Canada Advances Development of Sustainable Investment Guidelines

Canada is taking important steps toward establishing a coherent approach to sustainable finance as the federal government advances the development of national guidelines that will shape how green and transition activities are defined across the economy. This work reflects growing expectations within capital markets for credible and science-driven standards that align investment decisions with Canada’s climate and economic objectives.

In December 2025, the Government of Canada confirmed new steps toward the development of made-in-Canada sustainable investment guidelines. The decision follows Budget 2025 commitments to support the arm’s length creation of a national taxonomy aimed at mobilising public and private capital for the transition to net-zero. The government selected the Canadian Climate Institute to lead the process, in collaboration with Business Future Pathways. Together they will support the establishment of an independent governance structure designed to ensure credible and science-driven criteria for identifying green and transition activities in the Canadian economy.

Governance Framework and Roles

The Canadian Climate Institute will coordinate research and technical work to inform draft criteria while Business Future Pathways will contribute investor-led expertise. Their joint efforts will enable a new independent Taxonomy Council that will review and approve the investment guidelines. The Council and its advisory bodies will include representatives from academia, the financial sector, climate scientists, civil society, and Indigenous communities. Working groups specialising in priority sectors will provide additional technical insights. Current expectations indicate the finalisation of guidelines for three sectors by the end of 2026 with a further three sectors scheduled for completion in 2027.

Significance for Capital Markets

The guidelines will provide a clear framework for identifying activities aligned with Canada’s climate and competitiveness objectives. They will be voluntary, but broadly compatible with major international taxonomies. According to government statements, the taxonomy is expected to offer common standards that support the issuance of green and transition financial instruments and strengthen the credibility of sustainable investment products. More than 60 taxonomies are now in use or in development worldwide and the Canadian initiative aims to secure the country’s position in a rapidly evolving global market for climate-aligned capital. The approach will build on the work of the Sustainable Finance Action Council which has been endorsed by Canada’s largest financial institutions.

Next Steps for Implementation

The first priority will be the appointment of the Taxonomy Council through a temporary committee of experts in finance, climate, and governance. Over the following two years, the Council will formalise science-based and technology-neutral criteria for the six priority sectors, including safeguards to prevent significant harm. Collaboration with industry, government, and other stakeholders will guide the selection of these sectors based on their potential to deliver emissions reductions and support low-carbon competitiveness.

Outlook

Both the federal government and participating organisations underline the importance of developing a credible system capable of directing capital towards projects that advance national climate and economic goals. The emerging taxonomy is intended to help transform emissions-intensive sectors while promoting investment opportunities that reinforce Canada’s role in the global transition to a low-carbon economy.