On October 9, 2024, the federal government announced:

1. An intention to amend the Canada Business Corporations Act (CBCA) to require climate-related financial disclosures for large, federally incorporated private companies; and
2. A plan to deliver Made-in-Canada sustainable investment guidelines (also referred to as the "taxonomy").

This announcement builds on previous commitments made by the federal government in the 2023 Fall Economic Statement and Budget 2024, where it committed to developing a sustainable finance taxonomy to promote credible climate investment.

1. Mandatory climate disclosures

The federal government announced its intention to mandate climate-related financial disclosures for large, federally incorporated private companies and intends to bring amendments to the CBCA that will require these disclosures. The federal government intends to work with provincial and territorial partners to ensure broad disclosure coverage across the Canadian economy and harmonize its regulations with similar regulations imposed on public companies by securities regulators.

To determine the substance of the disclosure requirements and the size of private federal corporations subject to them, the federal government intends to launch a regulatory process involving the Department of Finance, Environment and Climate Change Canada, and Innovation, Science and Economic Development Canada. Similar disclosure requirements are already in place for federal Crown corporations and federally-regulated financial institutions. Small and medium sized businesses will not be subject to the mandatory disclosures.

2. Sustainable investment guidelines

The Made-in-Canada sustainable investment guidelines will be a voluntary tool for investors, lenders and other stakeholders for identifying "green" and "transition" economic activities, and will define each as follows:

• Green: low or zero-emitting activities that do not have material scope 1 and 2 emissions, low or zero downstream scope 3 emissions and sells into or benefits from markets that are expected to grow in the global net-zero transition; and
• Transition: decarbonizing activities that have material scope 1 and 2 emissions, including those with low or zero scope 3 emissions, that do not face immediate demand-side risk (i.e. market contraction) and do not create carbon lock-in and path dependency.

The federal government has outlined priority sectors where it will focus its development of eligibility criteria, including electricity, transportation, buildings, agriculture and forestry, manufacturing, and extractives, including mineral extraction and processing. It also provided a list of potential taxonomy eligible activities in the backgrounder for the taxonomy.

The development of the Canadian taxonomy will be overseen by an external, third-party organization to ensure its credibility and alignment with international standards and taxonomy for two or three priority sectors is anticipated to be released within 12 months of the organization beginning its work.

It is generally understood that the federal government’s plans are based on the Taxonomy Report provided to the government by the Sustainable Finance Action Council.

Follow Dentons Insights to stay up to date on future developments of these initiatives. For more information on this topic, please contact the authors, George Antonopoulos, Vivek Bakshi, Bill Gilliland, Bill Jenkins, Bernard Roth, Hazel Saffery, George Hua or Jack Yuan.