Most Canadians, we believe, are approaching their ballot choice with an understanding that climate action and economic prosperity aren’t a zero-sum or either/or proposition. But the scope of the economic opportunity that’s embedded in climate action is still widely under-estimated.

So this week, Corporate Knights is beginning to attach dollar values to that opportunity, based on an assessment of five major sectors: buildings, transportation, electricity, heavy industry, and oil and gas.

In each, we quantified the likely level of business-as-usual capital investment in the six-year period from 2020 to 2025. We then quantified the incremental clean investment (ICI) that would be required to turbocharge demand for viable decarbonization options in sectors with the greatest greenhouse gas emissions.

Under the logic of “what gets funded gets done,” we propose a six-year time-bound clean stimulus program to cover the lion’s share of the incremental clean investment, estimated at 2% of GDP per year. The war chest to provide the clean stimulus could be most logically financed via a Canada green bond borrowing program averaging just under $50 billion per year over the next six years. To put this number in context, Scotiabank’s economists are calling on the federal government to undertake up to a $100 billion per year stimulus program to counteract the coming economic contraction. Directing half this amount toward a clean stimulus is ambitious and aspirational yet realistic.

We would expect a modest increase in Canada’s debt-to-GDP ratio, which could be mitigated from incremental tax revenues resulting from additional GDP growth that the stimulus would spur. This stimulus package would drive demand at scale to deploy a host of decarbonization technologies economy-wide, with significant knock-on effects including hundreds of billion of dollars of GDP growth and hundreds of thousands of new jobs, not to mention getting us 70% of the way to our 2030 Paris carbon reduction targets by the end of 2025. It would also place Canadian industry at the forefront of a large growing global market for low-carbon solutions.

The Capital Plan for Clean Prosperity demonstrates that transitioning to a low-carbon economy is less about “shutting down” than it is about retooling, diversifying and growing, especially in the oil sector, which offers the biggest carbon savings bang for buck, and where production costs per barrel will be critical to remaining competitive. The benefits of doing so can be remarkable. You can read a summary below, and you’ll find more details on the Corporate Knights website.

Regardless of which party is elected later this month, the time for baby steps has passed. A targeted clean stimulus of this magnitude will bring about rapid economic growth and realistic greenhouse gas reductions that Canadians of all political stripes can get behind.

The Biggest Opportunity: A Carbon-Lite Built Environment 

Of the five sectors assessed by Corporate Knights, building construction and retrofitting – both residential and commercial – represents the biggest GDP growth opportunity.

Business-as-usual investment in the building sector will top out at more than $795 billion from 2020 through 2025. We estimate that an incremental investment of 10% on top of this targeted at developers for new builds and contractors for retrofits would be sufficient to bring a quarter of Canada’s commercial and residential buildings to a zero-carbon ready standard by the end of 2025.

This incremental investment of $78 billion over the next six years could be part of a clean stimulus administered under a Zero-Carbon Building Fund targeting:

• Public financing to cover the incremental cost to build 50% of new buildings to a zero-carbon energy efficiency standard over the next six years. Total cost: $18 B
• Public financing for basic flood-protection measures to floodproof 3% of homes with basements in high-risk flood zones every year between 2020 and 2025. Total cost: $11B
• Public financing for energy retrofitting 3% of the existing building stock every year between 2020 and 2025. Total cost: $23B
• Public financing for electrification of 1.5% of the existing building stock annually from 2020 to 2025. Total cost: $26B

The combined GDP impact of this ICI could be as high as $314 billion, while job growth would be roughly in the range of 154,600–183,400 over the period. Notably, about half of the ICI would be directly offset by savings from reduced energy costs. Governments would also benefit from increased tax revenues in the range of $26 to $102 billion over the six years.

You can read a more detailed overview of the building-sector impacts and outlook in this article. See also: comparable assessments of the transportation, electricity, heavy industry, and oil and gas sectors.

Building Construction, 2020–2025 incl.

* Driven by Clean Stimulus Plan.

** The wide range for the GDP estimate results from application of multipliers with varying degrees of conservatism. Results should be interpreted as indicative. Actual results will vary depending on slack in the economy, interplay with demand in other sectors, exchange rates and the degree to which machinery and equipment are sourced from Canada.

*** Resulting from reduced energy costs.

Rounding Out the Rest: Jobs and GDP Growth in Four Other Sectors

The building sector is a standout in terms of the positive impact on GDP growth that an ambitious but realistic stimulus program would drive. But the economic potential is significant across all the sectors Corporate Knights assessed, as summarized below.

Our detailed building sector analysis has already been released, with analysis for the rest of the sectors to be rolled out over the course of this week.

Potential Incremental Clean Investment and Benefits by Sector, 2020–2025 incl.

^⌂ Residential and commercial buildings combined.

* Driven by clean stimulus program.

** The wide range for the GDP estimate results from application of multipliers with varying degrees of conservatism. Results should be interpreted as indicative. Actual results will vary depending on slack in the economy, interplay with demand in other sectors, exchange rates and the degree to which machinery and equipment are sourced from Canada.

***Resulting from reduced energy costs.

Note: Numbers may not add up exactly due to rounding.

Decarbonization Policies on Which Potential Incremental Green Investment (IGI) Is Based (2020-2025 inclusive)

^⌂ Residential and commercial buildings combined.

* Additional to Government of Canada Projections (Reference Case)

The post The 2% solution: Our stimulus plan for clean prosperity appeared first on Corporate Knights.

For better or worse, Canada’s business community is both risk-averse and generally skeptical of new regulatory actions. The safest bet for the average company is to stay silent on controversial policies like carbon pricing, even if there’s internal support for it. But the private sector is also home to smart and innovative leadership that is demonstrating remarkable foresight on issues related to sustainability. To push Canada towards a low-carbon future, private sector leadership will be needed to spur governments into action, and vice versa.

We’ve begun to see a new dynamic play out over the past year across Canada. In Metro Vancouver, major business groups worked hard in support of the failed Yes side for the transit plebiscite.

Over 160 B.C. businesses signed an open letter calling on the provincial government to strengthen the province’s carbon tax, while major oil sands producers joined Alberta Premier Rachel Notley on stage for her climate policy announcement last November. The Mining Association of Canada recently endorsed the federal government’s efforts to establish a national carbon price.

The Council for Clean Capitalism takes this a step further by placing CEOs at the head of a group advocating for the integration of clean capitalism principles into broader economic and social policy.

Companies are grappling with how to shift their business models internally towards an economic model in which what is good for business is also good for the environment and society. Economist and author Jeremy Rifkin counselled companies at an event in Toronto earlier this year “to be in two business models simultaneously for the next three decades.” Many companies, including energy powerhouses Suncor and Enbridge, are working hard to bridge this gap to a cleaner future.

Another example of business pursuing this dual focus is the B.C.-based financial co-operative Vancity, the top-ranked company in the 2016 Best 50 Corporate Citizens in Canada ranking. The company has worked hard to remake itself as a different kind of financial institution, one that places values-based or ethical banking at the heart of its business model (see here for a full profile).

Following Vancity on the list is WestJet, a leader in the airline industry on resource productivity and taxes paid. Third place went to the Co-operators group, the insurance provider and perennial contender that finished first in 2011. It performed particularly well on its pension and tax scores, and maintained one of the lowest CEO to average worker pay ratios among the Best 50.

A deeper dive into the indicators turned up a mixed bag when it came to benchmarking any improvements in disclosure practices. All but two companies on the 2016 Best 50 released their energy and carbon productivity, with slight disclosure increases occurring around water and waste productivity as well. The CEO to average worker pay ratio fell to 73:1 from 88:1 in 2015, whereas the amount of tax paid increased three points to 14 per cent.

One troubling finding was a significant decline in innovation capacity from 0.97 per cent in 2015 to 0.55 per cent in 2016. R&D expenditure is measured as a percentage of revenue, trailing over the past three years. Diversity levels, meanwhile, stayed stagnant. Slightly better board diversity scores were offset by lower levels of diversity among senior management.

As Rifkin said, this shift to a cleaner form of capitalism will remain a work in progress for decades to come. The companies on this year’s Best 50 are setting themselves up to flourish in this changing environment.

Click here to go back to the ranking landing page.

The post Looking to leadership from corporate Canada appeared first on Corporate Knights.

Incentives

Ontario, Alberta and Manitoba all came out with ambitious carbon pricing plans, meaning 90 per cent of Canada’s population now lives in a jurisdiction that is, or will soon be, covered by a carbon price. Globally, half of all nations have already or will soon be implementing a carbon price.

Information:

Canada made a major advance on natural capital accounting, this past December becoming the first country in the world to include commercial natural wealth on the balance sheet at a sectoral level of detail. These new measures matter as they “shed additional light on the Canadian economy in terms of both economic activity and financial stability at a time when environmental assets are taking on increased importance,” according to Pat O’Hagan, International Accounts and Trade Division at Statistics Canada.

Provinces across the country are planning to follow Ontario’s leadership announced this past October to require that buildings disclose energy greenhouse gases and water use by 2017. This will help building owners manage their energy and water consumption and save money on their utility bills.

To the extent that “sunlight is said to be the best of disinfectants,” in the words of U.S. Supreme Court Justice Louis Brandeis, big investors will soon be cleaning up their investments. The Ontario Pension Benefits Act will require over 4,000 Ontario pension funds to disclose information about their consideration of environmental, social and governance factors in their statement of investment policies starting in 2016. This investor transparency measure fits in nicely with the $10 trillion in investments held by signatories to the Montreal Carbon Pledge, an initiative developed by Corporate Knights in partnership with the UN-supported Principles for Responsible Investment.

Investment:

Ontario plans to follow up its initial $500 million green bond issue, which was used to finance public transit, with over $1 billion of green bond issues in 2016. At least one other Canadian province is expected to initiate a green bond program in 2016, as is the Canadian federal government, which has promised to issue green bonds to institutional and retail investors to help fund electric vehicle, smart grid, clean power and energy storage projects.

Infrastructure:

The Canadian government has agreed to make significant new investments in green infrastructure, including electricity transmission lines, which will be required to fulfil what the North American Electric Reliability Corporation has projected as a 300 per cent increase in U.S. demand for clean power from Canada to meet its Clean Power Plan requirements.

The Council for Clean Capitalism is a group of forward-thinking companies that seek public policies in support of an economic system in which prices incorporate social, economic and ecological benefits and costs, and people know the full impacts of their marketplace actions.

The post 2015: A (council) year in review appeared first on Corporate Knights.

The post Rewarding sustainable wealth appeared first on Corporate Knights.