Last week, I attended the two-day Sustainable Finance Forum in Ottawa to hear about Canada’s progress on climate finance. The event saw influential decision-makers, including Prime Minister Trudeau and Deputy Prime Minister Freeland, converge with industry leaders, sector experts and international advocates. The event highlighted examples of how finance can align with climate commitments, which is key for Canada to secure both a stable climate and economy. One thing was clear – conference attendees were ready and waiting for climate-aligned financial regulation, but something is holding up progress.
Conference participants called for two crucial pieces of regulation from the government. First, federally regulated financial institutions must publish mandatory credible climate transition plans. These plans would outline clear steps on how institutions will meet their net-zero targets, including short-term goals.
The second call was for the implementation of a green taxonomy, which is a standardized and enforceable classification system for investments, outlining which ones are actually aligned with our climate targets, making it easier for all investors to avoid greenwashing.
A taxonomy functions similarly to the energy efficiency ratings on electrical appliances like dishwashers, where consumers have reliable information to inform sustainable choices. Combined, these regulations would help align Canada’s financial system with net-zero mandates, and ensure that investments work in the best interest of people and communities across Canada.
Throughout the conference, the message was clear: Canadian industry and global investors are ready for clear government regulation. Indeed, there was an unusual display of cross-party support as a panel to conclude the event, with MPs from Bloc Québécois, the Green Party, the Liberal Party and the NDP voicing unanimous support for transition plan disclosure and a green taxonomy.
The question remains – why have regulations not been introduced, despite overwhelming support?
In May 2021, the Government of Canada established the Sustainable Finance Action Council, mandating it to make recommendations on measures to build sustainable finance in Canada. The Action Council, comprised of industry leaders and technical experts, released a clear set of recommendations on the taxonomy in September 2022, including requirements for clear transition plans and public disclosure of unsustainable assets. Although there remain important criticisms of this framework – for instance the potential inclusion of some fossil fuel investments within the taxonomy – it represents a long-awaited step toward a more climate-aligned financial system. Over a year after the Sustainable Finance Action Council made its initial recommendations to the Minister of Finance and the Minister of Environment and Climate Change, neither minister has yet acted on these recommendations.
Throughout the Forum, panelists expressed a collective sentiment – “we are waiting”. Though everyone stopped short of calling out what they were waiting for, we all knew. The power to make these changes lies firmly with the Deputy Prime Minister and Minister of Finance, Chrystia Freeland, as well as with Prime Minister Trudeau. While they both spoke at the Forum with warm words for climate-aligned finance, they have not yet delivered policy in this domain.
Not only is there an industry consensus and cross-party support, but there’s strong public support for action too. According to recent polling, over 65 per cent of the public support sustainable finance regulation, and 78 per cent support regulations that stop greenwashing. You, our Environmental Defence supporters, have sent almost 10,000 letters to the federal government calling for climate-aligned financial regulation.
The calls for action keep coming. This week, MP Ryan Turnbull shared a letter signed by up to 600 forum attendees to Prime Minister Trudeau and Deputy Prime Minister Freeland. If you haven’t yet sent a letter to these ministers calling for action, you can do so here.
Canada is trailing on the global financial stage, at risk of missing net-zero targets while continuing to fund its own environmental crises. All that is required is for the Prime Minister and the Deputy Prime Minister to respond to the clear requests to act on climate-aligned finance.
The federal government must advance the Sustainable Finance Action Council’s recommendations for a green taxonomy, and advance climate-related disclosure and transition plans across the economy. Canada’s climate goals depend on it.