulators such as the U.S. Securities and Exchange Commission (SEC) step in and require companies to disclose more of their carbon metrics, some sustainability advo­cates say. This is especially relevant when applied to high-emitting business sectors and how they report Scope 1 (direct from controlled sources) or Scope 2 (indirect from purchased energy) greenhouse gas emissions.

Instead of lobbying specific businesses to do this, “investor time would be much better spent calling up the legislature and their congressmen and saying, ‘I’m deeply concerned that my portfolio isn’t being protected from obvious risks,'” says Brian Reynolds, a New Jersey-based consultant who specializes in energy, sustainability and corporate climate resilience issues. “Some­one should send a letter to the SEC giving them more of a push to do something here.”

Some investors already have, though the last time the agency openly called for pub­lic comment to help develop guidelines in this area was between 2007 and 2009. Since then, many investors have argued that com­panies should regularly examine certain risks for materiality, which the Sustain­ability Accounting Standards Board (SASB) says on its site is important because the “po­tential for negative social and environmen­tal impacts of operations can present high costs to investors, companies and society.”

Remember Superstorm Sandy? Many institutional investors certainly do. Among those surveyed by PricewaterhouseCoopers (PwC) in 2014, 84 per cent said companies should periodically assess risks from heat waves, storms, water shortages and other physical impacts of climate change, while 89 per cent pointed to the risk of disruption that low-carbon technologies pose to exist­ing products and assets.

Yet the majority of investors in North America – more than 60 per cent, PwC found – are dissatisfied with how compa­nies go about reporting sustainability met­rics.

It’s not just that some don’t disclose at all. More and more are disclosing sustain­ability performance, such as to organiza­tions like the CDP (previously known as the Carbon Disclosure Project) or to research organizations like Corporate Knights Capi­tal. The problem is that disclosure is spo­radic and the data is often not based on any comparable standard. It also isn’t assured that the same information is getting shared in financial filings with the SEC.

The bottom line: sustainability metrics such as carbon emissions do not trickle down in a consistent way to investors. “Companies are disclosing different things in different venues,” says Don Reed, man­aging director of PwC’s sustainable busi­ness solutions practice. “It’s a bit of a messy world.”

That’s why a set of clear reporting rules issued by the SEC or another regulatory agency could go a long way, some experts argue.

The cause of this messiness is under­standable. Companies are faced with a pro­liferation of competing reporting standards, says Tima Bansal, a professor of general management at the Ivey Business School at the University of Western Ontario. Bansal is also executive director of the Network for Business Sustainability, a Canadian non-profit that works with more than 15 compa­nies, including Suncor Energy and TD Bank Group.

“There’s a real need to have some con­solidation and reconciliation with all these metrics,” Bansal adds – and investors seem to agree. Two-thirds of those who respond­ed to PwC’s survey say they’d be more likely to consider sustainability information when making investment decisions if common standards were used.

So how has the SEC tried to tame this wild west of reporting? While the agency wouldn’t speak to Corporate Knights on the record, it did openly acknowledge (back in 2010) that many companies were providing information to their peers and the public about their carbon footprints, as well as their efforts to reduce them. It also pub­lished a set of guidelines to help companies with disclosure requirements regarding cli­mate change matters.

But SEC interest appears to be waning. The commission issued 49 comment letters to companies in 2010 and 2011 that ad­dressed the adequacy of climate change dis­closure. In 2012, however, it only released three such letters – and issued none in 2013. “Since then, there has been a significant fall-off in SEC attention to this area,” warns a 2014 report from Ceres, which studied all of those complaints.

Indeed, the SEC gives considerable lati­tude on whether or not a company needs to disclose carbon-related metrics in the first place. The agency also leaves it up to com­panies (and their attorneys) to decide what is considered material.

All told, 41 per cent of S&P 500 compa­nies didn’t include any climate-related dis­closure at all in their 10-K filings in 2013, according to a Ceres report, and when busi­nesses have felt compelled to report infor­mation publicly they’ve often skimped on details. In its report, Ceres faulted most cli­mate disclosures for being very brief, pro­viding little discussion of material issues, and failing to quantify impacts or risks.

“What happens is a company is able to pay lip service to the realities that a less stable climate will create business problems by saying something as obvious as ‘the com­pany recognizes there’s ongoing risk due to legislation to deal with greenhouse gases’—and that’s all they’re going to say,” Reynolds says. “That’s very, thoroughly unsatisfying.”

Where does that leave companies with their reporting requirements? For now, without any clear direction from the SEC, some corporations turn to organizations like the CDP for their primary reporting framework. The Hershey Company, for example, first began reporting its Scope 1 greenhouse-gas emissions that were direct­ly produced by its facilities in 2008.

While it only focused on its wholly owned facilities in North America back then, the chocolate maker has since ex­panded its reporting. It now includes its global facilities as well as Scope 2 emissions (caused indirectly from energy purchases) and some Scope 3 emissions (other indi­rect emissions, such as employee travel and commuting). Because these steps have been voluntary, though, most other companies have not followed suit.

Meanwhile, SASB is developing stan­dards on what constitutes materiality in reporting across 10 sectors, including re­newable resources and alternative energy, healthcare, transportation and consump­tion, “so you can truly compare apples to apples within an industry and from one to another,” says Todd Camp, a member of the SASB advisory council and senior director for corporate social responsibility and com­munity relations at Hershey.

Even so, SASB’s framework will not fo­cus solely on emissions reporting, and it will be much broader than what the CDP already outlines, says Camp. That means Hershey along with many other companies will likely continue to disclose their efforts voluntarily through a mix of annual CSR re­ports and surveys from the CDP and vari­ous investment groups.

Until regulators like the SEC step in and force companies to disclose a standard set of metrics and in more detail, some argue, this haphazard reporting style isn’t likely to change.

“The vast majority of companies are relatively circumspect about the scale and scope of their climate disclosure in financial filings, as compared to voluntary disclo­sures,” says Veena Ramani, director of Ce­res’ corporate program.

Ramani believes this is shortsighted. “Especially where companies do have strong programs in place to address climate change, it would behoove them to discuss these issues in more depth in their regula­tory filings – as this would help educate and engage the very investors that they are looking to reach out to in these efforts.”

The post Is it time for regulators to set some carbon disclosure ground rules? appeared first on Corporate Knights.

For the past couple of years, Canada’s prime minister has dismissed such talk as “crazy” and described all variations of car­bon pricing as a “job-killing tax” on hard-working Canadians.

Alberta’s carbon levy can best be de­scribed as better than nothing. B.C.’s carbon tax would be a superior model to emulate, as emissions in the province have dropped while its economy has grown. Still, Harper’s flip-flop – no matter how non-committal – tells us climate action has emerged as a hot-button political issue in Canada.

It is a lesson on the importance of tim­ing, and the patience good timing demands in politics. As Pierre Elliott Trudeau once said, “The essential ingredient of politics is timing.” Former federal Liberal leader Sté­phane Dion became a victim of bad timing when a major part of his 2008 election cam­paign was to create a carbon tax similar to what B.C. has today.

It was a great idea, but politically it was a dud. Harper took advantage of that, warning voters that the proposal would undermine both the economy and national unity.

It didn’t matter that Harper was talking rubbish. What mattered was that the public was ready to believe Harper more than embrace Dion’s call to do the right thing. The re­percussions were lasting. Dion’s spectacular failure made any future mention of carbon taxes politically radioactive, until recently.

Harper knows he can’t take that gamble anymore – there’s too much momentum in the opposite direction and plenty of evidence now that carbon pricing, when properly im­plemented, doesn’t undermine economies.

Canada’s national newspaper, the Globe and Mail, is now writing editorials urging adoption of a national carbon tax, calling it Economics 101. Preston Manning, the father of Canada’s modern-day conservative move­ment and former boss to Harper, hit the air­waves and commentary pages in November urging fellow right-wingers to support car­bon pricing.

A November public opinion poll from Environics Research found that for the fourth year in a row a majority of Canadians outside of B.C. support having a B.C.-style carbon tax in their own province. Average support was 56 per cent. Ontario had the highest rate of support, 61 per cent, which is a six-point increase over the previous year.

Ontario, as we reported last week, is ready to bank on that support. Premier Kathleen Wynne has made climate action a priority for her government, which has already signaled that carbon pricing is com­ing this spring. “When you see it, it will be real, it will be efficient, and it will be eco­nomically positive,” Glen Murray, the prov­ince’s minister of environment and climate, told Corporate Knights.

In Oil’s Slippery Slope, published in the latest issue of Corporate Knights, I explained why Canada’s oil industry should be paying attention. The desire for change is growing thicker in the air. You can hear the chorus of voices calling for it growing louder.

In September, institutional investors rep­resenting more than $24 trillion in assets called for a price on carbon, and many of those same investors want oil majors to dis­close how such policies will affect the value of their assets and nature of their business.

After all, does it make sense to spend bil­lions of dollars on oil exploration when pre­venting the worst affects of climate change means leaving two-thirds of the world’s known fossil-fuel reserves in the ground?

It’s what some residents living around the Gulf of St. Lawrence must be asking as they watch oil companies preparing to drill in what many consider an ecological treasure. Regular CK contributor Peter Gorrie took a closer look at this developing story and how it’s poised to erupt into another Keystone-esque resistance movement.

Not that the oil industry doesn’t have other problems. Caught off guard by the plunge in oil prices, many high-cost de­velopment activities are being shelved as companies rework the economics of their projects and face the reality of oversupply in the market.

Given the situation, don’t think this isn’t a good time to introduce a carbon tax. Quite the contrary – it’s a perfect time. While we’re at it, oil subsidies should also go.

It will lead to higher fuel prices, but that’s exactly why it should be done now while consumers are less likely to feel it, argues Maria van der Hoeven, executive di­rector of the International Energy Agency.

“The worst course of action would be complacency in the face of low oil prices,” she wrote in a recent online commentary. Policymakers, she added, “have a once-in-a-generation chance to get us back on track. Let’s hope they seize the moment.”

That’s what Canada’s Ecofiscal Commis­sion is doing. It’s a collective of 12 econo­mists from across the country who believe that properly designed fiscal policy – like the B.C. carbon tax – can achieve both environ­mental protection and economic growth.

Five years ago, such a commission would be largely ignored. But when it launched in November, it received widespread cover­age in major media. What has changed? I posed that question to commission chair­man Chris Ragan.

“The mood or mindset is starting to change on this,” said Ragan, explaining the commission is tapping a nerve. “It has,” he added, “been fortuitous timing.”

The post Carbon tax talk no longer economic blasphemy appeared first on Corporate Knights.

Would they raise concerns about the rise in forest fires attributed to climate change, or how the Moun­tain Pine Beetle and Emerald Ash Borer are threatening their survival? Would they remind us how impor­tant they are as a carbon sink?

Would they lecture some coun­tries for treating them carelessly, and praise others for being more responsible and helping them regenerate?

Forests can’t talk, of course, so the best we can do is shine a light on their wounds and observe how they’re healing. That’s the idea behind Corporate Knights’ first Country Canopy Index, which looks at the world’s biggest deforesters from a variety of perspectives and identifies those coun­tries that need to do a better job.

We wanted to call this report the “Lorax Index” – the Lorax, after all, speaks for the trees – but lawyers representing Dr. Seuss Enterprises denied us permission to lever­age the name of its client’s “much-beloved property.” No matter, the spirit of the Lo­rax lives on in this report, which was made possible by Global Forest Watch, an online tool launched last February by the World Resources Institute and partners including Google and the University of Maryland.

What this free, publicly accessible tool does is empower users to monitor tree loss around the world. Through a combination of satellite technology, mapping software, open data and crowdsourcing, any per­son with an Internet connection is guar­anteed timely and reliable information about forests for the first time, no matter the location.

Corporate Knights used the tool to look at how the world’s forests have done in the 21st century – specifically between 2000 and 2012. We focused on countries where forests have been most impacted, and where forests have the most impact.

Countries were assessed across five in­dicators: absolute trees loss, absolute tree gain, loss as a percentage of total forest coverage, loss per capita, and loss per bil­lion dollars of GDP. The results from these indicators were used to calculate a final index score for the 12 countries assessed, which collectively represent about 65 per cent of the world’s forests and 62 per cent of total observable tree loss this century.

(Scroll to the bottom of this article for a closer look at our methodology, assumptions and caveats).

Renewable natural capital

We know that forests are an integral part of the world’s natural capital, and that they supply us services that carry a value. We take trees for granted, but consider that worldwide forest wealth is estimated at more than $273 trillion (U.S.), much of it concentrated in a dozen or so countries, according to the Inclusive Wealth Report 2014, a joint initiative of the United Na­tions University and United Nations Envi­ronment Programme.

Their document, released in Decem­ber, cites “alarming losses” of forest capital in most countries over the past 20 years. “From an accounting perspective, these losses are frequently hidden from view,” write report co-authors Haripriya Gun­dimeda, a professor at the Indian Institute of Technology Bombay, and Giles Atkinson of the London School of Economics and Political Science.

They concede that natural capital ac­counting of forest assets remains a “work in progress,” but even rudimentary analy­sis shows that forest capital is a significant component of our total wealth. “Many countries appear to be losing significant amounts of this wealth,” Gundimeda and Atkinson warn.

Our Country Canopy Index makes this conclusion alarmingly clear. In the first 12 years of this century, just five countries – Brazil, Canada, Indonesia, Russia and the United States – saw 117 million hectares of tree loss. This is roughly equivalent to the entire land area of Ontario, and represents about half of all tree loss this century.

The biggest single-country loss of tree cover was seen in Brazil, though Indonesia is now losing forests at a faster rate due to illegal harvesting. Recognizing the severity of the problem, Indonesia’s new president, Joko Widodo, pledged in November to crack down on deforestation, a move that was applauded by Greenpeace. (The deci­sion by Asia Pulp and Paper in early 2013 to halt its own deforestation activities in Indonesia also bodes well for the country’s forests – see Heroes and Zeros.)

It wouldn’t be so bad if we were gaining the same density of forest cover at the same rate, either through natural growth or plan­tations, but that is far from the case. For every hectare of new growth in those same five countries, more than two hectares were lost. And that’s a relatively good outcome.

Bolivia, which had the worst overall score in our index, has a loss-gain ratio of 16-to-1, an unsustainable path for the Ama­zon basin that makes Brazil – especially in recent years – look like a treehugger by comparison. Surging deforestation in Boliv­ia since 2000 to support large-scale agricul­ture led to the tightening of land-use laws in 2013, but environmentalists have dismissed the measures as weak and ineffective.

Partial victories

Not to suggest there hasn’t been progress. It’s generally recognized that the rate of deforestation has slowed worldwide and reforestation efforts are on the rise, with developing countries from Brazil to Viet­nam taking encouraging steps to tackle the problem.

Environmental and social groups in Brazil, for example, pressured the coun­try’s soy and cattle industries to voluntarily declare moratoriums on product grown on deforested lands. If soybeans were pro­duced on lands deforested before June 2006, members of the Brazilian Association of Vegetable Oil Industries and the National Association of Cereal Exporters refused to buy them.

The Brazilian government also expand­ed the number and size of protected areas, while state and local authorities beefed up enforcement of land-use laws with the help of public prosecutors. Enforcement efforts also became more sophisticated. The coun­try’s National Institute for Space Research began using satellite technology to monitor where and when forest changes were taking place, allowing authorities to zero in on de­forestation hot spots and take swift action.

The Union of Concerned Scientists profiled several “success stories” in a June 2014 report. These countries, it said, “dem­onstrate how the power of political will – manifested in a range of actors across the public, private, and community spectrum – can have positive impacts on forest conser­vation, socioeconomic development, and forest-land use changes.”

Still, these are only partial victories at best. The bottom line is that our forests, whether by human hand or force of nature, are shrinking. It’s why the more than 30 countries and 40 large corporations that signed The New York Declaration on For­ests, announced in September at the UN Climate Summit, committed to helping end natural forest loss by 2030 and cut the rate of loss in half by 2020.

Signatories also agreed to reward countries that take action to reduce forest emissions. Norway, for example, is paying $150 million to Liberia to put a halt to de­forestation within its borders by 2020. The U.K. and Germany made similar financial commitments, which will help countries like Mexico, Ghana and Nepal resist the temptation to cut down their forests for economic gain.

Click to enlarge the image.

This approach is the basis of a UN pro­gram called REDD, which stands for Reduc­ing Emissions from Deforestation in Develop­ing Countries. The idea was proposed in 2005 by a coalition of countries led by Costa Rica and Papua New Guinea, and was embraced as a global program by the United Nations at the 2007 climate conference in Bali.

So far, argues the Union of Concerned Scientists, REDD financing “has proved to be money well spent.” Environmental groups, from The Nature Conservancy to WWF, are also supportive of the initiative. WWF says it has potential to cut gross de­forestation by 75 per cent and reduce net deforestation worldwide to zero by 2020. But, the group says, “it must happen on a large scale.”

Another approach, called Payments for Ecosystem Services, is similar to REDD in that it uses money to discourage deforesta­tion or promote reforestation. The differ­ence is that the funds are targeted at spe­cific people or communities.

Pointing fingers

If we were to call out those countries most responsible for or affected by global tree loss, who would it be? The most clear-cut approach is to look at the absolute loss of forest coverage, in which case Brazil, Rus­sia, the United States, Canada and Indone­sia top the pack.

But that may be an oversimplification. Looking at forest loss as a percentage of to­tal forest cover, none of these countries top the list. Viewed this way, Malaysia’s forests appear to be under the most stress, with forest loss this century representing 22 per cent of the total forest cover it had in 2000. Indonesia followed with 15 per cent, and surprisingly, Sweden came in third at 9.2 per cent.

Should Sweden, which in 2010 had less than 4 per cent of the forest cover Russia had, escape scrutiny because it is having relatively little global impact? Or, should countries be held more accountable for forest loss within the context of their own borders?

Another approach is to assign respon­sibility by population. Can Canadians feel good about the fact that since 2000 each citizen’s share of Canada’s tree loss works out to two-thirds of a hectare, more than twice the per-capita figure for second-ranked Finland and eight times the share for a U.S. citizen?

And compared to China? A Canadian’s share of forest loss this century is 155 times the share of a Chinese citizen. If China had the same per-capita tree loss as Canada, all of its forests would be gone – even taking the current rate of regrowth into account.

Finally, what if we assigned blame based on how economically productive countries are with their forest resources? By this mea­sure, the Democratic Republic of Congo (DRC), Bolivia and the Central African Re­public (CAR) have done most poorly. DRC, for example, lost 372,000 hectares of forest for every $1 billion of its GDP. Here, we picked GDP for 2006 (current U.S. dollars) as the mid-point for the 12 years analyzed. Bolivia and CAR each lost about 245,000 hectares.
On this metric, Canada does much bet­ter, having lost 16,196 hectares per $1 bil­lion GDP. Even so, Canada is 10 times less productive than the United States, which lost only 1,708 hectares.

This may explain why, taking all five indicators together, Canada ranked third in our index behind Bolivia and Malaysia. Across a number of metrics, the country doesn’t perform well.

But care must be taken when attributing blame. When we talk of tree loss, we’re not strictly talking deforestation. In the context of this report, “loss” can include mechani­cal harvesting, but also loss due to forest fire, disease and storm damage. The pine beetle alone has had a devastating impact on some countries, particularly Canada.

In other words, this is not an indictment of any country’s logging industry. This report does, however, tell us a lot about the health of a country’s forests and how the global canopy continues to be chipped away by commercial interest, the impacts of climate change, and random acts of nature.

Methodology, assumptions & caveats:

With our analysis, we assumed greater than 50 per cent canopy density when calculating forest loss or gain, meaning that from a satellite’s perspective forests are only counted if trees are seen as covering more than half the ground. Also, vegetation must be at least five metres high.

With each indicator we ranked the 10 worst-performing countries, or 10 best in the case of forest gain. Our final “index” is based on the cumulative of what countries scored on each indicator. Overall country scores are out of 100. The lower the score the more dire the situation on the ground.

When we talk of tree loss, we’re not strictly talking deforestation. It can include mechanical harvesting, but also includes loss due to fire, disease and storm damage. In other words, this is not an indictment of any country’s forestry sector, though readers can draw their own conclusions.

Tree gain represents growth in an area that previously had no tree cover, and includes natural growth and plantations.

While individual indicators are based on safe assumptions, we recognize the methodology for our index is subjectively designed. Our goal is to simply present the data in a different way. We also recognize that not all forests are created equal. A rich and diverse old-growth forest is not equivalent to a monoculture plantation on so many levels, but comparing forest type is beyond the scope of this project.

The post Country Canopy Index: taking stock of forest loss around the world appeared first on Corporate Knights.

Ontario and EDC turned to the University of Oslo’s Centre for International Climate and Environmental Research to help smooth their first forays into the fast-growing market for “green bonds,” fixed-income investments used to finance projects that help combat or adapt to climate change. The Norwegian group, known as CICERO, has emerged as the most influential arbiter of which borrowings qualify as “green.”

CICERO’s work underscores one of the biggest challenges facing the green bond market as it makes the transition from a pet project of environmental activists into the mainstream of global finance.

Which projects deserve to be classified as green? Who is best qualified to be the judge? Should there be a single set of international standards for green bonds? Should such standards be voluntary or mandatory? The answers to such questions will determine the future credibility of the green bond movement.

Demand for green bond issues has ballooned in the past two years as pension funds and other pools of capital – joined increasingly by retail investors – have sought to burnish their social-responsibility credentials.

“Green bonds are building an investor base that’s more aware of what the money they’re investing is achieving in terms of impact and outcomes,” says Heike Reichelt, head of investor relations and new products at the World Bank, which has raised over $7 billion (U.S.) from 77 green bond issues in 17 currencies since the market’s inception in 2007.

Investors bought less than $5 billion of green bonds a year between 2007 and 2012. But demand soared to $11 billion in 2013, and to more than $35 billion last year.

The market took an important step forward in January 2014 when 13 of the world’s biggest banks agreed on a set of voluntary Green Bond Principles that set out a process for designating, disclosing, managing and reporting on green bond issues. The original signatories included Bank of America, Citigroup, Crédit Agricole, Deutsche Bank, Goldman Sachs and HSBC. Several others, including Royal Bank of Canada, have subsequently signed on.

The market has gained sufficient traction that U.K.-based Barclays and MSCI, a compiler of capital markets data, launched a green bond index in mid-November. A bond’s eligibility for inclusion in the index is judged according to four criteria: use of proceeds, project evaluation, management of proceeds, and reporting.

Green bonds “have got a lot of momentum, but they’re still such a marginal portion of the bond market,” says Christa Clapp, CICERO’s head of climate finance. Clapp estimates that green bond issuance still makes up just 0.04 per cent of a total that amounts to about $80 trillion a year. “There’s just not a big awareness of it yet,” she says.

Educating the market

The time and effort involved in educating investors means that issuing a green bond requires more preparatory work – at least for the time being – than a regular public borrowing.

“The marketing process is maybe a little more involved than when we do a benchmark, plain-vanilla type issue,” says Michael Manning, executive director for capital markets at the Ontario Financing Authority, which launched the province’s maiden $500 million (Canadian) green bond last October.

Susan Love, EDC’s treasurer, says the Ottawa-based export-finance agency spent two years laying the groundwork for its first green bond, a $300 million (U.S.) issue.

“With a green bond there’s more information that has to be conveyed to investors,” Manning adds. “Sometimes you’re not just dealing with the portfolio manager. You might be dealing with a sustainability officer or the socially responsible investing manager. The fact that it’s a newer instrument means that we have to be a bit more patient in how we issue it.”

Negotiations on the pricing of the Ontario bond took six days, compared with as little as 10 minutes for a regular domestic deal.

But patience has paid off. Sixteen of 27 investors that subscribed to EDC’s issue last January had no previous dealings with the corporation. Similarly, Ontario’s green bond drew five new investors.

Love says in her almost three decades at the export-credit agency, “this is probably something where you feel you can really make a difference for my kids, and for the kids that come after that.”

On a less sentimental level, green bonds provide a rebuttal to the argument often heard around boardroom tables that protecting the environment runs counter to maximizing corporate profits.

Interest payments on a green bond are generally no more – and sometimes even less – than a conventional public borrowing. Conversely, for investors, “green bonds could be a good way to be responsible without taking a bigger risk,” says Olaf Weber, associate professor and chair of the sustainability management program at the University of Waterloo.

The recent Ontario bond, which is being used to help finance Toronto’s newest light-rail transit line, was more than four times over-subscribed. In a sign of investors’ enthusiasm, the bond was trading 35 basis points (0.35 of a percentage point) above the benchmark Government of Canada issue in mid-November, three basis points tighter than a similar conventional Ontario bond.

“It means that it’s a very easy credit committee argument to buy these bonds because they’re the same rating and yield as other bonds,” says Sean Kidney, chief executive of Climate Bonds Initiative, a U.K.-based non-profit. “The green feature addressing climate change is a bonus.”

Explosive growth

Kidney predicts that green bond issuance could more than double this year, and that a total of $300 billion in financings is “eminently achievable” by 2018. He cites several promising areas for growth – among them, private-sector companies, China, and the municipal bond market.

Corporate issuers have been a driving force in the explosion of green bond issuance over the past 18 months. Borrowers have included companies as diverse as Toyota, Unilever, and Stockland, Australia’s biggest real-estate trust.

Reichelt at the World Bank says many corporations are genuinely changing how they operate and are starting to incorporate these types of aspects into their business. “Green bonds are a good way to communicate that,” he says.

Then there’s China. Kidney sees the Chinese green bond market exploding over the next 12 months as Beijing steps up its anti-pollution drive and investment in renewable energy.

Ma Jun, chief economist at the People’s Bank of China, has pointed to green bonds as one of the financial instruments that China needs to put in place to support government policies. “They should have lower financing costs and greater support from the government, such as tax exemptions,” Jun reportedly said last spring.

Municipalities are also an obvious target for the green bond movement. Not only are they among the biggest borrowers on global capital markets, but much of the money they raise is spent on infrastructure well suited to closer environmental scrutiny.

The Swedish city of Gothenburg has issued two green bonds to finance public transport, water management, energy, and waste management projects. Other municipal issuers of green city bonds include Paris, New York and Johannesburg.

At the national level, there has even been talk of “green quantitative easing,” through which central banks would inject money into the economy by purchasing only green infrastructure bonds. The idea is to both stimulate economic activity and boost the availability of capital for climate mitigation and adaptation projects.

Sir David King, the U.K. government’s former chief scientific advisor, has been a strong promoter of such programs, and proponents include the Green Party (U.K.) and Green Party (Canada). Kidney is also a fan of the idea. “Crazy that it’s taken so long to get on the agenda,” he says.  “We’re pushing it with our EU engagement.”

Whatever the attractions, the market’s long-term credibility – and thus its growth –

hinges on confidence among investors that projects financed by green bonds genuinely contribute to a cleaner environment. Clapp says her biggest fear is that “some sort of headline shows up that a green bond is invested in a coal plant, and investors start fleeing. That’s what we want to avoid.”

There’s also the issue of so-called additionality. In other words, if a green bond isn’t attracting new – additional – investment to low-carbon projects, is it anything more than just an exercise in greenwashing?

Renat Heuberger, chief executive officer of carbon management consultancy South Pole Carbon, recently elaborated on this concern in a Huffington Post commentary: “How can the issuer ensure that the proceeds are indeed used for the declared ‘green’ purpose and that the new green bond is not just a re-branded normal bond that would have been issued anyway?”

The same question has long plagued the credibility and growth of the market for carbon offsets.

Shades of green

Meanwhile, a vigorous debate has erupted in the green bond community – researchers, bankers, issuers, investors and environmental activists, among others – over what criteria should determine whether a project is eligible to be financed by a green bond, and who should decide whether those criteria have been met.

Some banks favour a minimum of outside supervision. Deutsche Bank’s chief sustainability officer Sabine Miltner told a conference in London last September that calls for eligibility standards and requirements were premature and risked choking the fledgling market. The focus “should be on expanding issuance and investor interest,” Miltner said. “Over-burdening the market with prescriptive green standards is counter-productive at this stage.”

Others take the opposite view. According to Love at EDC, “what’s important is that we need to have high standards in the process and high standards of transparency. We heard from many investors that it was very important to have second-party validation.”

The Climate Bonds Initiative has set up several working groups to draw up eligibility criteria for specific sectors, similar to the Fair Trade designation on products as varied as coffee, gold, wine and clothes. “Some banks think we’re killing the market, but so be it,” Kidney says. “We would argue that we’re not being stringent, we’re just being clear but also science-based.”

Adds Kidney: “Clarity will be the friend of a long-term sustainable market. But it’s tough for a capital markets person who sees his clients walk away because it all looks a bit too hard.”

Some take a more middle-of-the-road approach. The World Bank, one of the first and still one of the biggest issuers of green bonds, has developed its own criteria for eligible projects. In doing so, it sought advice from investors and a second opinion from CICERO. “This was the investors telling us, ‘These are the types of projects you finance that we want to support’,” Reichelt says.

Reichelt is among those who question the practicality of a “one-size-fits-all” standard. “There are differences within countries and from country to country as to what people think is green, or good for the environment,” she notes. “People in countries like France, for example, may tend to be more supportive of nuclear energy than in Germany. Some people might see a mix of energy sources, including ‘cleaner’ fossil fuels, as important for going forward, and others may say definitely not.”

CICERO also favours a balanced approach. “The most important thing is that investors have disclosure,” Clapp says. “That’s done through a second opinion or through a standard. I just don’t see that one standard fits all – not right now”.

The Norwegians have so far issued second opinions on about 30 bond issues – including the recent EDC and Ontario bonds. They broadened their base last June by joining forces with four other research groups to set up an Expert Network on Second Opinions, known as ENSO. The new partners include the International Institute for Sustainable Development, based in Winnipeg; the others are in Spain, China and Sweden.

Announcing the new network, CICERO insisted that it “will operate independently from the financial sector and other stakeholders to preserve the unbiased nature and high quality of second opinions (on green bonds).”

Clapp says CICERO’s work is based, above all, on science. “We are trying to tie our second opinions to … what we know to be the climate risks on investments and what we know to be in line with the pathway towards a zero-carbon future in the long term.”

Even so, the group stops short of prescribing specific criteria or standards for green-bond eligibility. Citing the example of different biofuels, Clapp says a lot of questions are asked of the issuer about the context a project. “The regional context is important – how they view the lifecycle analysis and greenhouse gas emissions,” she explains. “We dig into those grey areas and try to provide context, rather than just saying you can include or exclude that specific category.”

CICERO is working on a green-bond grading system that Clapp describes as a “menu of choices,” ranging from dark green for projects that are most effective in combating climate change, to lighter shades for those that make a more modest contribution but need to take other realities into account.

“I think there’s some value for investors in being able to choose their own environmental risk profile,” Clapp says. “We’d love to see the whole record be dark green, but if that means fewer green bonds, we haven’t made much progress towards our ultimate goal of an improved climate. We recognize that some investors care somewhat about the green, but don’t need it to be the darkest, perfect colour.”

The post Going big with green bonds appeared first on Corporate Knights.

Media and pundits were confused by the lack of cohesive demands or centralized leadership coming out of these protests, but Saul saw something more important: The protests were part of a broader re-emergence of aboriginal Canadians into a position of power and influence.

As with much of his work, Saul locates Idle No More within 400 years or so of Canadian history. In his 2008 book, A Fair Country, Saul wrote about the egalitarian relationship and strong influence that First Nations people enjoyed with the European settlers for hundreds of years. But this began to change in the middle of the 19th century, as European colonial views about white racial superiority were combined with a precipitous decline in the aboriginal population. Governments began to betray treaty obligations and pass racist laws and policies to assist with this assimilation. But Canada’s First Nations did not disappear, and have worked hard to recover from this terrifyingly low point. Unfortunately, the views of the “pink people,” as Saul describes the 96 per cent of non-aboriginal Canadians, remain stuck in the past.

Saul decided to write The Comeback as a clarion call to his fellow pink people to be supportive and part of a new narrative around Canada’s First Nations people. It’s not that aboriginal people haven’t been saying this for a hundred years, he explains repeatedly in the book. It’s that we haven’t been listening. Corporate Knights recently sat down with Saul to discuss the book’s history of Canadian protest movements, the concept of the Honour of the Crown, and lessons for the extractive industry.

CK: How would you summarize the average Canadians’ views of First Nations people?

Saul: The dominant viewpoint in Canada regarding First Nations people has remained largely the same for the past 100 years, which is built around a negative paternalistic narrative. They’re irrelevant, tragic people that need our help to modernize. Sure, we’ve done some nice things like apologize and trying to offer help, but let’s take a look at some of our most recent efforts on education and financial transparency. First Nations people aren’t wards of the state, but the Department of Indian Affairs and the federal government in general sure act like they are.

Yet even as this narrative has persisted, the Canadian aboriginal population has been engaged in a remarkable comeback. The population continues to bounce back, presenting a true civilizational triumph. Graduates are pouring out of universities and colleges at a greater rate than ever before with more than 30,000 indigenous youth currently enrolled. It’s producing a new indigenous elite that is hungry for change and optimistic about the future. That was what most people, who focused on the immediate deliverables, missed about the Idle No More movement: it was a moment where this underground aboriginal comeback broke surface for a brief time, and it is going to continue apace, whether we support it or not.

Jeremy: You describe Idle No More as fitting within a rich Canadian tradition of public mobilization.

Saul: It’s a very interesting thing because, unlike in most other countries, a great deal of the direction of Canada has actually been set through public debate and protest movements. Go through the history of Canada – from women’s rights leaders like Nelly McLung to the end of capital punishment – or public campaigns to let in larger groups of refugees. All of these movements developed outside of the formal corridors of power in Canada. So something like Idle No More is very much in this tradition of noisy, uncomfortable public movements. Now it comes at a time when people are used to what I call managerialism, the “let’s not talk about it, these are the people who know how to do it” way of approaching governance that has proliferated in recent decades. It also buts up against an atmosphere in Ottawa that is very secretive, very loathe to be part of public debate.

CK: Many Canadians were confused by aboriginal leaders’ demands to involve the governor general in Idle No More talks. Why was this request so significant?

Saul: It comes down to the difference between power and legitimacy. The prime minister represents power through parliament, while the governor general represents legitimacy. Legitimacy is a much broader concept, enveloping written and unwritten rules, understandings and traditions in a way that outlasts power in Canada. Idle No More leaders wanted the governor general there because she represents the state, the crown, and the people.

The presence of the crown invokes the concept of the Honour of the Crown. The court essentially ruled that the crown, through its administration of the country on behalf of the people, has an obligation to act with respect for the citizen. It’s not about the letter of the law, but rather the spirit of the law. First Nations leaders insisted on the governor general’s presence because they wanted to move the conversation away from strict legal commitments towards the ethical and moral underpinnings of the state’s commitments through the treaties, represented through the Honour of the Crown. The treaties were signed by the crown, after all, not the government of the day. We are all treaty signatories.

It’s obvious where the courts are going on this – we’re already there and we’re just going to keep going there. Governments have repeatedly used their power over the past 150 years to betray the Honour of the Crown on everything from residential schools to basic clean water provision. So at a certain point, how massively can the Canadian government be in contravention of the law? If I were to phrase this question from the point of view of legitimacy, at what point does the Canadian government lose its legitimacy, because it’s so in contravention of the law?

CK: One of the main sources of tension between the federal government and First Nations people involves resource extraction. How should the extractive industry engage with Canadian aboriginal peoples regarding resources on their land?

Saul: First Nations groups are used to being presented with the unappealing option to either accept jobs on someone else’s conditions or be viewed as an irrelevant nuisance on the sidelines of the decision-making process. If the extractive industry wants to have a productive relationship with Canada’s aboriginals, they should focus on three key points. The first involves actual jobs training. Aboriginal groups want on-site jobs, sure, but it’s even more important that they involve longer-term managerial positions. For this, you need sustained consultation with the community to set up robust apprenticeship programs of the sort that used to be more prevalent in the Western world.

But having on-site and managerial positions only gets you so far. This still sets up an uneven, rather colonial relationship. First Nations groups need to be granted a certain amount of equity in these projects to level out the playing field. This, in turn opens the door to a number of alternative business models. Look at what was agreed to in Haida Gwaii, a development plan with a greater long-term perspective.

CK: How does the concept of the Honour of the Crown fit into this?

Saul: Interestingly, and it hasn’t really been covered in the press yet, but there was a decision made in early December by the Yukon Supreme Court regarding the Peel River Basin. In the Northern Yukon, there is an enormous watershed that feeds into the MacKenzie River. There was a conservation consultation process that involved all the stakeholders that resulted in an agreement. But then new leadership came into power in the province and decided to change course. So the Na-Cho Nyak Dun and others went to court. Of course, it wasn’t an agreement like a treaty or even a contract, but the courts still agreed that it needed to be respected. The court ruled that the government had to go back to the consultation stage, as the proposed changes did not advance the goal of reconciliation with first nations and were “inconsistent with the honour and integrity of the crown.” This may not have been big news in Toronto, but this is a vast area of pristine land. Legally, and constitutionally, this is of huge importance.

CK: So what is the Canadian public’s role in the aboriginal renaissance?

Saul: If you look around, you see all of these different elements of progress. I gave that example of land management Haida Gwaii. Look at the Government of Yukon. It’s just wasted three years of its life for nothing. It’s not in the First Nations best interest, it’s not in the private sector’s interests, it’s just a waste of time for everyone. Is there no lesson in that?

The only role that I have as a writer and as a thinker is to go out and say to people that you have a responsibility in this. People need to pressure every politician to deal with the aboriginal question in an open and responsible manner. It’s an argument that needs to be made, and even if one got it partially up the slope, it would change the public debate in Canada.

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“Our government wants to ensure the responsible and sustainable devel­opment of these resources to benefit all of Canada, and especially Quebec,” Harper said. The agreement, intended to eventu­ally create a Canada-Quebec Offshore Pe­troleum Board, is “a major milestone” that “will usher in a new era of prosperity.”

In what has become a familiar story – think Northern Gateway, Keystone XL and Energy East – Harper’s announcement raised the temperature of a battle between those aiming to exploit the Gulf’s petro­leum resources and critics who want the in­dustry barred from this rich and fragile en­vironment. The latter include First Nations, environmentalists, and many in the fishing and tourism industries.

At issue is whether this is an area that should simply be off limits.

“Whether you are a whale scientist, a fisherman, or you’re on holiday on the shores of the Gulf, this issue and this place touches all Canadians,” says Gretchen Fitzgerald, Atlantic campaigns director for Sierra Club Canada, which is part of Save Our Seas and Shores, a coalition opposing development.

“People who live around the Gulf know its vital importance to their lives, in terms of their economy and their communities. But we need all Canadians to learn about the Gulf and to celebrate this unique and stunningly beautiful place. It’s a place we need to protect and restore, not place on the auction block.”

The Geological Survey of Canada esti­mates the Gulf holds 39 trillion cubic feet of gas, equal to about half of Canada’s current known reserves, and, conservatively, 1.5 bil­lion barrels of oil, a significant amount al­though tiny compared with the nearly 170 billion barrels in Alberta’s oil sands.

The search for the resource has proceed­ed sporadically since the mid-1960s, with 60,000 kilometres of seismic surveys and 10 exploration wells, mainly in the southern Gulf. The drilling produced just one “sig­nificant” gas discovery; the other wells were “minor shows” or came up dry.

Five provinces share jurisdiction over the Gulf. Each negotiates with Ottawa to create an offshore board for its zone. The boards are required to conduct open bidding for exploration permits as well as ensure that proposed projects undergo environmental assessments and measures are in place to prevent and respond to spills. Project oper­ators are responsible for cleanup costs and damages up to $1 billion. Each province sets and receives its own royalties.

Nova Scotia and Newfoundland and Labrador got boards nearly 30 years ago to manage development off Sable Island and Newfoundland’s east coast. Quebec, which allows drilling on Anticosti Island and the Gaspé Peninsula but suspended offshore ex­ploration in 1997, agreed with Ottawa three years ago to begin the steps toward a board. The legislation announced by Harper will put that deal into effect. New Brunswick wants to start negotiations. Prince Edward Island has no known offshore reserves.

Driven to drill

While the bureaucratic stage is being com­pleted, petroleum development is proceed­ing slowly.

A small Halifax-based company, Corri­dor Resources Ltd., has conducted seismic tests on its undersea block, 80 kilometres off Newfoundland’s southwest corner, and is working on an environmental assessment. It must still undertake an “extensive public consultation,” complete further regulatory steps and find a partner to help finance the $55-million drilling cost.

With drilling more than two years away, the company is seeking a third, indefinite, extension of its exploration permit past the current deadline of Jan. 1, 2016.

Corridor points out that while prelimi­nary evaluations suggest its block could contain up to five billion barrels of light crude oil or seven trillion cubic feet of natu­ral gas, no deposits have been discovered.

Part of the block is in Quebec’s waters, and work can’t proceed there until the new legislation is in place.

Another junior company, Black Spruce Exploration Corp. of St. John’s, along with a couple of partners, plans this year to con­duct seismic and other preliminary activity and prepare environmental assessments on three neighbouring blocks estimated to con­tain about 750 million barrels of light crude.

In November, the Newfoundland board announced it had received no bids on four additional blocks near Corridor’s. While opponents cheered that result as an indi­cation petroleum development might stall, the federal government and the industry remain bullish:

“We do not believe the result of that call for bids is indicative of the prospectivity of the area and certainly not of the wider Gulf of St. Lawrence,” Natural Resources Canada said in an emailed response to questions.

“We wholeheartedly agree” with those who “extol the immense opportunity” and we’re committed to developing our properties, says Black Spruce president David Murray.

“The entire Gulf is an area of interest with potential for a hydrocarbon presence,” says Paul Barnes, Atlantic Canada manager of the Cana­dian Association of Petroleum Producers.

Still, questions remain about the size of the resource, indicated by the widely differ­ing figures from the Geological Survey and Corridor. “The exact quantity is not known,” Barnes says. The federal estimate “is a ball­park figure.”

Potential players face a labyrinthine regu­latory regime and the prospect of a tough le­gal battle with First Nations demanding a 12-year moratorium to allow consultation and a region-wide environmental assessment.

The industry and its foes agree the Gulf’s environment must be protected. They dis­agree on the current regulations’ effective­ness and whether protection is possible no matter how stringent the rules.

In a “Strategic Environmental Assess­ment” issued last May, the Newfoundland board announced: “Petroleum exploration activity generally can proceed in the West­ern Newfoundland and Labrador offshore area with the application of standard miti­gation measures currently applied.”

A spokesperson also says the board has dealt with concerns raised in a 2012 report by the federal Commissioner of the Environ­ment and Sustainable Development, which criticized spill-response and clean-up plans and the lack of policies “related to … obliga­tions under the Species at Risk Act.”

In addition, in response to complaints that Corridor’s environmental assessment was based, unrealistically, on a small spill of light, fast-evaporating crude oil in a calm sea, the board spokesperson says a “worst-case” scenario produced by Environment Canada would be incorporated into the en­vironmental assessment.

Corridor is equally sanguine: “There have been issues with respect to people bringing up concerns,” says president and CEO Steve Moran. “But we’ve done an aw­ful lot of work in that regard and we’re very comfortable that it can be done safely.”

No laughing matter

Critics say this optimism overstates the indus­try’s ability to manage the Gulf’s many risks while understating its significance and fragility.

They describe the Gulf, which covers about 250,000 square kilometres from the mouth of the St. Lawrence River out to Newfoundland and Nova Scotia, as a bio­logically diverse and productive “global eco­logical treasure.”

Strong currents and tides mix fresh and salt water and nutrients over a wide variety

of underwater features, creating ideal habi­tats for more than 4,000 species, from tiny krill to massive blue whales. This bounty and the beauty of the surrounding land support a $1.5-billion fishing industry and $800 million in tourism activities. Salmon, shrimp and snow crab stocks provide food and income for 40 First Nations.

The Gulf is already stressed by pollution, oxygen-depleted dead zones and species loss and has qualities that make it an espe­cially hazardous, potentially ruinous, place to drill for oil and gas.

It’s a semi-enclosed sea in which the tides, winds and counter-clockwise cur­rents not only create precarious operating conditions for petroleum development, but also would quickly spread spilled oil and other pollutants. Since it takes a year for the water to flush out into the open Atlantic the widespread damage would persist. If a spill happened when ice covered the Gulf, cleanup would be next to impossible.

The critics say spill impacts would likely be far worse than even those from the 2010 Deepwater Horizon blowout in the Gulf of Mexico, because that body of water is six times larger than the Gulf of St. Lawrence and flushes far more quickly.

An example of the risk, they say, is that Corridor’s block, known as Old Harry, sits within the 470-metre-deep Laurentian Channel, the sole passageway in and out of the Gulf for migrating blue whales and leatherneck sea turtles, both endangered species, as well as myriad other fish and marine mammals.

They’re amused that while Old Harry was named for a community on the nearby Magda­len Islands, it’s also a sailors’ term for the Devil.

The rest, they insist, is no laughing matter.

Development decisions disregard their concerns as well as gaps in knowledge about species and their interactions, they say.

“We don’t have enough science,” says Mary Gorman, who heads Save Our Seas and Shores. “According to the precaution­ary principle, this exploration can’t proceed because we don’t even know the harm we’re doing. How can you mitigate when you don’t have enough science to know what has to be mitigated?”

Environmentalists can’t even seek legal protection for blue whales and other endan­gered species because their “essential habi­tats” haven’t been mapped, as required un­der federal law, notes Sylvain Archambault, of the Quebec-based St. Lawrence Coalition, another group pushing for a moratorium.

As well, critics complain, the regulatory system divides the Gulf into areas of pro­vincial jurisdiction when, in fact, it is, eco­logically, a single body of water and must be managed as one.

“Only a complete picture of the social, environmental and economic impacts would allow for an enlightened decision regarding the future of the Gulf, which must be stud­ied from every angle, instead of the piece­meal approach based on the administrative boundaries set by men, as is presently the case,” says “Gulf 101,” a report published last summer by the St. Lawrence Coalition.

Furthermore, says Gorman: “The laws fa­vour the petroleum industry, and allow regu­lators to both protect marine habitat and issue licenses. It’s an inherent conflict of interest.”

Testing treaty rights

First Nations not only fear the environmen­tal impacts of petroleum development but also are angry about inadequate consulta­tion, says Troy Jerome, executive-director of the Nutewistoq Mi’gmawei Mawiomi Secretariat. The secretariat represents Que­bec’s Mi’gmaq nation and, along with Mali­seet and Innu groups, threatens legal ac­tion, based on treaty rights, if the demand for a moratorium is ignored.

“Why are we continuing to move for­ward with these kinds of developments without consulting with the people who would be directly affected? We have a clear­ly defined constitutional right.”

Oil and gas can’t be safely exploited with current technology, Jerome says. Whether that might change in 12 years, “I can’t say yes or no. We need to see the results of a proper study.” Such a review, he adds, would take at least a decade.

“You can’t just study the Gulf for a year. The patterns can change. We’re looking at a complex food chain. All the species create an environment … a lot of things occur that allow others to survive. A spill there would cause irreparable harm. It’s not like you’re cut­ting a tree down and the tree will grow back.”

The federal government was evasive when asked about the moratorium call: It “recognizes the importance of the Gulf … to Canadians, and offshore development will not proceed unless it is safe for Canadians and safe for the environment,” Natural Re­sources Canada said in its email. “Indepen­dent, arm’s-length regulators will not allow any offshore activity unless it can be done safely for workers and the environment.”

If the issue went to court, the First Na­tions would rely on Supreme Court of Cana­da rulings that have progressively enhanced aboriginal rights to be consulted and accom­modated about development on territories where they’ve submitted land claims.

Archambault notes some progress among regulators, particularly toward un­derstanding that “water and fish don’t rec­ognize provincial boundaries.” A report for the Quebec government said the Gulf should be studied as one area. Two Prince Edward Island Legislature committees made a similar recommendation. During its Strategic Environmental Assessment, the Newfoundland board held hearings in each Gulf province.

Still, industry opponents insist the search for oil and gas must stop.

The priority should be restoration, with the moratorium leading to establishment of a net­work of marine protected areas and integrated management of the entire Gulf by the federal and provincial governments, states “Gulf 101.”

So the lines are drawn: Corridor will perse­vere, Moran says. “Our mandate is to keep fol­lowing along through the regulatory process.”

And on the other side: “If you don’t stop the industry before they start … it’s game over,” Gorman says. “We just keep on keeping on. The only thing they can’t control is the passion of the people. Their biggest problem is that some of us can’t be silenced.

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