Green firm financing could bring in $110 billion by 2025: report

Canada’s financial companies could make annual revenues of $110 billion by 2025 by targeting firms and projects that reduce or have lower greenhouse gas emissions, a trio of public and private groups said Sept. 17.

Taking advantage of the estimated opportunity, which was measured by Corporate Knights Research, requires a coordinated strategy between governments and companies, public-private partnership Toronto Finance International and financial services firm Ernst & Young Canada, two other members of the group, said.

“Research shows this is more than just the right thing to do, it makes business sense,” Ernst & Young Canada climate change and sustainability services leader Thibaut Millet said in a statement.

Canadian financial firms, predominantly based in Toronto, would make the revenues by supporting projects across the building, transportation, energy and heavy industry sectors between 2019 and 2025, the group’s report, Capitalizing on Sustainable Finance: A growth opportunity for Toronto’s financial sector, says.

Around $158 billion of annual investments are needed across those sectors for Canada to reach its emission reduction targets, according to estimates by Corporate Knights Research.

Toronto Finance International, which seeks to promote the city as a global hub in the investment sector, represents a cross-section of political and business leaders in Canada.

Federal Finance Minister Bill Morneau, Ontario Premier Doug Ford and Toronto Mayor John Tory sit on its leadership council, as well as the CEOs of 15 leading financial institutions.

The report supports the case for turning Toronto into a global leader in sustainable finance, the group’s president and CEO Jennifer Reynolds said in a statement.

Toronto Finance International was until recently known as the Toronto Financial Services Alliance.

The report looks at global growth in sustainable finance as a way for Canada’s financial services industry to grow revenue.

Socially responsible investments grew by a quarter to US$23 trillion between 2013 and 2015, according to the Global Sustainable Investment Alliance.

This could grow to US$63 trillion by 2025, according to estimates by Corporate Knights.

Canadian financial firms could reap C$18 billion in annual wealth management fees by capturing five percent of the US$63 trillion estimate with investment solutions that charge 0.5 percent in fees, today’s report says.

Global issuance of green bonds, which fund sustainable projects and companies, reached a record US$155.5 billion in 2017 and is expected to reach more than US$1 trillion by 2025, according to the Climate Bonds Initiative, a London-based not-for-profit that seeks to spur investment in the bonds.

If Canadian financial institutions were to capture five percent market share of the green bond underwriting market, this would mean C$420 million in fees by 2025, today’s report says.

The report breaks down the $110 billion annual revenue opportunity for financial institutions by sector with the financing of green homes offering between $4.4 billion to $17.9 billion in revenues and sustainable commercial buildings offering between $2.6 billion and $10.7 billion by 2025

Supporting more sustainable petroleum projects would bring in between $1.4 billion and $5.8 billion, while servicing green electricity outlays could bring financial firms between $1.3 billion and $5.3 billion, the report says.

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