1a. The first phase of taxonomy development will focus on climate mitigation. In subsequent phases of the Canadian taxonomy, which objectives should be prioritized? Please select your top choices.

• Climate change adaptation / resilience
• Water and marine resource conservation
• Other (please specify)

1b. Specify priority

● Extreme weather and climate change are increasingly impacting Canadian communities through property damage, health and other economic impacts. We know these impacts and risks will increase for the next several decades, despite efforts to mitigate greenhouse gas emissions. There is an urgent need to shift from reactive disaster recovery to proactive investments in risk prevention, adaptation, and resilient infrastructure. Addressing these risks requires the mobilization of significant capital, which the taxonomy could help facilitate.
● Over 60 per cent of Canada’s public infrastructure is municipally controlled but has seen federal funding decline, widening the infrastructure gap. Local governments cannot reasonably carry the full financial burden of building resilient communities alone. Private investors can help bridge the gap and ensure all Canadians are protected.
● Climate change and nature impacts are interconnected and the protection of biodiversity, ecosystem health, freshwater and marine resources is critical for withstanding climate impacts and for ongoing economic prosperity for communities. Future phases of taxonomy development should work on clarifying the categories for investment in these areas.
● Pollution prevention and control as well as circular economy are simply critical elements of the above priority areas, without these climates, nature goals cannot be met. Better pollution prevention, circular economy elements can help stabilize regional natural resources and healthy communities, which are foundational elements to strong economies.
● Indigenous sustainable bond principles are an element that we think is important to supporting all of the above goals. For more information on key recommendations related to this work please see article on key recommendations: https://addendacapital.com/en/insights-news/creating-an-indigenous-sustainable-bond-framework-from-vision-to-action; and full article series https://cms.addendacapital.com/Portals/0/IndigenousSustainableBondFramework_Thoughtleadershippaper_FINAL.pdf

2a. Do you agree or disagree with these proposed principles as the foundation for the taxonomy?

Agree

2b. Please share the reason for your answer in the space provided

● Credibility based on alignment with climate science is appropriate as the first and overarching principle for the taxonomy. The other principles are pragmatic and appropriate to ensure the use and longevity of the taxonomy.

3. Please rate each of the principles below on a scale from “very important” to “not at all important.”

Credible

Very important

Usable

Very important

Interoperable

Very important

Dynamic

Very important

Regionally Specific

Not that important

Prioritized

Important

4a. Do you agree or disagree with the proposed partial alignment approach, which would require entities to disclose the extent to which DNSH/MSS criteria are or are not met rather than requiring full alignment with all DNSH/MSS criteria?

Agree

4b. Please explain your answer in the space below

A partial alignment approach would allow for broader applicability that can help phase in best practices and improve disclosures in the market over time.

However, additional considerations to explore and research when developing the DNSH/MSS approach include:
● Clarifying how implementation of UNDRIP is applied to partial alignment. For example, how Indigenous Knowledge is utilized differs across regulations such as the federal Impact Assessment Act and the Canadian Environmental Protection Act. Whether the taxonomy is based on meeting compliance or if it goes beyond compliance will be important.
● If the activity is in partial alignment with the taxonomy, but the entity is not and has been repeatedly out of compliance with Canadian law or sub-national laws, what is the approach?
● Are there certain issues where full alignment is required, and partial alignment is not an option?
● Will a timeline be developed for advancing from partial alignment to full alignment, and how will this progress be determined? Will disclosure of the strategy for demonstrating progress be required, including the planned steps or proposed investments to address the partial alignment? How will the risk of partial alignment becoming permanent be addressed?

5a. Do you agree or disagree with the proposed scope of objectives to be covered under the DNSH and MSS frameworks?

Agree

5b. Please explain your answer in the space below

• Interoperability is highlighted, which is important for efficiency, usability and uptake of the taxonomy. The inclusion of Indigenous rights in the MSS Framework is also fundamental for credibility and will also require additional specifics based on the input of rightsholders.

6a. Do you agree or disagree with the proposed approach to grounding the DNSH/MSS frameworks in Canadian legislation and going beyond existing laws and standards where necessary?

Agree

6b. Please explain your answer in the space below

• This will support evolving best practices and learning from other jurisdictions.

7. In which areas, if any, is it necessary to go beyond existing laws and standards for the DNSH/MSS framework?

• Engagement and input from Indigenous rightsholders should be integrated, covering FPIC, traditional knowledge, and other insights.

8a. Do you agree or disagree that different DNSH/MSS standards should apply to projects or entities of different sizes? E.g. more comprehensive disclosures required for larger projects and/or entities, with more streamlined disclosures for smaller projects and/or entities?

Agree

8b. Please explain your answer in the space below

• Proportionality makes sense when developing disclosure requirements. Consideration of what is needed if another entity acquires a project should also be developed.

9. Are there any gaps in the proposed DNSH/MSS framework that could result in unintended environmental or social harms?

Pollution, chemicals of particular concern to human health and the environment (e.g. PFAS)

10. How should the taxonomy operationalize the principles of the UN Declaration on the Rights of Indigenous Peoples and, in particular, the principle of Free, Prior, and Informed Consent, in the MSS framework?

• Indigenous rightsholders should be engaged to identify and co-design what they consider appropriate best practices and consequences for not meeting the requirements. Keeping in mind the critical elements of FPIC and “nothing about us without us” and not looping in rightsholders at the very last minutes and not providing enough time for thoughtful input.

11. Is there any other feedback you would like to provide on the proposed MSS/DNSH framework?

no

12a. Do you agree or disagree with this approach?

Agree

12b. Please explain your answer in the space below

Aligned with climate science and the Paris Agreement goal of reaching net-zero by 2050 while also reflecting current realities and challenges in voluntary carbon emissions reporting.

Allow for emissions related to technologies, products, services and solutions that enable the transition and other sectors or industries decarbonize.

A pragmatic approach required balancing the science and real-world realities.

13a. Do you agree or disagree with this approach?

Agree

13b. Please explain your answer in the space below

• The Transition category will ensure the credibility of the labelling of projects that need to decarbonize, and this could support increased capital availability and market confidence. It can also spur the launch of transition-labeled bonds and the development of an exciting new category within the green and sustainable bond market in Canada, which can also raise awareness and interest in Canada from the global investment community.

14a. Do you agree or disagree that the proposed guardrails for the transition category (both for the whole-of-activity and measures pathways) are sufficient to protect the science-based credibility of the category and reduce the risk of carbon lock-in, while supporting usability?

Agree

14b. Please explain your answer in the space below

• The parallel development of the Canadian Transition Plan Framework will support this category where whole-of-activity (entity level) taxonomy alignment is used. As companies will have a Canadian framework to use for disclosing how they will meet the taxonomy requirements. The entity-level requirement should also be aligned with the CSSB standards for climate and sustainability disclosure in Canada to support interoperability and credibility.
• For the category of transition measures, there should be a timeline for progress and advancement of emission reductions for the project/measures that demonstrate progress. This could be a slimmer version of a transition plan.

15a. Do you agree or disagree that the taxonomy should include a third “abatement” category, as proposed, that covers demand-decline activities?

Neutral

15b. Please explain your answer in the space below

Having a separate category that allows investors and stakeholders to recognize credible near-term reductions in high-emission-intensive activities that cannot decarbonize over the long term is a useful approach. However, it will also require significant research and analysis to ensure that the guardrails are clear and that disclosures are substantive, so that this category doesn’t undermine the credibility of the Canadian taxonomy. With the limited capacity of the current custodian team and secretariat, we agree that it makes sense to complete the initial six sector taxonomy criteria for green and transition before spending resources on the development of this category. This will allow the learning from these first sectors to inform the later developments. This is especially important as Canada looks to attract investment for industrial sectors that have a decarbonization pathway aligned with net zero by 2050. A final decision to move forward on this could be made at this later date.

16. Should any additional guardrails be considered?

Consideration of adding a requirement for CSSB-aligned disclosure at the entity level.

18a. Do you agree or disagree with the proposed approach for developing technical screening criteria?

Strongly agree

18b. Please explain your answer in the space below

• The proposed approach ensures credibility and interoperability and allows investors to integrate forward-looking information into their investment processes. The success of the US$5 trillion sustainable bond market is built upon technical, science based expert build taxonomies and a rigorous stakeholder and public feedback process developed by the Climate Bonds Initiative. These technical elements were needed for market credibility and growth beyond just high-level principles.

19. Please rate each of the proposed elements for the screening criteria on a scale from “very important” to “not at all important.”

Forward-looking wherever possible

Very important

Include sunset and/or sunrise dates where relevant

Important

Revise as necessary during regular review periods

Important

Primarily use quantitative metrics

Important

Primarily focus on Scope 1 emissions but address Scope 2 and 3 emissions where feasible and/or material

Important

Informed by a range of robust methods

Very important

20. When thinking about the taxonomy’s credibility and usability, how technologically specific or prescriptive should the technical screening criteria be?

See previous comment.

21. Do you agree or disagree with the proposed approach of focusing primarily on Scope 1 emissions, and addressing Scope 2 and 3 emissions where feasible and/or material?

Agree

22. Overall, how satisfied are you with the proposed sustainable finance taxonomy framework?

Very satisfied

23. Is there any other feedback you would like to provide on the methodology report as a whole that has not already been covered?

Addenda Capital and our parent Co-operators was an active member of the Sustainable Finance Action Council, and we are very pleased that the Government of Canada is supporting the development of the Sustainable Finance Taxonomy. We want to express our support and appreciation for the Business Future Pathways process and the professional coordination and analysis from the Canadian Climate Institute and the Canadian Climate and Law Initiative.
A summary of the highlights of our comments regarding the consultation questions is as follows:
• We appreciate the commitment to a transparent public consultation and engagement process, including the posting of input on the Business Future Pathways website, which is in alignment with other international processes.
• We encourage the inclusion of resilience and adaptation as a priority for the next phase of taxonomy development and the systemically interconnected nature-related issues of biodiversity and water (fresh and marine).
• Credibility based on alignment with climate science is appropriate as the first and overarching principle for the taxonomy.
• We support the focus of the first phase of taxonomy work on green and transition for the six sectors, as these are identified as having the greatest impact in decarbonizing Canada’s economy and supporting economic competitiveness.
• Indigenous rightsholders’ engagement and insights should be prioritized for ensuring the credibility and legitimacy of the taxonomy.
• Encourage alignment with CSSB and use of the Canadian Transition Plan Framework to support interoperability.
• Encourage the release of use cases to illustrate how issuers and investors can benefit from uptake of the taxonomy.