The Bank of Canada has indicated that it plans to take a closer look at the impact of increasingly frequent and severe weather events on the prices consumers pay for goods, as part of its mandate. of controlling inflation.
The promise made by the central bank on Wednesday, which it linked to the UN climate summit in Glasgow (COP26), Scotland, will also see it explain more publicly how climate change could impact the trajectory of the Canadian economy.
The announcement comes shortly before the release of a central bank report on the risks climate change poses to the financial system, which will include details on sectoral impacts, and a renewal of the Bank of Canada’s mandate.
The central bank’s current mandate calls for it to try to keep annual inflation as close to 2.0% as possible, but its monetary policy framework is renewed every five years.
Conservative Leader Erin O’Toole warned Prime Minister Justin Trudeau in a letter late last month that his party would oppose any “growth or other expansion of the Bank of Canada’s tenure.”
While the climate issue is not officially part of the Bank of Canada’s role, other central banks argue they should play a bigger role in helping economies adapt to climate change.
“We can’t leave them in a blind spot; it will haunt us if we are not fully aware of it, ”said Alejandro Diaz de Leon Carrillo, Governor of the Bank of Mexico, during a virtual panel hosted by the Toronto Center.
Speaking on the same panel, Bank of Canada Deputy Governor Toni Gravelle said policies to mitigate the impact of climate change would slow economic growth because the carbon-intensive sectors that have contributed to fueling gains will be drastically reduced.
He pointed out that there could also be an impact on the financial system, noting the possibility that losses could be recorded due to falling prices of assets that are not considered as green as others.
This is why Gravelle argued that better information on climate risks needs to be disclosed by companies, so that financial institutions understand their own exposure.
Duff Conacher, co-founder of Democracy Watch, said in a statement that big banks and financial institutions should not be allowed to keep details of their loans, investments and insurance in the fossil fuel industry secret, or be authorized to set their own voluntary disclosure and investment standards.
The Bank of Canada has worked with some of the largest banks in the country to determine what this risk looks like, to help them and others in the financial system understand the financial risk posed by climate change.
This report, explained Gravelle, should be published in late November or early December. He will understand what he describes as how-to guides on risk disclosure.
This work will likely coincide with the decision of an international disclosure body to locate one of its offices in Montreal. The Chartered Professional Accountants of Canada have indicated that they will help create a disclosure standard.
Toni Gravelle explained that the impending economic change would be similar to the magnitude of the impact of technological innovation on the economy in recent decades, but “on steroids,” with broad impacts on sectors and industries. labor markets.
Mitigating this impact would require investments in productivity-enhancing technologies, which would make workers more efficient, he said.
“The problem is that policies have to be aligned, the incentives have to work, and that can seem very hard to swallow in the short term, but in the long term it actually creates a lot more jobs and makes life easier. ‘much more flexible economy,’ argued Gravelle.