Canada is brimming with the potential to meet the aspirations of its citizens. No matter their political affiliations, Canadians overwhelmingly desire a flourishing economy that generates skilled jobs, ensures secure retirements, provides affordable housing and fosters economic opportunities. They seek meaningful reconciliation with Indigenous Peoples, a commitment to preserving nature, and robust protection for their homes and businesses against increasingly severe natural disasters. And most are deeply concerned about the future of our planet.
While opinions may diverge on the best policy approaches, one truth remains: achieving these goals demands substantial financial investment. And while government action is crucial, relying solely on public spending will not suffice.
At the Sustainable Finance Forum this week in Ottawa, we are bridging the gap between the capital providers, the policymakers and the people with innovative ideas to scale investments that address these urgent priorities.
Canada has made significant strides recently, but we have merely scratched the surface of our potential. Other jurisdictions around the world are advancing rapidly by establishing sustainable finance policies to support investment in environmental and social priorities, including Europe, Australia, Asia, and even U.S. states like California, the world’s fifth-biggest economy.
So, can Canada seize this opportunity for the benefit of Canadians? We think so. Here are five transformational strategies we’re exploring during our time in Ottawa.
Adopt a green and transition taxonomy
In October, the federal government announced its plan to develop a green and transition “taxonomy” to provide a clear definition for a green or transition investment, helping eliminate confusion and prevent misleading claims about environmental benefits. Supported by Canada’s 25 largest financial institutions, this initiative is crucial for accelerating capital flows to climate solutions.
An important next step will be for the taxonomy governance structure to be announced and decarbonization strategies established for major industrial sectors identified by the Sustainable Finance Action Council. More than 40 global jurisdictions have taxonomies or will soon, with Australia drawing directly from Canada’s Taxonomy Roadmap Report. And they are already seeing the benefits. The European Union, for example, has had a considerable boost in taxonomy-aligned investments.
Make climate disclosures mandatory
Investors need the full picture to make climate-smart choices. That means companies must come clean about their climate risks and carbon footprints, particularly large, heavy emitters. While some do this voluntarily, quicker progress is needed.
Some Canadian companies will also be subject to reporting based on existing international regulations. But it’s time to make disclosures mandatory in Canada. Without decisive Canadian leadership, our companies will be at a disadvantage trying to navigate international reporting on their own.
Additionally, we expect the forthcoming Canadian Sustainability Standards Board reporting standards to be closely aligned with the International Sustainability Standards Board in terms of rigour, scope and timelines. Canada is a small market competing for global climate capital; we need to level the playing field.
Work with social innovators
Canada’s social innovators are poised to tackle pressing challenges. Deploying repayable capital among social purpose organizations – a core focus of the Social Finance Fund program – is vital in empowering those who are addressing some of our toughest grassroots challenges.
But capital alone is not enough. An ecosystem approach is needed to improve market access, improve data and reduce regulatory barriers. As a first step, ensuring that social purpose organizations are eligible for business support programs and expanding existing programs to incorporate social and environmental objectives will support non-profits and co-operatives in addressing issues like housing and food security.
Strengthen social finance intermediaries and capital supply
Investing in social finance intermediaries like the Canadian Co-operative Investment Fund or Raven Indigenous Capital Partners is critical for building capacity and developing infrastructure. Introducing legislation like the U.S.’s Community Reinvestment Act could create durable support to seed Canadian community-development financial institutions, leveraging Canada’s strengths in credit unions. Additionally, tax incentives for qualified impact investments can increase supply and lower capital costs. The use of the federal balance sheet to de-risk larger impact-bond issuances is an urgent need and obvious opportunity for growth.
Update charities regulations and legislation
Canada’s endowment disbursement quota (DQ) could be modified to incentivize the deployment of endowed capital by philanthropic foundations into impactful ventures. Strengthening guidance for program-related investments will align Canada’s regulatory framework more closely with that of the United States, which allows those investments to offset DQ requirements effectively.
The time to act is now
To achieve these priorities and more, Canada must act decisively. By adopting the right regulations and creating supports such as tools, data and education, we can position ourselves for success. Without these measures, we risk falling behind in a fast-evolving market. The upcoming federal budget is an unmissable opportunity to build a financial system that is resilient, forward-looking and sustainable. This is our moment to step up and join world leaders in sustainable finance.
Maya Saryyeva is interim executive director at the Institute for Sustainable Finance at the Smith School of Business at Queen’s University. Graham Singh is CEO of Relèven and vice-chair of the Table of Impact Investment Practitioners.Michael Toye is executive director of the Canadian Community Economic Development Network. The authors’ organizations are presenting partners of the Sustainable Finance Forum, working in the fields of sustainable finance, social finance and impact investing, respectively.
