Stockholm (NordSIP) – While the EU Taxonomy gets the most coverage in the news, it is not the only game in town. On the other side of the pond, Canada has been struggling to find its own way for some time. At least as far back as February 2020, the Canadian Standards Association (CSA) Group, the nation’s organisation responsible for developing standards, started working on the establishment of a so-called “Transition Finance Taxonomy” – Canada’s response to the EU’s own Taxonomy.
However, the process has been marked by controversy, claims of capture by the fossil fuel industry and greenwashing. Now the process has stalled. NordSIP has been able to confirm that the “CSA Group has paused its facilitation activities for the development of a document outlining foundations for a transition finance taxonomy in Canada. CSA Group intends to work with the Sustainable Finance Action Council (SFAC) and government stakeholders in the coming days and weeks to determine next steps,” NordSIP was told by a CSA Group spokesperson.
Fears of Canadian Greenwashing
According to the CSA Group, “National Standards of Canada are developed by a Technical Committee comprised of a balanced matrix of experts across all relevant interest groups. The Committee for the development of this standard includes representatives from Canada’s financial sector (including the major banks, pension fund managers, wealth and asset managers, insurance companies, rating agencies), Canada’s natural resource sectors, government and related industry stakeholders.”
Unfortunately, it appears that these interest groups combine poorly with Canada’s native fossil fuel industry. Investors for Paris Compliance – a sustainable investments engagement specialist – and Corporate Knights – a Toronto-based media, research and financial information products company focused on promoting ESG integration – have both raised concerns about the merits of the CSA Group’s efforts.
“In 2019, Canada’s Expert Panel on Sustainable Finance released its final report, firmly renouncing the clear EU transition finance definition because it would largely shut out Canadian oil and gas producers. It’s not a mystery why. Canada is home to the oil sands, producing some of the highest-cost and highest-carbon oil in the world. This is an industry long facilitated by Canada’s political and financial establishments. Bending the rules to protect this industry is a hard habit to quit,” Adam Scott, director of Shift Action for Pension Wealth and Planet Health, wrote for Corporate Knights in November 2021. Shift Action for Pension Wealth and Planet Health is a Canadian non-profit project that works to protect pensions and the climate by bringing together beneficiaries and their pension funds on the climate crisis.
Matt Price, Director of Corporate Engagement at Investors for Paris Compliance, concurs. Writing in January 2022 about a leaked copy of the CSA Group’s draft Transition Finance Taxonomy, Price noted that “Even a cursory read reveals that, contrary to the EU sustainable finance taxonomy, the CSA version would have permitted all kinds of fossil fuel activity – even in the oil sands – to get a green stamp of approval so long as incremental gains are made in pollution abatement and the recipient company has promised to get to net zero (as all the oil and gas companies are now claiming, so long as you don’t pay attention to Scope 3 emissions or their expansion plans).”
A Better Alternative
However, the Canadian Taxonomy does not have to be doomed to failure. “Adopting a weakened taxonomy could stem financial flows into Canada, as major European investors will lack confidence in Canada’s compliance with international standards. It could also create headaches for internationally invested Canadian financial institutions like pensions. A better approach would be for Canada to hit reset and move to adopting standards aligned with the EU, ensuring that Canada’s valuable progress on sustainable finance isn’t undermined,” Scott says.
Price seems to agree. “So far the Canadian government has shown no signs of taking responsibility, but now that the CSA process has stalled out, and with growing claims of “greenwashing,” it’s a matter of time before we’ll see that change. The credibility of sustainable finance in Canada depends on it,” Price concludes.
