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.

• Other (please specify)

1b. Specify priority

All objectives are important and several are mutually reinforcing and interconnected. Protection of biodiversity and healthy ecosystems, including water is important to climate mitigation, adaptation and resilience. As climate change accelerates additional objectives may need to be added, such as support for agriculture, flood/fire protection, and remedial work to reverse damages from climate events.

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

The taxonomy should be fit for purpose for the Canadian economy-i.e. the scope of activities to be included is as important as the underlying principles. It is instructive to consider the SASB standards underlying principles- focused on the core principles of relevance, financial materiality, and decision-usefulness. The concept of relevance is embedded in consideration of the specificities of the Canadian economy, inclusive of Canada’s natural resources-based economy and consideration of indigenous peoples.
Also of note are the EU taxonomy principles which include substantial contribution to various environmental goals while complying with minimum safeguards for human rights and labour laws (e.g., OECD and UN guidelines), as well as technical screening criteria. These considerations feature elsewhere in the proposed Canadian 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

Important

Regionally Specific

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?

Neutral

4b. Please explain your answer in the space below

Ceres recommends caution in proposing a partial alignment approach for compliance with DNSH and MSS criteria, so that entities are not excused from alignment but instead are met with the expectation that they work towards closing the gap and build capacity to do so.

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

Broadly agree with the proposed scope for DNSH criteria (adaptation, biodiversity, water, pollution and circular economy) and MSS criteria (indigenous rights, human rights, labour standards, corruption and bribery controls and taxation integrity.)

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?

Neutral

6b. Please explain your answer in the space below

Ceres supports upholding the existing legal framework in Canada as it pertains to DNSH and MSS. However, this topic may require further research to determine whether and where existing laws and standards are insufficient to meet the criteria of the DNSH/MSS framework.

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

This topic requires further research to determine whether and where existing laws and standards are insufficient to meet the criteria of the DNSH/MSS framework.

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

Broadly agree that larger projects or entities should be held to a higher disclosure standard than smaller projects or entities.

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

This topic requires further research to determine where existing laws and standards are insufficient to meet the criteria of the DNSH/MSS framework.

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?

It may be sufficient to state that the taxonomy supports the principles of UNDRIP, and social and human rights considerations as espoused and delineated by OECD, ILO, the UN and international law.

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

Not at this time

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

Strongly agree

12b. Please explain your answer in the space below

Ceres agrees that the green category should be limited to activities with zero to near zero emissions that contribute to climate change mitigation. However, green is a vague concept that must be defined, and an evaluation of ‘substantial contribution’ is open to interpretation. The ultimate goal of the taxonomy framework should be for the financial sector to align capital allocation with a Paris aligned net zero by 2050 warming pathway.
A sector specific approach may be useful to convey investor expectations that the activity/entity follow a best-in-class approach. For example, a solar farm can contribute to decreased emissions and avoided emissions yet there are still scope 3 emissions in the supply chain, and end of life and circularity considerations the entity should be accountable for.

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

Agree

13b. Please explain your answer in the space below

Ceres agrees that the transition category should include high emitters that have the potential to decarbonize in alignment with NZ 2050, which are likely to have stable or growing demand scenarios.
However, the taxonomy should take precautions to review its criteria and demand outlooks regularly. It is quite possible that fit for purpose, lower carbon substitutes will be found for cement, steel or metals/chemicals manufacturing, reducing demand projections for the high carbon version.

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?

Neutral

14b. Please explain your answer in the space below

The delineation of two pathways for investment under the transition category seems credible in allowing for inclusion of decarbonizing activities that are, and that are not yet aligned with a NZ by 2050/1.5 degrees pathway, while encouraging transition of business activity to a lower carbon version.
However, the distinction between the ‘whole of activity and the ‘measures pathways’ is confusing and requires further clarification.
In addition, we would encourage the creation of a new and separate methane abatement subcategory. In the current draft, methane is grouped with more complex measures such as CCS, despite having a different cost, permanence, measurement and lock-in profile.
Several illustrative guardrails on pages 39–41 are potentially too broad for methane. These include requiring:
• decommissioning of the asset within a specified period;
• accompanying investment in low-carbon alternatives; and
• an entity-level transition plan.

These may be appropriate for some large, long-lived investments, but applying all of them to every methane retrofit could exclude projects with the greatest near-term benefit, particularly projects undertaken by smaller or poorer-performing operators.
A more proportionate framework would distinguish between project-level and issuer-level safeguards.
A distinct methane subcategory would allow a presumption of low lock-in risk for specified measures, subject to project-level tests. This would improve usability without suggesting that the underlying oil or gas activity is aligned.

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

Agree (i.e., agree in principle, with conditions)

15b. Please explain your answer in the space below

Ceres finds that an abatement measures category is somewhat supportable, to attract funding of decarbonization measures for activities that are carbon intensive and unable to sufficiently reduce their emissions to align with the Paris agreement, and likely to experience declining demand as the world transitions to cleaner energy.
The proposed abatement measures category would attempt to reduce carbon lock in for certain business activities such as production, transportation and refining of oil and of liquified natural gas (LNG.)
According to some projections, global demand for LNG will rise substantially in the short to medium term time frame, and perhaps through to 2040 or beyond, owing to burgeoning electricity demand, including data center growth as well as demand in Asian markets. Natural gas is also considered a critical input into glass manufacturing, while petroleum is a primary raw material used in plastics production, alongside natural gas. Yet to align with NZ 2050 scenarios it will be important to reduce and abate emissions from both oil and gas.
We support the inclusion of the ICMA’s Climate Transition Bond Principles, and the Methane Finance Working Group’s Guidance for Including Methane Abatement in Oil and Gas Structuring.

16. Should any additional guardrails be considered?

Inclusion of a whole of activity such as operation of a cement plant along with a specific project addressing a transition measures pathway will build the entity’s capacity to decarbonize and potentially align with a net zero pathway in the future. It makes sense that eligibility for the transition category is time bound, with sunset and sunrise measures baked in as the entity moves through different phases of transition.
It is not clear how a stipulation requiring asset owners to implement accompanying investments in low-carbon alternatives would be received by asset owners, although it appears to make sense from a diversification viewpoint.
Ceres’ supports and emphasize the importance of issuers adopting and implementing a climate transition plan. Credible transition plans require the entity to adopt milestones, interim targets and defined pathways for capital deployment, linking board oversight, manager selection and remuneration to measurable progress.

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

Agree

18b. Please explain your answer in the space below

Broadly agree, we suggest adding academic /scientific review and communication with industry associations to determine what is feasible over various time frames.

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

Very important

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

Very 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?

The technical screening criteria should be focused on material, comparable, decision useful, verifiable and relevant performance measures such as GHG emissions reduced year over year and efficiency measures such as energy or water consumption per unit of production for a given industry and region.

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?

Considering that an entity has most control over its scope 1 emissions Ceres broadly agrees that this should be the primary focus; however, entities should be expected to calculate their scope 2 emissions and to address ways to reduce these, while also using estimation methodology to calculate their scope 3 emissions and determine how to influence these.
Alignment with leading global taxonomies will be important for global issuers and investors.
Review periods – should suggest time frame such as every 2-4 years
Suggest quantitative criteria

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

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?

With respect to this statement regarding scope, “To support the usability of the taxonomy, entity-level criteria (e.g., net zero targets, climate-related disclosures, transition plans) will not be required for taxonomy alignment. Rather, the taxonomy will strongly encourage users to implement these other important components of sustainable finance and, in particular, to follow forthcoming guidance from Business Future Pathways on climate transition plans,”
Ceres highly recommends that climate related disclosures and transition plans be included as a requirement for taxonomy alignment.