Veteran pension-fund executive Marlene Puffer has been appointed to lead investment and sustainability experts in developing a green and transitionary investing guidebook.Jason Franson/The Globe and Mail
War in the Middle East is not swaying institutional investors from pushing for a Canadian guidebook certifying green investments, according to the newly appointed chair of the council charged with putting the document into use.
Marlene Puffer, a veteran pension-fund executive, has been appointed to lead investment and sustainability experts in developing a green and transitionary investing guidebook. The goal of the document is to attract at least $115-billion in capital needed annually for Canada to meet its net-zero targets by 2050.
The government of Prime Minister Mark Carney formalized the process last December by naming a pair of organizations to co-ordinate the development of the document, or taxonomy, which is aimed at ensuring investments meet specific climate objectives and are not merely greenwashing exercises. Since then, the war in Iran has upended the global economy, driving up oil prices and making energy security a top priority.
Even so, investors still want a Canadian taxonomy, Ms. Puffer said in an interview. As many as 60 jurisdictions around the world have implemented taxonomies or are in the process of doing so, she said, despite U.S. President Donald Trump’s administration’s attempts to purge his country’s financial system of environmental, social and governance measures.
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“There is still an enormous amount of activity ongoing that is related to making smart investment decisions in the context of the reality of climate change,” Ms. Puffer said.
“The language is shifting a little bit. The geographic approach perhaps is shifting somewhat. But it’s very important that Canada doesn’t lag behind the rest of the world in its movement toward having very clear guidelines and criteria that classify with legitimacy and credibility what constitutes science-based investments that will reduce carbon emissions.”
The taxonomy has been in the works for several years. It will set out sector-specific criteria for determining which investments are certified as green, such as renewable energy, and those that fit into a transitionary category. The latter would involve technology for decarbonizing high-emitting industrial processes.
The new Taxonomy and Transition Planning Council is tasked with developing guidance for three industrial sectors this year and another three in 2027. They have yet to be chosen, Ms. Puffer said.
“This is a proven approach to enhance the credibility of investment in the transition and in green activities and it’s a proven approach to enhancing investment returns. There’s some early evidence that this will also lower the cost of capital,” she said.
Ms. Puffer was previously chief investment officer at Alberta Investment Management Corp., chief executive officer at CN Investment Division and was vice-chair of the board of trustees at the Healthcare of Ontario Pension Plan. She is currently chair of the investment oversight committee at Railpen, the U.K.-based retirement fund.
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She will lead a council of prominent sustainability professionals, including Barb Zvan, CEO of University Pension Plan Ontario; Bentley Allan, principal at the Transition Accelerator; Sarah Thompson, global head of sustainable finance at RBC Capital Markets; Simon Donner, professor at the University of British Columbia; among others.
Peter Routledge, Superintendent of Financial Institutions; Yves Ouellet, CEO of Quebec’s Autorité des marchés financiers; and Wendy Berman, chair of the Canadian Sustainability Standards Board, are official observers.
In addition, nearly 60 experts from the institutional investment, academic, regulatory and nongovernmental organization fields are part of financial services and technical advisory groups with the council.
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A coalition of environmental advocacy groups, led by Investors for Paris Compliance, said in a recent statement that a taxonomy must incorporate a number of characteristics to be credible: It should be simple, interoperable with others in use around the world, and usable as a first step to other reporting expectations.
The document should uphold Indigenous rights, be consistent with climate science and ensure that transition means a shift away from fossil fuels, not just mitigation, the group said. It should also spell out how it will achieve its objective of doing no significant harm to such things as biodiversity and labour rights.
Initially, use of the taxonomy will be voluntary, but it is being designed with enough incentives to be an attractive tool for investors, Ms. Puffer said.
“This is the missing link that I wish I had had as an investor at the helm of large pension plans, rather than everyone else having to kind of invent their own taxonomy and evaluation criteria,” she said. “Having a clear set of guidelines and criteria helps the entire system work more effectively, more efficiently and with better transparency.”
Editor’s note: This story has been updated to correct the spelling of Bentley Allan's name.