New climate taxonomy and disclosure rules set to drive drive long-term investment in Canada

Properly implemented, a new climate investment taxonomy will unlock the capital needed to reach net zero emissions.

09.10.24

OTTAWA — Jonathan Arnold, Research Lead in Clean Growth at the Canadian Climate Institute, made the following statement in response to the release of the federal government’s climate investment taxonomy framework:

“The federal government’s commitment today to a credible, science-based climate investment taxonomy sets the stage for a major acceleration of Canada’s clean energy transition. By the federal government’s own estimate, more than $115 billion per year in new clean energy and transition-aligned investments is needed to build Canada’s net zero economy. A Canadian climate investment taxonomy can help unlock the funds that will build those projects.

“A climate investment taxonomy will establish a standardized language for how investors and capital markets categorize financial investments and assets that are fit for the transition to net zero. Clearly defining those opportunities will help cut emissions from Canada’s most energy-intensive industries, which will increase their global competitiveness.

“Today’s announcement builds on the blueprint developed by the Sustainable Finance Action Council, which represents the 25 largest financial institutions in the country, and in partnership with the Canadian Climate Institute. The next step, as laid out by Minister Chrystia Freeland today, will see the creation of a new climate investment taxonomy that includes definitions for both “green” and “transition-aligned” investments. This taxonomy will create clarity for capital markets seeking sustainable investment opportunities.

“The government’s proposed framework aligns with global best practices for “green” taxonomies, while laying the groundwork for a “transition” taxonomy—the “missing middle” in climate finance. Critically, today’s announcement stresses the need to exclude new natural gas projects from the taxonomy framework. It also emphasizes the importance of having a credible, independent governance structure for how the sector-specific criteria and pathways are determined.

“In addition, the government announced that federally regulated corporations in Canada will be required to disclose how climate change and the global energy transition will impact their business and future profitability. This change is an important step to prepare Canada’s economy for the rising threat of a rapidly changing climate and the profound transformation already underway in international capital markets.

“Canada is well positioned to take a global leadership role in these areas. Done well, Canada’s climate investment taxonomy and updated risk disclosure requirements will help attract global capital to compete with our neighbours to the south.”