Taxonomy Foundations
Please feel free to answer only the questions that are of the most interest and relevance to you.
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
- Protection of biodiversity and healthy ecosystems
It is proposed that the design and implementation of the Canadian taxonomy be informed by the following six principles: Credible; usable; interoperable; dynamic; regionally specific; and prioritized.
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
We agree with the proposed principles, placing particular emphasis on a taxonomy which is credible and builds trust in the sustainable finance space; is usable by organizations of various sizes; and is harmonized with existing international standards so Canadian assets can attract international investment.
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
Do No Significant Harm and Minimum Social Safeguards
Please feel free to answer only the questions that are of the most interest and relevance to you.
The proposed taxonomy framework for Canada includes a set of Do No Significant Harm (DNSH) criteria and Minimum Social Safeguards (MSS), which will be designed to ensure that climate mitigation objectives do not adversely impact other environmental and social values, or legal rights. It is proposed that issuers must disclose the extent to which they meet specific criteria for both DNSH and MSS in order to claim taxonomy alignment.
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
We agree with the partial alignment approach but would make a few additional suggestions to ensure the values of DNSH/MSS are not undermined.
1) Minimum Standard: While a partial alignment approach encourages adoption of the taxonomy, we feel that a minimum standard (i.e., governance, legal, ethical standards) should be met in order for an investment to qualify as taxonomy aligned.
2) Phase-in / Grace period: The goal should be for companies to be fully aligned over time. A phase-in or grace period approach would give companies time to address deficiencies and develop a pathway to full alignment.
5a. Do you agree or disagree with the proposed scope of objectives to be covered under the DNSH and MSS frameworks?
Strongly agree
5b. Please explain your answer in the space below
Agree with these objectives, particularly with the inclusion of Indigenous rights under MSS. The taxonomy should also ensure to clearly define each objective and what the minimum standard looks like to ensure consistent application.
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
As a voluntary framework, the Taxonomy should be grounded in existing Canadian law, while recognizing that in some instances international best practices are evolving faster than domestic regulatory frameworks.
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
The same DNSH and MSS requirements should apply to all projects and entities. Smaller projects should not receive a lower environmental or social standard, though smaller entities may require longer timelines and additional guidance in demonstrating compliance.
9. Are there any gaps in the proposed DNSH/MSS framework that could result in unintended environmental or social harms?
We would defer to scientific experts and community insight on this.
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 peoples should be engaged on developing, governing and operationalizing the principles of UNDRIP and FPIC within the MSS Framework.
Section 3: Activity Classification Framework
Please feel free to answer only the questions that are of the most interest and relevance to you.
The activity classification framework proposes that the green category should be limited to activities with zero or near-zero emissions that make a substantial contribution to climate change mitigation or to activities that directly enable zero to near-zero emissions climate solutions (e.g., electric vehicle manufacturing facilities)
12a. Do you agree or disagree with this approach?
Strongly agree
12b. Please explain your answer in the space below
The "green" category is consistent with a Paris-aligned scenario which ensures credibility and has a high degree of interoperability with other taxonomies.
The framework proposes that the transition category should include activities that have materially high emissions today but have the potential to decarbonize sufficiently to align with the green definition (i.e., zero to near-zero emissions) by 2050. These activities are likely to experience stable or growing demand in Paris-aligned representative pathways due to a lack of technically feasible low-carbon substitutes (e.g., major decarbonization investments in steel, cement, and chemicals manufacturing).
13a. Do you agree or disagree with this approach?
Strongly agree
13b. Please explain your answer in the space below
We agree with the transition category and its objective of enabling the transition of high-emitting sectors in line with the Paris pathways. We also support the requirement that these activities must have the potential to decarbonize sufficiently to align with the green definition (i.e., zero to near-zero emissions) by mid-century.
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?
Disagree
14b. Please explain your answer in the space below
The proposed transition category is good, but the guardrails are not yet sufficient.
– Key terms need to be defined; quantitively where applicable (carbon lock-in, materially reduce, technically feasible substitute, and dead-end pathway)
– The “whole of activity” transition label should be tied to the entity, not just the activity. Entities should be required to publish a climate transition plan when they use this label for financing climate-aligned activities.
– The entity-level requirement should be phased-in to balance both usability and credibility of the taxonomy.
The report proposes that initial research on the abatement measures category should be conducted in 2027 and include select emissions-reduction measures for activities that have high Scope 1 emissions today and are unable to achieve the life cycle emissions reductions necessary to align with Paris-aligned pathways (e.g. major decarbonization investments in the upstream production, refining, and distribution of oil and gas). These are activities that are highly likely to experience declining demand as the world transitions to clean energy and alternative technologies.
15a. Do you agree or disagree that the taxonomy should include a third “abatement” category, as proposed, that covers demand-decline activities?
Strongly disagree (i.e., disagree on fundamentals)
15b. Please explain your answer in the space below
We strongly disagree with the abatement category.
1) It could give a sustainable-finance designation to activities that do not align with science-based, Paris-aligned pathways. While these industries should be required to reduce emissions, meeting policy requirement should not be enough to qualify a project as sustainable under the voluntary taxonomy.
2) With this category, we are concerned about the potential re-direction of capital from long-term solutions to short-terms solutions as “sustainable finance activities”. The taxonomy is intended to support investment in Paris-aligned assets and projects, which these sectors are not.
3) Investment in this category under the climate aligned label could have the unintended consequence of extending the lifespan of assets which are incompatible with the net-zero economy (i.e., Carbon lock-in)
The report proposes an illustrative list of guardrails for the abatement measures category that, if formally developed and finalized, would be designed to prevent carbon lock-in and ensure the abatement measures category remains credible within a Paris-aligned framework. When thinking about the taxonomy’s credibility and usability, please provide feedback on this illustrative list of guardrails.
16. Should any additional guardrails be considered?
If the category is kept, it needs to have strict company-level guardrails, as well as a sunset on the abatement category to ensure these assets are eventually decommissioned.
17. Is there any other feedback you would like to provide on the proposed activity classification framework?
It is good that there is clear distinction between green, transition and abatement categories, rather than including abatement under the transition category. This ensures clarity and alignment of key categories with the Paris-aligned scenarios.
Section 4: Technical Screening Criteria
Please feel free to answer only the questions that are of the most interest and relevance to you.
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
Proposal ensures usability, interoperability and allows investors to integrate forward-looking information into their investment processes.
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
- Very important
- Revise as necessary during regular review periods
- Very 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
- Important
- Informed by a range of robust methods
- Important
20. When thinking about the taxonomy’s credibility and usability, how technologically specific or prescriptive should the technical screening criteria be?
Including a transition measures list which clearly defines technologies and assets that contribute to emissions reduction can help provide a practical entry point for implementation. However, the overall technical screening criteria should be technology neutral as different approaches can deliver the same outcome in terms of GHG reductions.
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
Final questions
22. Overall, how satisfied are you with the proposed sustainable finance taxonomy framework?
Neutral
23. Is there any other feedback you would like to provide on the methodology report as a whole that has not already been covered?
We appreciate the commitment to a transparent public consultation and engagement process in developing the Canadian taxonomy. Below is a summary of our final thoughts:
• The taxonomy should provide decision-useful metrics for capital markets, including 1) assessments of revenues, capital expenditure and use-of-proceeds, and 2) shift from narratives to quantitative measures
• Encourage Indigenous engagement to operationalize UNDRIP and FPIC under MSS
• Encourage industry engagement to ensure technical screening criteria are practical and economically feasible
• Further clarity, including defining key terms and what they mean under the Canadian taxonomy, should be included in the next version