Reflecting on the ‘spring and summer’ of sustainable finance in Canada, to prepare for the seasons ahead

When we think about the trajectory of sustainable finance in Canada, we might compare it to the concluding Canadian summer.

When we think about the trajectory of sustainable finance in Canada, we might compare it to the concluding Canadian summer: It may have taken a bit longer to get here, but we quickly found ourselves racing between many favorite seasonal past-times, with little time to sit back and reflect.

 That’s true when you consider how Canada followed in the footsteps of our European counterparts, who embraced the concept of sustainable finance some years back. Today, sustainable finance transactions are continuing to heat up in the Canadian marketplace, and now is an opportune moment to perform a temperature check of this natural resource- and energy sector-driven nation, and ask how we can sustain the momentum, long after summer has passed.


The spring of sustainable thinking

It’s remarkable to note that not that long ago, sustainable finance was in its infancy in Canadian markets. Mainstream discussion was sparked when Canada’s Expert Panel on Sustainable Finance published their final report, Mobilizing Finance for Sustainable Growth in 2019 – an important step to connect Canada’s climate objectives, economic ambitions, and investment imperatives.[1] 

That said, they were not working from a blank slate. While European governments, businesses and investors led the way almost 15 years ago, the groundwork in Canada was laid by a handful of pioneering, domestic public and private sector entities, including the Ontario and Quebec governments, and a small cadre of ESG-conscious investors. In fact, the Province of Ontario led with its first green bond in 2014, the first of six such transactions in recent years[2]. This has inspired more recent entrants to sustainable finance, including leading corporates in the financial, power, energy, real estate, and telecommunications sectors.  

This increasing activity is noteworthy, in light of the long-held perception that Canadian markets are dominated by natural resource and energy industries, and a conservative financial sector. Interestingly, those sectors have shown an astute awareness of the risks and opportunities posed by global warming and they are genuinely engaged in serious dialogue about transitioning to a lower carbon future and sustainable finance opportunities.  

It’s important to highlight the word ‘opportunities,’ since it represents a noteworthy shift in mindset in a very short time period. Whereas many sustainable finance discussions began from a risk management perspective, now many organizations are embracing sustainability as a strategic and competitive advantage and embedding ESG considerations into their business models. It’s also impressive how diverse industry players appreciate the economic opportunities unfolding at this moment in history, including the ability to help transition our national economy to one that is low-carbon.

Financial institutions themselves, including Scotiabank, are also enthusiastically embracing sustainable finance. While our Bank was among the early underwriters of green financings for Canadian clients, our efforts really ramped up in the past two years. We issued our Climate Commitments in 2019 to mobilize $100 billion by 20253, to reduce the impacts of climate change, both within our organization, and in partnership with our clients, governments, and industry. 

We’ve since built a strong Sustainable Finance Group whose strength lies in the diversity of their expertise and backgrounds with a focus on financing, ESG advisory, product innovation and research, to support our clients in their sustainability integration and low-carbon transition efforts. In tandem, the Bank has intensified its own work to integrate sustainability-based decision-making – and a consciousness of our global impact – across the organization with sustainability expertise in many business lines and corporate functions, including Global Risk Management and our enterprise-wide Social Impact and Sustainability unit.


The summer of sustainability

Today, sustainable finance in Canada is enjoying summer-like conditions. Year-to-date in 2021, sustainable or sustainability-linked bonds and loans have reached $19.8 billion among Canadian public and private issuers, representing 90% growth over the same period in 2020, and dramatic 110% growth over 20194. Breaking down this growth, we see that green bonds represent 60%, whereas sustainability-linked instruments and social bonds are capturing an increasing share of the market at 10% and 4%, respectively4. And, in light of continuously rising interest among our clients, we anticipate steady growth in green bonds and continued diversification of labels.

 This market confidence is fueled by positive signals from legislators both here and abroad, with Europe introducing new sustainable finance regulations and the U.S. rejoining the Paris Agreement. And, our own Federal Government is developing a ‘made-in-Canada’ plan to achieve its Net Zero by 2050 with Bill C-12, most notably with the creation of the Sustainable Finance Action Council this year. 

While these signs suggest a strong future for sustainable finance, there remain hurdles for this still-maturing market. Canada is beginning to follow the progressive actions taken in other jurisdictions to achieve regulatory clarity and standardization of taxonomy and sustainability reporting standards. This will help drive enhanced and consistent disclosure – and likely increase the prevalence of corporate ESG targets. This, in turn, will increase demand for sustainable finance instruments and engage a greater swath of Canada’s economy and investment community. 

 Indeed, expanded reporting and ambitious target setting is essential to help ensure that the current growth in ESG-linked products can itself be sustained. As issuers link their financing costs to their broader ESG goals, investors will expect transparent disclosure of these companies’ progress against their environmental, social, governance and transition targets.  

Despite these issues, based on the widespread ubiquity of ESG-labelled instruments in Europe – where in 2021, roughly 25% of issuances have been in labelled ESG format4 – financings with ESG attributes may become the norm in Canadian markets. Perhaps we will even reach the point where ‘sustainable finance’ is simply called ‘finance.’ And these trends are unlikely to abate, if only because global investor momentum will continue to influence the Canadian landscape.  

Future ready, for the seasons ahead

So much swift change may feel un-nerving for organizations that are just now beginning their sustainability journey. However, the short but intense history of innovation among Canada’s leading issuers, investors, financial institutions, and governments – including their openness to mobilize capital to manage risks and leverage new opportunities – suggests that we can reshape our economies, society and environment, in readiness for the ever-changing seasons ahead. 


4 Source: Bloomberg, Scotiabank. As at September 14, 2021.

 [1] Government of Canada 2019: 

[2] Issued on July 27, 2021

[3] Scotiabank’s Climate Commitments