A new report is calling on Canada to develop a sustainable finance taxonomy in order for it to reach its carbon emissions targets.
“Many countries have developed, or are in the process of developing, taxonomies as a foundational tool within a broader policy framework to help mobilize and accelerate the deployment of capital to combat climate change,” wrote the Sustainable Finance Action Council in the introduction to its report. “Given the urgency and complexity of the transition to net zero, taxonomies are viewed as a way to help liberate and expeditiously align capital and business activities in a manner consistent with national transition pathways and climate objectives.”
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The report recommended that the taxonomy clarify the definition of scope 1, 2 and 3 emissions, as well as advising that the final version is jointly developed by the federal government and the financial sector with input from provincial governments and Indigenous organizations.
“The taxonomy’s criteria must be rigorous, objective and anchored in climate science to build and maintain international credibility. The criteria must be reviewed and updated regularly and support interoperability with other major science-based taxonomies.”
The report also included plans for the implementation of the taxonomy. If the federal government accepts the recommendations, the SFAC said it intends to release the interim version later in 2023. This would be followed by the selection of a custodian organization to lead the development of the full report.
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“With the custodian in place, including its senior leadership team, the council would then direct it to develop and submit for its approval the complete version of the taxonomy by fall 2025.”
The report suggested that the appointed custodian issue a consultation draft of the full taxonomy in early 2025. Over the course of the year, it would accept feedback to used in the finalized version, which would be unveiled by the end of 2025.
Created by the federal government in 2021, the SFAC is mandated to help lead the Canadian financial sector towards integrating sustainable finance into standard industry practice. Its members include representatives of the Alberta Investment Management Corp, the British Columbia Investment Management Corp., the Caisse de dépôt et placement du Québec, the Healthcare of Ontario Pension Plan, the Ontario Municipal Employees Retirement System, the Ontario Teachers’ Pension Plan, the Public Sector Pension Investment Board and the University Pension Plan.
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