The Government of Canada has appointed the Canadian Climate Institute to lead the development of a sustainable investment taxonomy. This initiative aims to establish a categorisation system for green and transition investments, with a preliminary framework anticipated by the end of 2026.
This decision follows a commitment made by the previous Canadian government in 2024 to create a sustainable investment taxonomy, which was to be developed by independent organisations. The current government solidified these plans in its 2025 budget, released last month.
The proposed taxonomy will provide criteria for identifying investments eligible for “green” or “transition” labels. This will enable companies to issue green or transition bonds and allow investors to assess the credibility of sustainable investment products. The move comes as several countries, including China, Australia, the EU, Singapore, Hong Kong, and India, are developing their own sustainable finance taxonomies. The UK recently decided not to proceed with its plans for a green taxonomy. The Canadian government stated that the new taxonomy will be voluntary and aligned with global frameworks.
François-Philippe Champagne, Canadian Minister of Finance and National Revenue, emphasised the importance of mobilising private capital to meet Canada’s 2050 net-zero target, noting the demand for clear, science-based investment standards.
Established in 2020, the Canadian Climate Institute provides independent research and policy advice on clean growth and climate change. It will collaborate with Business Future Pathways, focusing on climate investment, to develop the taxonomy. The Institute will lead research efforts and work with a Taxonomy Council, which will include experts from finance, climate science, Indigenous communities, and civil society.
The Council aims to finalise guidelines for three priority sectors by 2026, with an additional three sectors added in 2027. These sectors will be chosen based on their potential to reduce emissions and enhance low-carbon competitiveness in Canada’s economy.
Jonathan Arnold, Director of Sustainable Finance at the Canadian Climate Institute, stated that the guidelines will provide a clear, credible, science-based system to identify economic activities aligned with Canada’s climate and competitiveness goals. The guidelines will focus not only on clean technologies but also on transforming emissions-intensive sectors crucial to the national economy, guiding them towards low-carbon competitiveness.
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