Chrystia Freeland, Deputy Prime Minister and Minister of Finance, this evening at the Principles for Responsible Investment conference in Toronto announced:
- A plan to advance a “Made-in-Canada” sustainable investment taxonomy (backgrounder); and
- Mandatory climate-related financial disclosures for large, federally-incorporated private companies.
This bulletin briefly summarizes the two announcements, the implementation of which is very likely to be contingent on the outcome of the next federal election (which must take place on or before October 20, 2025).
Sustainable investment taxonomy. The Government of Canada committed, in the 2023 Fall Economic Statement (see our bulletin here) and Budget 2024, to develop a sustainable finance taxonomy identifying “green” and “transition” investments. The taxonomy builds on the work of the Sustainable Finance Action Council’s (SFAC’s) Taxonomy Roadmap Report, which was released in September 2022.
The taxonomy, which will be voluntary, is intended to categorize investments based on scientifically determined eligibility criteria that are consistent with the goal of reaching net-zero emissions by 2050 and limiting global temperature rise to 1.5°C above pre-industrial levels. It is also importantly intended to establish a “transition” category to identify, and increase funding for, scientifically credible pathways to rapidly decarbonize Canada’s emissions-intensive sectors.
A third-party, arm’s-length organization (or organizations) will further develop and implement the taxonomy. The development of the voluntary taxonomy would first focus on the following sectors for the Canadian economy: electricity, transportation, buildings, agriculture and forestry, manufacturing, and extractives, including mineral extraction and processing, and natural gas. The government intends for a taxonomy for two to three priority sectors to be released within 12 months of the arm’s-length, third-party organization beginning its work.
Mandatory climate-related financial disclosures. The government also intends to bring forward amendments to the Canada Business Corporations Act that will require large, federally incorporated private companies to make mandatory climate-related financial disclosures. The government will launch a regulatory process to determine the substance of the disclosure requirements and the size of private federal corporations that would be subject to them. Small- and medium-sized businesses would not be subject to the requirements.
For further information or to discuss the contents of this bulletin, please contact Lisa DeMarco at lisa@resilientllp.com.
