Sustainable Investing in Canada: A National Framework

Key Takeaways:

• The Canadian government has announced two years of seed funding to develop sustainable investment guidelines, also known as a sustainable finance taxonomy.
• The guidelines will create a common language for capital markets and help mobilize private finance towards clean growth projects.
• The Canadian Climate Institute and Business Future Pathways will work together to establish a robust governance structure and develop the guidelines.
• The guidelines will prioritize investments in projects and sectors that are essential to Canada’s economic growth and align with international investment taxonomies and science-driven climate targets.
• The development of the guidelines will help Canada catch up in the global race for capital and support the flow of green and transition capital across borders.

Introduction to Sustainable Finance Taxonomy
The Canadian government has taken a significant step towards establishing a sustainable finance taxonomy, which will play a crucial role in securing the country’s energy transition and future prosperity. In December 2025, the government announced two years of seed funding to develop Canada’s sustainable investment guidelines, commonly referred to as a sustainable finance taxonomy. This initiative aims to create a common language for capital markets around the types of projects and activities that are aligned with Canada’s climate and economic goals. By doing so, it will help mobilize private finance towards new, clean growth projects that can decarbonize existing, emissions-intensive sectors, increasing their global competitiveness.

Who’s Involved in the Development Process
The Canadian Climate Institute will work collaboratively with Business Future Pathways to establish a robust and independent governance structure to oversee the development of science-based taxonomy criteria and undertake stakeholder engagement. Together, they will enable and support the work of a new independent Taxonomy Council, which will review and ultimately approve investment guidelines. The Canadian Climate Institute will lead the research and technical work to inform the development of the proposed guideline criteria, and work with Business Future Pathways to convene the decision-making Council and its financial and technical advisory bodies. The Council and advisory bodies will include representatives from independent experts and academics, the financial sector, climate scientists, Indigenous representatives, and civil society.

The Importance of Made-in-Canada Sustainable Investment Guidelines
Developing made-in-Canada sustainable investment guidelines is essential for the country’s economic growth and competitiveness. The guidelines will establish criteria for "green" investments as well as "transition" investments, prioritizing guidelines for investment in projects and sectors that are most essential to Canada’s economic growth while ensuring alignment with international investment taxonomies and science-driven climate targets. This will help Canada catch up in the global race for capital, as more than 60 sustainable finance taxonomies are currently being used and developed around the world, including almost all of Canada’s major trading partners. Recent research has shown that investments into companies aligned with the European Union’s sustainable finance taxonomy generated an "alignment premium" in returns for those companies.

Next Steps in the Development Process
The first order of business will be the selection of the new Taxonomy Council, which will be led by a temporary Appointment Committee composed of highly-regarded finance, climate, and governance experts. The Council members are expected to be appointed and announced early in the new year. Over the next two years, the Council will work to formalize green and transition investment guidelines for six priority Canadian sectors, which will be science-based, technology-neutral, and include criteria that screen-out investments that could cause significant harm. The guidelines will be developed in collaboration with government, industry, and other key stakeholders to determine the initial priority sectors, based on consideration of where taxonomy guidance has the greatest potential to deliver emissions reductions and promote low-carbon competitiveness in the Canadian economy.

Quotes from Key Stakeholders
According to Barb Zvan, Chair of the Financial Advisory Committee, Business Future Pathways, "Canada is one of the best places in the world to put green and transition capital to work. These guidelines will help direct that investment toward the opportunities that will shape our shared future." Jonathan Arnold, Director of Sustainable Finance, Canadian Climate Institute, added, "The new sustainable investment guidelines will give Canada what investors have been asking for: a clear, credible, science-based system for identifying which activities in the economy are aligned with the country’s climate and competitiveness goals." These quotes highlight the importance of developing made-in-Canada sustainable investment guidelines and the potential benefits they can bring to the country’s economy and environment.

About the Canadian Climate Institute and Business Future Pathways
The Canadian Climate Institute is Canada’s leading climate change policy research organization, producing rigorous analysis, economic modelling, and in-depth research on policy solutions to help Canada adapt to the effects of climate change, and compete and prosper in the global energy transition. Business Future Pathways is a pragmatic, science-based, and non-partisan initiative focused on improving clarity and alignment on climate-readiness expectations between investors and companies. The ultimate goal is to increase Canada’s climate competitiveness by equipping Canadian companies with the guidance and guidelines necessary to meet investor and market expectations as the world transitions to net-zero emissions. By working together, these organizations will play a crucial role in developing Canada’s sustainable finance taxonomy and supporting the country’s transition to a low-carbon economy.