Sustainable Finance in Canada: Current momentum and future outlook

By Katie Wheatley, Head of Canada, UN-supported Principles for Responsible Investment (PRI)

Sustainable finance in Canada stands at a crossroads. In contrast to some jurisdictions, responsible investing in Canada has largely avoided heavy politicization. Canada’s responsible investing community now faces a unique opportunity: The country can create an enabling environment for investors, build a world-leading regulatory system, and benefit the broader Canadian society and economy in the long term.

As climate change accelerates and social and governance issues like Indigenous reconciliation, decent work, and tax fairness take centre stage, the financial system is taking action: In support of their fiduciary duties and the planet, investors are recognizing that transitioning to a sustainable future through responsible investment is essential.

In Canada, almost 240 institutional investors and service providers are committed signatories to our six Principles for Responsible Investment, which centre upon incorporating environmental, governance, and social factors into investment and ownership decisions. The Principles were developed by investors, for investors. In implementing them, PRI’s global network of 5000+ signatories contribute to developing a more sustainable financial system. These Principles have attracted a signatory base representing a majority of the world’s professionally managed investments, illustrating the weight of this movement.

Canadian investors are acutely aware of the systemic risks posed by climate change—evidenced by recent wildfires, droughts, and flash floods that have caused operational disruptions and physical damage, affecting investment performance. The 2016 Fort McMurray wildfire precipitated $9.5 billion in direct and indirect costs, illustrating the cost of such extreme weather events.

Recognizing this, many investors have been involved in meaningful collaborative dialogue with Canadian companies through initiatives like Climate Engagement Canada, supporting them in bending their emissions curve to maintain competitiveness in the net-zero economy of the future. Canadian investors are also taking explicit action to consider the social dimensions of transition in their stewardship activities. For instance, when Climate Engagement Canada first established its Net Zero Benchmark drawing largely on the Benchmark Framework of Climate Action 100+, it set out additional just transition-related indicators to assess the potential impacts of companies’ decarbonization strategies on Indigenous peoples and workers.

Nationally, Canada has put sustainability firmly on the agenda through ambitious laws and policies like the Canadian Net-Zero Emissions Accountability Act, the 2030 Emissions Reduction Plan, and the Federal Sustainable Development Act. Yet in the realm of sustainable finance, there are still opportunities to lead globally.

In 2023, the PRI released a report that made several policy recommendations to further support responsible investors. It found that Canadian investors would benefit from additional fundamental tools that have supported counterparts elsewhere, including a sustainable finance taxonomy, and comprehensive, globally comparable sustainability-related disclosures by public and private companies.

This October, the PRI will be hosting its annual PRI In Person conference in Toronto. The event, which convenes the global responsible investing ecosystem ranging from investors to policymakers, comes at a pivotal time. Alignment with international frameworks and collaboration with global bodies are essential in addressing urgent, system-level risks like climate change. Canada can lead in sustainable finance by building on the foundations already established and refining them with local expertise.