Financing Environmental Change: A New Role for Canadian Environmental Law
Richardson, Benjamin J., McGill Law Journal
Financial institutions occupy a central role in equity and debt markets, providing the finance that shapes economic development and thus environmental pressures. Environmental regulation has traditionally focused on development itself but not those that financially sponsor developers. To achieve an environmentally sustainable economy in Canada, new regulations and policies to promote environmentally friendly financing in the financial services sector are necessary. This article explains why financing environmental change is crucial, surveys the main private financial institutions in Canada relevant to this task, and makes recommendations on how financial regulation and its broader institutional context can be reformed to support sustainable development.
Les institutions financieres occupent une place centrale dans les marches boursiers et obligataires. Elles fournissent les ressources financieres modelant le developpement economique et les pressions environnementales qui en decoulent. Au Canada, la reglementation environnementale s'est traditionnellement concentree sur le developpement economique plutot que sur son financement. Pour developper une economie durable, il est necessaire d'enoncer de nouveaux reglements et politiques promouvant des pratiques de financement respectueuses de l'environnement dans le secteur des services financiers. L'auteur explique les raisons pour lesquelles il est crucial de financer le developpement durable, passe en revue les institutions financieres pertinentes a cet egard, et recommande des reformes de la reglementation financiere et de son contexte institutionnel.
Introduction I. Environmental Aspects of Financial Markets A. Sustainable Development, Capital Allocation, and Financial Institutions B. The Ethical Investment Movement C. Environmentally Responsible Financing in Canada II. Reforming Financial Markets Regulation A. The Marginalization of Environmental Policy B. Bringing the Environment into Financial Services Regulation C. New Policies to Link Environmental Performance to Financial Performance D. Addressing the Heterogeneity of the Financial Sector III. Regulating for the Financing of Environmental Change: The Wider Context A. Corporate Governance B. Economic Instruments C. Environmental Liability for Financial Sponsors D. Corporate Environmental Reporting Conclusion
Environmental regulation in Canada, as in most other nations, hardly addresses the financial services sector--the banks and investors that finance development. To most environmental lawyers, this might seem a strange comment, as the province of environmental law is not normally associated with banks, pension funds, or other financiers. If anything, those who trade in money are seen as rather environmentally innocuous or irrelevant, away from the main action, whether it be tackling forestry companies in British Columbia or prosecuting midnight polluters in Ontario. Although Canada has made great strides in improving its environmental laws since the 1970s, this lack of interaction between environmental and financial policy is arguably Canadian environmental law's greatest handicap. Because financial markets shape decisions concerning future development and thus resulting environmental pressures, the reform of investment, banking, and other financial services to promote more environmentally sensitive financing should be a government priority.
The challenge for Canadian policy reformers, therefore, is to find ways to embed environmental standards and responsibilities into financial markets. Quite simply, when granting a loan for a development project or investing in a company's shares, financial organizations must be encouraged to take into account the possible environmental impacts of their financing. Notions of environmentally responsible behaviour must be extended beyond the companies that develop, pollute, and consume to include the financiers that make possible--and profit from--these often harmful activities. …