The mid-2023 target for publishing a “short-form” taxonomy for Canada will need to be revised despite progress on the project by the Sustainable Finance Action Council (SFAC), the chair of its taxonomy technical expert group has told Responsible Investor.
The body – established by the Canadian government in 2021 to lead the country’s financial sector towards integrating sustainable finance into standard industry practice – is made up of representatives from 25 Canadian financial institutions, including banks, pension funds and insurers. It has three technical expert groups, including one on taxonomy.
Work on Canada’s long-overdue “transition taxonomy” stalled in early 2022.
At the time, the body overseeing it – Canadian standard setter CSA Group – told RI that efforts had been paused owing to “fundamental differences of opinion” between committee members, who included representatives of Canada’s finance and natural resource sectors.
SFAC took over responsibility for the taxonomy work shortly after.
In March, SFAC published a taxonomy roadmap – which it had submitted to the government in autumn 2022 – laying out 10 recommendations addressing the merits, design and implementation of a green and transition finance taxonomy for Canada.
The document also suggested two phases for the development. Phase one would involve SFAC publishing a short-form taxonomy covering priority sectors and activities by mid-2023. It would also lay the groundwork for the implementation of the taxonomy for the long term, including governance, funding and strategic planning.
During a webinar on Wednesday, the taxonomy group’s chair, Barbara Zvan, said the timeline will have to be revisited.
Zvan, who is also president and CEO of the University Pension Plan Ontario, later told RI: “We have continued our efforts provided within the SFAC effort and the view is to have guidance available incrementally so it can be utilised as soon as possible. Given it is already 1 June our mid-2023 target is unlikely and will need to be revisited.”
Despite the delay, Zvan confirmed that SFAC has made progress on the taxonomy project.
The organisation is currently working with the Institute of Sustainable Finance (based out of Queen’s University) and Smart Prosperity Institute (based out of University of Ottawa) on a prioritisation framework.
This will help decide which sectors or industry to tackle first, Zvan said. “The first couple are probably obvious, but after that how do we get agreement around which ones need to be done next and how do we get the voices of the different groups in there?”
She also noted that SFAC has been spending “a lot of time on the phone with different provincial groups and civil society groups” to discuss the taxonomy. “So that when we’re ready to ask them, ‘would you like to be in this thing formally?’, they have all the information they need to say yes.”
In addition, Zvan revealed that SFAC has an ongoing dialogue with the Climate Bonds Initiative (CBI) about creating a global definition of transition, with a view to creating a use-of-proceeds transition bond market.
Sean Kidney, chief executive of CBI, told RI: “SFAC has been pushing hard to ensure a taxonomy is developed that meets Canada’s needs and can be interoperable with global taxonomies. We’ve been supporting them, giving them advice where they ask, and providing information on what the International Platform on Sustainable Finance is doing.”
Zvan confirmed that SFAC is also in discussion with countries with similar economies – such as Australia – that are developing taxonomies. “As part of the development of the proposal, we believe it was important to identify others interested in transition to share learnings, progress, leanings as we progressed.”