Canada has worked for years toward finalizing a rule book for what can qualify as green investing, but progress has stalled with Ottawa focused on trade and U.S. tariffs.Paul Darrow/Reuters
Britain has dropped plans for a guidebook that certifies certain investments as green, raising questions about Canada’s halting efforts to adopt such a document as a key part of a transition to a low-carbon economy.
This week, the U.K. Treasury said a survey showed fewer than half of 150 respondents from a broad range of sectors believe that such a catalogue, known as a green taxonomy, would be an effective tool within the country’s sustainable finance framework for attracting capital and preventing greenwashing.
The Labour Party government of Prime Minister Keir Starmer said it remains committed to its clean energy and growth missions and meeting environmental targets, notably the Paris Agreement goal of aligning policies with limiting a temperature increase to 1.5 degrees above preindustrial levels. But it said it will rely on other means.
“Whilst our ambitions to continue as a global leader remain unchanged, the consultation responses showed that other policies were of higher priority to accelerate investment into the transition to net zero and limit greenwashing,” the government said in its Green Taxonomy Consultation Response.
The move does not portend a major step back for Britain’s overall push for a climate-aligned finance system that can attract the necessary investment to fund the green shift, an industry leader said.
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“We are disappointed to see the government concluding that the taxonomy has no place in the sustainable finance framework, but given everything else that is moving forward in the U.K., and things that are moving in a positive direction, there are many other components of the U.K. sustainable finance infrastructure that we’re really happy with,” James Alexander, chief executive officer of the U.K. Sustainable Investment and Finance Association, said in an interview.
The group’s members, which include investment managers, pension funds, banks and financial advisers, are pushing for quick implementation of other measures, including transition plans for large corporations and adoption of international sustainability reporting standards, Mr. Alexander said.
Many jurisdictions around the world, including the European Union and Australia, have implemented taxonomies, or are in the process.
Canada has worked for years toward finalizing one that reflects the makeup of the national economy, including its large natural resource sectors – but progress appears to have stalled again with Ottawa focused on trade and U.S. tariffs.
Last October, former finance minister Chrystia Freeland announced that a “made-in-Canada taxonomy” would start covering priority industrial sectors within the subsequent 12 months, with the aim of providing investors with certainty that their capital is being spent on activities that meet clear climate objectives.
In their campaign platform for the April, 2025, election, Prime Minister Mark Carney’s Liberals pledged to finalize and implement voluntary sustainable investment guidelines for priority sectors by the fall of 2026.
However, Caroline Feggans, spokesperson for new Finance Minister François-Philippe Champagne, said in an e-mail on Wednesday that the government had no update on progress on the file, pointing to an October, 2024, background document as being “still the most up-to-date information.”
Before completing its work last year, the government-appointed Sustainable Finance Action Council developed the taxonomy framework, separating investments into green or transitionary – depending upon the levels of greenhouse gas emissions they produce and whether they are likely to be used well into the future.
A taxonomy is only as effective as its scientific credibility and role in reducing emissions, said Julie Segal, senior program manager of climate finance at advocacy group Environmental Defence. Canada should be focused on sustainable finance efforts that prioritize those, she said.
In its announcement last year, the government left open the possibility that activities to cut emissions from natural gas or the “limited buildout” of gas facilities could be covered by the taxonomy if the output displaced more polluting fuels internationally.
“I think a taxonomy in and of itself doesn’t really do anything, unless it’s paired with other policies like transition plans – credible climate finance policies more broadly,“ Ms. Segal said. ”If industry and government want to move forward with a taxonomy, why not? So long as it’s credible in both the process and content. That’s the difficulty."
Sustainable finance policies, including taxonomies, disclosure rules, transition plans, scenario analysis and data and analytics, should be aligned under one umbrella, as they often overlap, said Anik Islam, senior research associate at the Smart Prosperity Institute think tank.
Currently, those pieces are implemented by numerous organizations, including federal and provincial regulators, supervisory bodies and standard setters.
“We should recognize that it works as a system,” Mr. Islam said. “Taxonomy governance, if it comes to one, will only be good if it is supported by the other stuff that’s going on around it.”