Investors weigh in on designing new Canadian sustainable investing guidelines

With the appointment of Canada’s Taxonomy and Transition Planning Council, Canadian investors will be closely following the development of made-in-Canada green and transition investing guidelines that will allow markets to identify and agree on which economic activities contribute to addressing climate change.

To help inform this work, ISF and the Principles for Responsible Investment (PRI) surveyed responsible investment practitioners in their respective networks. Thirty-three responses were received creating a self-selected sample of mostly senior respondents with interest and expertise in taxonomy development.

Key findings:

• Investors value “interoperability” or compatibility with the taxonomies of other jurisdictions such as Australia (82%) and the EU (76%), while reflecting Canada’s distinct economic, social, and institutional realities.
• Respondents’ organizations varied in their current approach. While 48% used their own internally developed taxonomies, 45% relied on external frameworks, illustrating the need for an agreed national standard.
• Investors show a clear preference for practical and credible transition tools such as a defined list of eligible transition activities (82%), alongside time-bound phase-out mechanisms (70%) and robust entity-level transition plans (67%).
• Investors primarily see the taxonomy as a stewardship tool (91%), enabling consistent engagement with investee companies to support assessment of transition progress through clearer criteria and thresholds.
• Absence of clear federal policy direction (88%) is widely identified as the main barrier to implementation.

For developers of the taxonomy, analysis of the survey responses suggests the following priorities:

• Clarify the intended role and use cases of the taxonomy. Respondents noted the taxonomy could serve multiple functions, including stewardship, portfolio analysis, product labelling and screening, and credit applications. A clearer articulation of its intended role and primary use cases would help ensure the design is fit for purpose.
• Define the transition design approach and performance expectations. This includes clarifying the boundary between “green” and “transition” activities, particularly for measures such as energy efficiency and clarity on how “measurable performance improvement” is assessed.
• Include a clearly defined transition measures list of eligible technologies, processes and assets that demonstrably contribute to carbon emissions reduction. This was the most widely supported transition feature in the survey, with 82% in favour. This list should be positioned as one component of a broader transition framework.
• Embed time-limited transition criteria and address higher-risk activities. Transition eligibility should include clear sunset dates or phase-down guidance. This approach was supported by 70% of respondents. Respondents also emphasized the importance of clear treatment of higher-risk or contested activities to reduce greenwashing and liability risks.
• Support implementation, Indigenous rights, and international alignment. The taxonomy should include practical guidance for investors, including activity-level versus entity-level application. It should reflect Indigenous rights and meaningful consultation, which 94% of respondents prioritized, and support interoperability with other global frameworks while maintaining alignment with Canada’s domestic context.

Survey responses indicate successful implementation likely also depends on policy signals such as disclosure frameworks and supervisory settings in shaping how the taxonomy may be used in practice.

Download and read the full report, “Building Canada’s Taxonomy the Right Way: Insights from a Survey of Investors”.

Participants in an April 28 webinar will discuss the survey results and implications. Register here.

Quotes

“Investors have been calling for a sustainable finance classification for a long time. It’s very gratifying to see the Taxonomy Council beginning its work. We hope this research and analysis helps inform that vital process, and also other government and regulatory agencies who will contribute to its success,” said ISF Director of Research Yrjö Koskinen.

“The signal on interoperability is clear: investors are telling us that a Canadian taxonomy must reflect Canada's resource-heavy economy and Indigenous rights while calibrating design features from other international frameworks in a way that global investors can recognize,” said Yingzhi Tang, ISF’s Senior Research Associate and co-author of the report.

“Canada’s announcement represents a meaningful step toward strengthening the foundations of long‑term, sustainable financial markets,” said Lindsey Walton, Director of Global Markets at PRI. “Through our work with investors globally, PRI has observed that clear and well‑designed taxonomies can help improve market transparency, support informed investment decision‑making, and enhance alignment with international frameworks. We look forward to following its development and understanding how it supports Canada’s evolving market needs.”

“Canada has a privileged starting point. It can build on established interoperability principles, draw on the strongest available methodologies and criteria, and design the taxonomy around its intended use cases for a more targeted approach and a smoother implementation process,” said Isabella Piuzana Rolla, Taxonomy Project Manager at the Climate Bonds Initiative. “This is precisely why the survey plays such an important role: it helps in reflecting investor needs from the outset and supports early buy-in across the market.”

"It is heartening — though not surprising — to see Australia identified as the top priority for interoperability by 82% of respondents,” said Nicole Yazbek-Martin, Executive Manager, Sustainability Standards and Practice at the Australian Sustainable Finance Institute. “Our two nations share resource-intensive economies, deep ties, and rich history of First Nations peoples whose rights must be central in the net zero transition. Australia has worked hard to develop a credible, practical approach to transition grounded in real-economy pathways. We hope Canada can build on this foundation. A stronger, more interoperable global market for credible transition finance benefits us all.