Executive summary Issuers lead Canada’s push for sustainability

The Canadian economy is transitioning to a more sustainable model, led by companies, which overwhelmingly have begun to pivot their businesses towards activities that take more account of their impacts on the environment and society.

Both issuers and investors in Canada are particularly concerned by pollution: many demand more effort be devoted to this problem. But the transition is still at quite an early stage — only 14% of issuers say they have a plan to reach full sustainability. 

This fundamental change is increasingly reflected in Canada’s capital markets. This in-depth survey of 182 issuers’ and investors’ views on sustainable finance shows that environmental questions in particular are now a core element in their thinking about financing and investing.

Issuers are leading this shift, but — in a country whose rich natural resources, cold climate and vast geography are all important economic factors — the more cautious Canadian buyside is moving too. 

Despite the Covid-19 pandemic, however, social issues do not yet appear to have gained as much focus. While the pandemic has increased attention on themes such as equality and access to health and education in many markets, as our recent 2020 global survey highlighted, these do not feature strongly in this Canada survey’s responses.

The study also highlights challenges in Canada’s drive towards sustainability. Some 48% of the country’s investors report obstacles to sustainable investing — about half of this group highlight the need to make lengthy commitments.

Issuers, however, are more confident: 59% say investing in Canada’s green and sustainable economy is relevant to them, and they will be able to put money to work in these opportunities now or in the future.

Sustainability considerations are gaining ground significantly in Canadian financing and investing, though investors in particular still report some obstacles to full engagement. 

A minority of hold-outs do not factor sustainability into their investment decision-making at all. In contrast, though, Canada’s issuers are almost universally persuaded of the need to engage with sustainability issues. 

In this survey’s most striking data point, 98% of issuers report that they have begun changing their activities to make them more sustainable. Indeed, no Canadian company in the largest two tiers surveyed (those with revenues of $1bn to $10bn and those with $10bn and higher, which together make up 50% of the sample) has failed to begin this journey. Nearly 30% of this blue chip group believes it is on track for — or has even reached, in a smaller number of cases — full sustainability, including net zero carbon emissions. Similarly, only 19% of issuers say they face obstacles to investing in Canada’s green and sustainable economy. 

Canadian investors are more sceptical on these questions. Almost half of those surveyed (49%) still perceive obstacles to sustainable investing, while 32% do not take sustainability considerations into account in their investment decision-making. Despite these substantial proportions, the survey shows the tide turning among Canadian investors. Importantly, 59% of this 32% of investors who do not yet factor in sustainability considerations say they plan to do so. 

Although the country’s issuers and investors have different priorities, a broad consensus has emerged among market participants that environmental challenges must be met and opportunities seized. 

Some of the most prominent challenges are causes of environmental degradation such as air pollution and non-recyclable plastic. 

The opportunities identified in the survey are headed by energy-efficient buildings, sustainable public transport and agriculture. Some renewable energy sources are also well supported, though issuers and investors are strongly divided over the attractions of each of these. Solar power is issuers’ top pick but bottom of investors’ ranking; the pattern is reversed for hydrogen. 

One theme that unites the two constituencies, however, is their appetite for guidance on sustainability considerations. While the topics on which they seek insight vary — issuers seek assistance in marketing their sustainability stories, investors on financial products like social bonds and green deposits — both are strikingly keen for external help.

Asked what measures would help to encourage investment in Canada’s green economy, respondents’ top suggestion is government or regulators instructing banks and investment firms to consider sustainability — though issuers support this more widely than investors.