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Key Impact Points:
- Categorizing Investments: Canada’s new sustainable investment taxonomy will categorize “green” and “transition” investments aligned with net-zero by 2050 goals.
- Sector Focus: Priority sectors include electricity, transportation, buildings, and heavy industry, with clear pathways for decarbonization.
- Voluntary Tool: The taxonomy will serve as a voluntary guide for investors and financial institutions, promoting credible climate-related investments.
The Government of Canada is advancing a Made-in-Canada sustainable investment taxonomy aimed at accelerating progress toward net-zero emissions by 2050. This taxonomy will provide a framework for identifying “green” and “transition” investments based on scientifically determined criteria. The goal is to guide private capital into activities that align with limiting global temperature rise to 1.5°C above pre-industrial levels, as outlined in the Paris Agreement.
Building a Credible Framework
The Canadian taxonomy sets a high standard to maintain credibility. It aims to mobilize investment in low- or non-emitting sectors, as well as identify decarbonization pathways for Canada’s emissions-intensive industries. The taxonomy’s “transition” category will support investments that help these sectors reduce emissions significantly, contributing to Canada’s leadership in transition finance globally.
The development of this taxonomy will initially focus on key sectors like electricity, transportation, buildings, agriculture, forestry, manufacturing, and extractives. A classification system for two to three sectors will be released within 12 months after the third-party organization overseeing the taxonomy begins its work.
“This taxonomy is a vital tool for accelerating private investment in Canada’s net-zero economy, providing clarity on what qualifies as a green or transition activity,” said an official from the Sustainable Finance Action Council (SFAC).
Voluntary Use with Global Alignment
The Canadian taxonomy will be a voluntary tool, available for financial institutions, lenders, and other stakeholders to classify climate-related investments. It is designed to be interoperable with international taxonomies, ensuring consistency and clarity for global investors, while being tailored to Canada’s unique economic and environmental context.
Setting the Stage for Private Sector Investment
By defining “green” and “transition” investments, the taxonomy will support a broad range of use cases, from climate-related bonds to evaluating the sustainability credentials of various financial instruments. The goal is to unlock private sector capital, facilitating Canada’s transition to a low-carbon economy and creating sustainable jobs in the process.
“With the launch of this taxonomy, we’re building a system that guides investors and industries in making informed decisions that align with net-zero pathways,” said a government representative.
New Climate Disclosure Initiatives
In addition to launching the sustainable investment taxonomy, Canada has also taken significant steps to mandate climate-related financial disclosures for large private companies. This policy, discussed in detail in a previous announcement, demonstrates the government’s commitment to ensuring transparency and accountability in climate action. Together, these initiatives highlight Canada’s dedication to creating a comprehensive framework for sustainable finance, bolstering investor confidence while advancing national climate goals.
With these initiatives, Canada continues to build a thriving sustainable finance ecosystem, leading the way toward a resilient, net-zero economy.