On October 9, 2024, the Government of Canada announced to support the development of Made-in-Canada sustainable investment taxonomy and mandatory climate disclosures to progress towards its net-zero emissions by 2050 goal. The taxonomy will provide a framework to categorize investments based on scientifically determined eligibility criteria and limit global temperature rise to 1.5°C above pre-industrial levels.

Once finalized, the Canadian taxonomy will be available for financial institutions, private lenders, asset managers, and impact investors to use on a voluntary basis and get a specified framework to make environmentally aligned decisions. 

Let's explore the new sustainable taxonomy for Canada and mandatory disclosure in detail. 

About sustainable investment taxonomy

The sustainable investment taxonomy of Canada is a tool for financial market participants to provide clarity about what economic activities are considered "green" or "transition." According to the taxonomy, the green category considers low—or zero-emitting activities, and the transition category includes decarbonizing emission-intensive sectors that are crucial for environmental sustainability. The main aim of the Canadian taxonomy is to mobilize investments in support of Canada's net-zero transition by enabling investors to understand and communicate which investments will contribute to the Canadian net-zero economy.

Key aspects of the taxonomy advancement by Canada

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  The development of a made-in-Canada taxonomy will first focus on the following sectors: electricity, transportation, buildings, manufacturing, agriculture, forestry, and natural gas. A taxonomy will be released within a year for the two or three priority sectors. 

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  The Canadian taxonomy will be a voluntary tool available for financial market participants to classify climate-related investments; therefore, aligning with guidelines will not be mandatory. 

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  The guidelines will be designed to interoperate with existing international taxonomies, ensuring consistency and clarity for the global investors participating in the Canadian economy. 
  
  

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  The taxonomy supports a wide range of use cases, from setting standards for the classification of climate-related financial instruments to evaluating the green or transition credentials of financial instruments and issuers. 

New mandatory disclosure initiative 

With the sustainable taxonomy announcement, the Government of Canada has taken huge steps to mandate climate-related financial disclosures for big private corporations. Mandatory disclosures are already present for the federal Crown corporations and federally regulated financial institutions. However, the government intends to extend the disclosure requirements to include new financial disclosures to federally registered big corporations. The mandatory climate disclosure will include the provision of information about the company's climate-related governance, strategy, risk management, metrics, and targets. The launch of disclosure requirements, as well as the size of the company it applies to, is yet to be released. 

While you're here…

Financial institutions, private equity and credit firms, asset managers, and impact investors should carefully consider the new taxonomy advancement and Canada's mandatory climate disclosure in their investment strategies and risk assessments to capitalize on opportunities and mitigate potential risks.

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Let's explore how Auquan can help you and your team eliminate tedious and time-consuming manual data work and focus more on what you do best.