Building Canada’s taxonomy the right way: Insights from a survey of investors

Key findings

1. Investors favour interoperability with taxonomies in jurisdictions such as Australia (82%) and the EU (76%), while also emphasizing that Canada’s taxonomy should reflect domestic realities, including Indigenous rights, energy security and sectoral transition pathways.
2. There is no dominant taxonomy approach in the Canadian market. Respondents reported using a mix of internal taxonomies (48%) and external frameworks (45%), suggesting continued fragmentation in market practice.
3. Respondents support a taxonomy that is practical and credible in its treatment of transition activities. The most supported design features were a transition measures list (82%), sunset dates or phase-down guidance (70%), entity-level transition plans (67%) and forward-looking thresholds (61%).
4. Investors see a Canadian taxonomy primarily as a stewardship tool (91%) and as useful for portfolio allocation and tilting (76%), indicating demand for a framework that can support engagement, comparability and decision-making.
5. The absence of clear federal policy direction was identified as the main barrier to implementation (88%). Respondents also pointed to challenges related to credible transition pathways, data availability and industry resistance.

Key recommendations

• Taxonomy developers may wish to clarify the taxonomy’s intended role and use cases, including how it distinguishes between green and transition activities.
• The findings suggest there may be value in incorporating practical transition design features, including a transition measures list, clear sunset dates or phase-down guidance, and links to credible sector pathways and entity-level transition planning.
• The report suggests that interoperability with major international frameworks could support usability, while still allowing the taxonomy to reflect Canadian circumstances, including Indigenous rights and domestic transition needs.
• Survey responses indicate that consideration could be given to how taxonomy-related metrics might be integrated into disclosure and supervisory frameworks, including through CSA disclosure architecture and OSFI climate risk expectations.
• The findings also suggest there may be value in clearer federal policy signalling on the taxonomy’s role within Canada’s broader sustainable finance framework, including its potential use in sovereign labelled bonds.

This research and report were prepared jointly by the Principles for Responsible Investment and the Institute for Sustainable Finance.