How the City of Toronto turned climate rhetoric into action

Anyone looking for inspiration on ways to tackle the climate crisis could do worse than look to the achievements of Heather Taylor, CFO and Treasurer of the City of Toronto.

While the last two years have arguably provided the perfect excuse for the focus on climate risk to stall, Taylor says the extreme weather events around the world have also made it hard to ignore. Even before the pandemic, the rallying cries of Greta Thunberg were striking a chord with an increasingly receptive audience, Taylor says. 

“People were paying attention to it,” Taylor says. “We were side-tracked by COVID but climate change hasn’t been side-tracked. And so from my perspective, I've actually used COVID as an opportunity to try and tell the story.”

In July 2018, Toronto issued its first green bond - a debt instrument specially reserved to raise money for climate and environmental projects. Its second green bond followed in September 2019, and the third on 1 December 2021. 

“With an increasing number of investors looking for environmentally and socially responsible investment opportunities, engaging with the capital markets through a green bond is an important tool that helps the City deliver tangible and sustainable outcomes, financially and environmentally,” Taylor says. 

In 2020, Toronto’s sustainability financing framework was expanded to also include a social bond, giving investors the flexibility to direct their funds towards climate or social programmes including shelters and affordable housing. The bonds continue to be oversubscribed attracting investors from around the world.

“The pandemic has put pre-existing systemic socioeconomic inequalities and poverty into the spotlight. We need to address these issues at the forefront of our thinking,” says Taylor. 

“We attracted investors from the Middle East, Europe, Asia, and it oversold by more than two times the amount. We proved that despite this global pandemic, there was such a desire in the markets to see advancement.” 

Taylor’s commitment to sustainability in all its guises has also prompted her to blaze a trail as the first Canadian government to publish an ESG report in January this year. 

“If we stay silent on the information that we're sharing with the public, who's going to hold us accountable?” Taylor asks. “It doesn’t have to be perfect. But start somewhere so that it can evolve, start somewhere so that people can see your commitment, so they can hold you accountable. And then look for incremental improvements.”

Her incremental approach started out back in 2019 with a note on climate change in the City’s 2018 audited financial statements – a line in the sand to give people the opportunity to hold the government to account, she says. Year two was all about demonstrating progress, to which Taylor turned to the Task Force on Climate-Related Financial Disclosures (TCFD) framework.

In January this year, the City of Toronto published its inaugural ESG report, which outlines how the City is focused on ESG-related opportunities and risks across strategic priorities, sustainable finance and socioeconomic outcomes to reflect its commitment and performance in each of three areas: environment, social well-being and governance. 

Taylor admits that the document is a work in progress. “It’s not about expecting to have it perfect, but it is about saying we're going to create that baseline, we're going to demonstrate to people that we care enough to put it in writing so you can hold us accountable. And then you look for incremental improvements.” 

The temptation for those in government is to force the huge volumes of data at your disposal into a very specific narrative, she says. The trick is to look for the nuggets, Taylor advises. “As we get more data, the narrative will grow but don't be afraid just to start with a small piece. Most jurisdictions will know what their biggest carbon emitters are. Start with that story.”

The concept of doing a good enough job doesn’t necessarily sit comfortably with the inherent perfectionism of many accountants, she admits. “My fear is that as accountants, we're pretty conservative and we have to wait until it's perfect. If we do things in incremental ways, we're demonstrating progress, we're demonstrating that we're future-oriented, that we're focused on what is to come and rather than being reactive we need to be proactive.”

Despite the kudos of being the first City and first government in Canada to produce an ESG report, the first to include climate disclosures in its audited financial and the first to create a sustainability financing framework, Taylor remains frustrated that more haven’t followed suit. She accepts that the task is daunting and speculates that not knowing where to start is stalling progress. “That's been my motivator - to do it in a way that others can look at it and say, I can do that.”

Whatever the approach, cost can't be the driver, Taylor warns. “We spend close to $9bn in goods and services on an annual basis so right now we have a social and a climate lens being built into all our procurement decisions. And it’s in our $45bn 10-year capital plan. I'm a CFO, of course I'm going to be fiscally prudent, but I've tried to communicate that these decisions will pay off down the road. it's not about spending, it's about investing.”

More broadly, Taylor is unwavering in her conviction that accountants are pivotal to driving ESG programmes. In the context of climate change, that boils down to quantifying the risks that organisations – both public and private – face and ultimately holding them to account. “Our profession has an obligation and also an enormous opportunity to play a role in setting the stage for how we can tackle this,” she says.

While the politicisation of climate change during the Trump era did little more than present obstacles to progress, Taylor says, she recognises that positive change hinges on solid reporting and the ability to measure yourself against recognised standards. “The reason why I'm so definitive on this is that otherwise there are no metrics, there's absolutely nothing concrete to say, ‘you said you were doing x, where's your progress?’”

The absence of mandatory climate reporting standards is unhelpful, Taylor believes. “Without standards, no one is actually forced to address the problem - they do it because they want to or they feel they need to. And that's where as a profession, we can insert ourselves in and force that conversation.”

But as the data on ice shields and rising temperatures illustrates all too well, waiting for standards to emerge simply isn’t an option. “Get on with it,” Taylor urges, “because by the time standards come, you might already be ahead. Our profession can be leaders, our profession can be forward-thinking our profession can be proactive rather than reactive.”

In a world where private sector organisations are scrambling over each other to tie their colours to the sustainability mast, the significance of Taylor’s decision to “lead with our chin” is not to be underestimated.