Canada’s largest oil sands producers formed an unprecedented alliance to achieve net-zero greenhouse gas emissions. Kim Parlee speaks with Amy West, Global Head of Sustainable Finance & Corporate Transitions, TD Securities, about how Canada can lead the transition into a non-carbon world.
Keystone XL pipeline is officially over, which, of course, has left Alberta reeling. Alberta's major oil sands producers, as I just mentioned, have pledged this allegiance to try and get to net zero. What's the evolution like, from where you sit?
- Absolutely. And first off, thank you for having me today. There's no question that leading up to the conference of parties, the climate summit in November in Scotland, that there's been an increasing focus on how we achieve a net zero emissions world. Every boardroom and senior executive suite now has ESG as a priority topic on their agenda, which is a pretty significant change from a few years ago. What's more, it's not actually just energy companies, but clients across a wide range of industries that are now making these net zero announcements. And this transition, like any transition, presents both challenges and opportunities.
In the case of the oil sands pathway to net zero initiative, which, as you mentioned, was announced last week, I was extremely encouraged to see that a number of major energy companies in Canada formally announced an alliance to work together to achieve a net zero vision. And I was actually even more encouraged to see support from both the provincial and federal level of government, because we're going to need support for programs and infrastructure as we look to grow and expand these emissions reductions programs.
And I should just say, Canada, in my mind, is uniquely positioned to provide leadership in this energy transition. It's not only a country with the technical expertise required to lead, but a highly educated and skilled workforce. So it's no surprise that a number of the new initiatives and technologies that are being developed right here could easily drive job growth and creation of new opportunities in the future.
- Well, I know that the capital market players know better than anyone that in change lies opportunities. So it's a really good point. You know, you mentioned that it's interesting to see the number of companies. And I think I saw a stat here that 20% of all companies, not just energy companies, have committed to a net zero target. Sorry, 20% of large companies. Can you maybe get into a little more of the how? You mentioned people and technology, but what's it going to take?
- This question is exactly why the sustainable finance and corporate transitions group that I lead was created at TD Securities. We're really trying to unpack and focus on the how, and help our clients through this journey. And I should start off by saying there is no silver bullet or easy solution to get to net zero. Each and every company will have its own path. However, speaking to clients, I think a few things are clear-- that most companies will need to do one of three things to achieve their objectives.
Either they're going to need to organically develop technologies to enable their business to effectively compete in a net zero world, they'll need to acquire companies or technologies that will expedite these initiatives, or they'll need to invest in carbon credits to actually assist in offsetting their carbon footprint. And from my seat, in many cases, I expect clients are actually going to do all three.
- What about-- we talk about the carbon side of things, with their credit and the size of that market. I mean, I've seen people start to talk about just how to start trading those types of things. And does the market really exist? Is that something that's coming, and is that going to accelerate things a bit?
- Currently, the carbon market is definitely still developing. While we have established a mandatory or compliance carbon credit market, the voluntary market still has a long ways to go to becoming the liquid market that we see for other commodities. I do think, in the future, verified carbon offsets are going to become increasingly important, because when you look at a path to net zero and how we actually ask and look for companies to account for their emissions, carbon offsets are going to play an important role in how our clients achieve their net zero goals.
- What's it going to take to get that liquidity into that market to really get it going?
- I think it's going to take a couple of things. I think it's going to take more market participants. Banks like TD actually do trade the compliance markets. We're actively exploring the voluntary markets. We're also working with clients to create carbon offsets and verified carbon offsets that are credible. And I think that we're seeing a lot of really positive developments around how we actually increase the supply of carbon offsets, but we do it in a way that is verifiable.
We do it in a way that is strategic where we can say these are credible, and these aren't just avoidance credits. These are actually going to be reduction credits. I think that the more that we develop some structure around this, and maybe even things like a meta registry, we could actually see huge evolutions in the liquidity of this market that people can use.
- Amy, can Canada thrive-- not just survive, but thrive as we transition into a non-carbon world?
- Absolutely. As an example, Carbon Capture and Sequestration, or CCS for short, is a very promising technology that captures carbon dioxide and sequesters it back under the ground. Not only does it have the potential to reduce CO2 emissions, but it is an emerging technology that Canada has shown a lot of leadership in, not only through its startups, which it has a number of that are really accelerating and leading the charge globally, but Canada has also been chosen by some international energy companies to be the area where they're doing pilot projects and technology investments around this. So I think that not only can Canada survive, I do think it's well-positioned to thrive in a lower-carbon world.
- I want to ask you about TD, and I know TD was the first North American bank to become carbon neutral back in 2010. Now it's moving towards a net zero greenhouse gas emissions target by 2050. But at the same time, TD is a significant financier in the energy space. So how do you balance that? What is, from your perspective, TD's strategy in financing Alberta's energy sector? But at the same time, allows it to still hit its climate action plan.
- Yeah, absolutely. TD has, and will continue to, take a balanced approach. While TD Bank Group takes our role in the transition net zero seriously, and we do view it as our social license to operate to take it seriously, we have always and we will continue to support our clients. We're not walking away from any industry or sector. I think our focus is really on providing guidance and advice on best practices, and how to incorporate both the market's expectation of our management teams and our businesses, but also the changing regulations. How do we think about that and factor that in to corporate strategy?
So what we're doing on the lending side is going to be part of it, but I think a much larger story here is really one of partnership. Because when our clients achieve their goals of getting to net zero, it actually helps TD achieve our goals across scope one, two, and three of how we get to net zero for our climate action plan.
- I've only got about a minute here Amy, but I do want to get this in. I know that the group that you lead, along with another group at TD, were selected by the Canadian government to advise on the first ever issuance of green bonds. So maybe tell us a bit about this.
- Well we're very excited to be partnering with the government of Canada in their inaugural green bond program. Obviously, this is something that has been talked about for a long time, but to see a world-class organization like the government come forward and to really step into this market that, as of yet, no other American sovereign has-- North American sovereign has issued, is really taking a leadership role. And I'll just say, TD, broadly, has been a leader in the green bond space, a key underwriter within the Canadian green bond market in particular, since its inception in 2014.
And so as we look at how Canada on the strategy side has laid out an ambitious agenda to reach net zero with the 40% to 45% emissions reductions targets by 2030, I view this development as another step in terms of how we can actually accelerate the flow of capital to these initiatives. That Canada is going to need to both be competitive, but also to demonstrate their place along other G7 countries in tackling the climate crisis. So we're excited to be a part of it, and looking forward to this initiative.
- Well, we look forward to hearing how it's going, and we'll check in to find out how it is going. Amy, thanks so much for joining us.
- Thank you.