Canada’s Roadmap to Net Zero Emissions and Sustainable Economic Growth
Canada is on a mission to grow its economy while achieving net-zero emissions by 2050. To achieve their goals, Canada’s Department of Finance has determined they need between $125 and $140 billion of annual investment. However, navigating the complex landscape of sustainable investing can be a daunting task for many potential investors. In an effort to streamline this process and encourage investment in Canadian businesses, the Canadian government has identified a need for clear guidelines that classify investments based on their sustainability efforts.
To satisfy this need, the Government of Canada announced its intention to develop:
- A plan to deliver a voluntary tool they describe as a “Made-in-Canada sustainable finance taxonomy” to help investors, lenders and other stakeholders to evaluate individual business decisions by identifying “green” and “transition” economic activities that are aligned with limiting global temperature rise to 1.5 degrees above pre-industrial levels.
Green activities will likely include emission activities such as a full business fleet’s transition to ZEVs while “transition” activities may include incremental improvements to business activities, such as transitioning conventional fuels such as compressed natural gas to a less emission-intensive alternative.
The Government of Canada also announced its plan to:
- Develop regulations which mandate climate-related financial disclosures for large, federally incorporated private companies to help stakeholders understand how large businesses are thinking about and managing climate-related risks.
- Evaluate possible incentives to encourage small and medium-sized businesses to voluntarily release climate disclosures as well.
By developing and implementing these measures, Canada aims to simplify the process of sustainable investing, expedite due diligence, and fast-track investments in Canadian businesses.
FSI Take
The global regulatory landscape continues to evolve rapidly. Jurisdictions are taking decisive steps to create transparency on climate risks for investors with Canada being the most recent country to implement a sustainable finance taxonomy and require companies to publicly disclose their climate-related risks.
Much like California’s approach, Canada’s forthcoming regulations will not be exclusively focused on public companies. Whether you’re a public or private enterprise, a large cap or mid cap organization, the message is clear. It’s time to gear up for climate disclosures and GHG inventories to enhance your regulatory preparedness. As the regulatory landscape continues to shift, businesses up and down the value chain that proactively adapt to these changes will be better positioned to navigate the challenges and opportunities that lie ahead.