As I sat in the Sustainability Finance Forum in Ottawa on Nov. 28–29, I reflected on how far we’ve come in discussing climate action. The forum included extensive dialogue around taxonomy and its potential to guide the financial sector in channelling billions – if not trillions – of dollars into the economy to mitigate and adapt to climate change.

Yet a stark realization emerged: we’ve barely inspired the financial community to catalyze meaningful business engagement on climate issues, particularly concerning energy supply and end-user demand. This gap became crystal clear when Andy Chisholm asked how many businesses at the Sustainable Finance Forum were end users. The answer was none!

This disconnect isn't new. Back in the early 1990s, when I was with Ontario Hydro’s Customer Energy Services, we partnered with CIBC to create a financial tool that incentivized energy-efficient capital projects. Customers could borrow money at reduced interest rates, provided they successfully implemented approved projects. It was an early, albeit small, step toward integrating finance and energy efficiency.

Fast forward to 2020: 360 Energy hosted a webinar entitled How the Canadian Industry Is Leading the Way in Sustainability.  During the session, BMO presented examples of sustainability-linked loans (SLLs), highlighting leaders like Maple Leaf Foods, which became the first net-zero food industry company.

Inspired by this, other businesses, including Samuel Son & Co., adopted SLLs to advance energy performance, reduce emissions and drive innovation.

Energized by the potential of sustainability-linked loans

I was energized by the potential of SLLs, loan instruments that encourage borrowers to meet predetermined sustainability targets. Unlike traditional loans, interest rates in SLLs adjust based on the borrower’s performance against set environmental, social and governance (ESG) metrics.

They’re a powerful financial instrument capable of enabling businesses to change and reduce energy consumption, lower carbon emissions and simultaneously cut operating costs. Our company played a modest role as a trusted independent administrator, helping clients meet the rigorous reporting and accountability required for SLLs. We saw firsthand how these loans spurred operational improvements and fueled the creation of low-carbon products and manufacturing processes.

Despite this promise, the widespread adoption of SLLs — particularly for small and medium enterprises — has been disappointing and non-existent. Here’s why:

• Data gaps: Both businesses and financial institutions struggle to collect, benchmark and report the energy data required to track energy and carbon reductions year over year.
• Limited expertise: Financial institutions often lack the resources, experience and motivation to scale SLL offerings effectively.
• Operational cost: To administer the loans.
• Revenue concerns: SLLs can reduce financial institutions’ revenue compared to traditional lending.
• Energy management gaps: Businesses, large and small, have historically failed to proactively manage energy. With energy contributing to 80 per cent of carbon emissions, inaction here is a major roadblock.
• Misaligned expertise: Many companies rely on large financial consulting firms that lack the technical understanding of: Engineering solutions required for implementation; customer energy usage patterns and energy market and pricing associated with energy usage; and different carbon markets and pricing.

A path forward

The good news is that many of these challenges have been, and can continue to be, effectively addressed to benefit all stakeholders. Proven solutions exist to empower financial institutions to scale SLLs and inspire clients to take meaningful action.

Businesses equipped with the proper energy focus, robust energy data, knowledge and strong senior management support can demonstrate that enhancing energy performance positively impacts every department. These solutions go beyond achieving climate targets — they drive tangible, measurable improvements to the bottom line.

Beyond financial and operational metrics, these efforts strengthen resilience against future market fluctuations and regulatory changes. By integrating sustainability into core business and lending strategies, we create a more stable, resource-efficient economy that benefits society, protects the planet, and ensures long-term competitiveness.

The tools and expertise are already in our hands. It’s time to bridge the gap between finance and sustainability, to go beyond dialogue, and to create scalable, actionable solutions. We must do better. The stakes — our businesses, economies and planet — demand it.