MFA’s Corner

is to be engaged in the present and focus attention on the task-at-hand. It’s better to do one thing great, than three things half right. • Over the course of his career he has come to appreciate the uniqueness of local government.

No other industry is interconnected with their end customers the way local government is. You, your local friends and family are also your end customers. The opportunity you have to impact how you live, work and play is unlike any other sector. Do not take this opportunity or responsibility for granted. • Lastly, have FUN! If you’re not, what’s the point?!

JIM BAUER has been with City of Penticton since October 2016, in the roles of Chief Financial Officer and General Manager, Finance and Administration. Jim provides strategic leadership in the areas of finance, information technology, land administration, human resources, communications and engagement, corporate services, procurement, business planning, and insurance and risk management. Prior to joining the City, Jim had a successful career with Alberta Public Service, where he held various senior roles in the ministries of Finance, Economic Development, Infrastructure, Solicitor General and Justice. His roles included Chief Financial Officer, Chief Information Officer and served as an Assistant Deputy Minister for nearly ten years. Jim and his family enjoy the active outdoor lifestyle the Okanagan has to offer.

Integrating ESG into Financial Reporting

Renata is the Director of Technology & Strategy at MFABC, leveraging external opportunities and internal resources to achieve the MFA’s mission of supporting financial success for BC Local Governments. As a proponent of life-long learning, she is pleased to manage the MFA’s ‘third pillar’ of championing financial education for MFA stakeholders.

The last eighteen months of wide-ranging pandemic, social justice and climate change impacts have intensified interest in Environmental, Social and Governance (ESG) factors for businesses and governments alike. Historically, disclosures have been primarily financial and accountants have naturally taken a leading role in the collection and presentation of this quantitative data. ESG reporting can be both financial and non-financial, quantitative and qualitative, but regardless, is still an area in which finance teams can and will be asked to add value.

Stakeholders look at ESG reporting to assess how an organization manages risks and plans for sustainable future operations. To access capital markets and fund infrastructure projects, municipalities and other levels of government are now being asked to provide such information as part of their bond market documentation. Investors and credit agencies prepare assessments of an organization’s ESG stance using materials provided by the entity or from their own analysis. They may “penalize” an organization with no or poor disclosures by downgrading their credit rating, requiring a higher rate of interest, or by simply not purchasing the bonds issued by that organization. This information has moved from a “nice to have” to a requirement in the investment markets, reflecting a change in the importance of these issues for both risk mitigation and to society as a whole.

To ensure continued access to the markets and the lowest cost of funds in Canada for our BC local governments, the MFA is responding to demonstrated market interest in ESG disclosure. In 2020, our team created a mapping tool from the Green and Social Bond Principles, as well as the United Nations Principles for Sustainable Development that describes how our clients’ projects meet these important goals. There is complexity here as there are no generally accepted standards around ESG reporting. For this important data to be relevant and comparable, these frameworks need to be streamlined with improved consistency; however, it is unclear when such clarification and consolidation may occur. In the interim, the MFA continues to work towards standardizing the local government data we request to meet these new requirements and maintain low-cost funding.

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Local governments may themselves be interested in understanding the ESG stance of potential investments when considering their reserve fund holdings. Such factors are therefore an element of interest on both sides of the local government ledger. The MFA has added “fossil fuel free” investment options for interested communities and shared additional ESG information for all our investment offerings. We have also begun to assess our own operations against these important principles. We are in good company, as many BC communities are also already considering these factors in the development of their strategic plans, capital asset management practices and investment policies. The MFA looks forward to collaborating with BC local governments, GFOABC and other organizations to standardize and share ESG information that supports our collective growth and success.

As this is a complex topic, I urge you to read about the MFA’s approach and explore additional resources available: • MFABC 2020 Annual Report (beginning page 21) • GFOA International • CPA Canada • United Nations

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