As many as 60 other jurisdictions have put green investing taxonomies into force, or are planning to, and in some cases, they have used Canada’s early work as guidelines.Jeff McIntosh/The Canadian Press
The federal government has named a coalition of climate and finance experts to put a long-delayed green and transitionary investing guidebook into use with the aim of attracting billions of dollars in private capital to help meet the country’s net-zero targets.
Finance Minister François-Philippe Champagne said the Canadian Climate Institute think tank will lead the effort to develop the climate-focused investing taxonomy along with an investor-led organization known as Business Future Pathways.
The taxonomy is being developed to give institutional investors comfort that their capital is being directed at projects that meet clear climate objectives, not greenwashing exercises.
As many as 60 other jurisdictions have put taxonomies into force, or are planning to. In some cases, they have used Canada’s early work as guidelines.
The group will put together a governance structure to oversee development of criteria for determining which investments are to be certified as green, such as renewable energy, and those that fit into a transitionary category. The latter would involve technology for decarbonizing high-emitting industrial processes.
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As a first step, it will set up a taxonomy council to review and approve investment guidelines, Mr. Champagne said in a statement. The council will comprise representatives from academia, finance, climate science, Indigenous nations and civil society. Working groups made up of industry experts will make recommendations to the council.
Prime Minister Mark Carney sees the effort as key to enticing foreign investors to help finance Canada’s decarbonization commitments, said Ryan Turnbull, parliamentary secretary to the Finance Minister.
Current estimates place required capital for meeting Canada’s net-zero target at $115-billion to $125-billion. That compares with the current investment of $15-billion to $25-billion.
“Capital markets need clarity and consistency, transparency and clear market signals. I think this is a clear market signal,” Mr. Turnbull said in an interview.
Sustainable finance experts formed Business Future Pathways earlier this year to give corporations guidance on international standards that deal with climate risks and the shift to a low-carbon economy. The organization is backed by a number of financial institutions and pension funds.
Barb Zvan, chief executive officer of University Pension Plan Ontario, was a driving force behind BFP. She previously held a senior role at the Sustainable Finance Action Council, an Ottawa-appointed expert panel that developed a taxonomy road map. It presented the government with the document in late 2022, but work toward formalizing it stalled.
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“Industries are going to grow as we move to renewable energy or fewer emissions, so how do we get money into Canada from foreign investors? How are they going to understand Canada and what our transition looks like? It’s confusing,” Ms. Zvan told The Globe and Mail.
Most companies today do not disclose how much of their capital spending is directed at navigating the energy transition, she said. And because Canada’s capital markets are dwarfed by those in the United States, many foreign investors won’t make the effort to conduct detailed research into Canadian companies.
The guidebook will improve companies’ access to capital as they plan projects to lower their climate-related risks, she said.
The Canadian Climate Institute will lead the research and technical aspects, building on the work of the Sustainable Finance Action Council and other sources, including taxonomies in place in other countries.
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In October, 2024, then-finance minister Chrystia Freeland said she expected a taxonomy would start covering priority industrial sectors within the following 12 months. That timeline was upended by the Liberal leadership race and subsequent federal election in the first part of this year, Mr. Turnbull said.
Now, the taxonomy council is the group expected to establish investment guidelines for three priority sectors by the end of next year, and another three by the end of 2027. Previously, Ottawa listed as priority sectors: electricity, transportation, buildings, agriculture and forestry, manufacturing and extractives (including mineral extraction and processing), and natural gas.
Jonathan Arnold, director of sustainable finance at the Canadian Climate Institute, said the effort is aimed at bolstering Canada’s competitiveness in the race for green capital.
“If you look at the list of trading partners of Canada outside of the U.S., almost all of them have national taxonomies, either fully developed or developing. So, it becomes a question of market access and access to capital in the energy transition,” he said.