Leveraging Sustainable Finance Leadership in Canada

The report proposes a three-year plan to transition Canada from voluntary to mandatory climate-related financial disclosure by 2021, aligning with TCFD recommendations. It highlights a market failure where Canadian clean technology firms face significant capital barriers and negative retained earnings, while the oil and gas sector carries substantial undisclosed 'tail risks' relative to global carbon budgets. The author recommends updating federal and provincial laws, such as the Canadian Business Corporations Act, and suggests that Canada align its sustainable finance frameworks with emerging EU taxonomies to diversify trade and attract international capital.

• Climate-related financial disclosure in Canada is currently insufficient and inconsistent with existing regulations, leading to an accumulation of climate risk in capital markets because risks are not fully accounted for in corporate planning or disclosed to investors.
• The report proposes a three-year roadmap (2019-2021) to make TCFD-aligned disclosures mandatory. This includes updating the federal Canadian Business Corporations Act – Part XIV Financial Disclosure and provincial National Instruments 51-102 and 58-101 to provide regulatory certainty for the private sector.
• Canadian clean technology firms suffer from a market failure characterized by negative retained earnings totaling USD 3.6 billion for a cohort of 714 firms. Barriers include volatile commodity prices, low carbon prices, fossil fuel subsidies (USD 3.3 billion in direct fiscal subsidies and USD 3 billion in loans), and a lack of best-available technology benchmarks in regulation.
• There is a significant 'tail risk' for Canadian oil and gas public equity. Under a 1.5°C scenario with a 66% probability (420 GtCO2e budget), the report estimates that 61% of the oil and gas public equity value is at risk, amounting to USD 270 billion.
• Canada should align its financial policies with the European Union's sustainable finance Action Plan and taxonomy to leverage existing trade agreements like CETA and attract European investment, which accounted for 35% of foreign investment into Canada in 2017.
• The report suggests that Canada should lead international efforts to strengthen the global financial system by participating in working groups with other oil-producing countries to translate carbon budgets into financial risk assessments, potentially expanding the concept of 'systemically important' institutions to include specific companies in the oil and gas sector.

APA

Bak, C. (2019). Leveraging Sustainable Finance Leadership in Canada. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/leveraging-sustainable-finance-canada.pdf

Chicago

Bak, Céline. Leveraging Sustainable Finance Leadership in Canada. International Institute for Sustainable Development, 2019. https://www.iisd.org/system/files/publications/leveraging-sustainable-finance-canada.pdf.

Wikipedia

{{cite report |last1=Bak |first1=Céline |title=Leveraging Sustainable Finance Leadership in Canada |publisher=International Institute for Sustainable Development |date=January 2019 |url=https://www.iisd.org/system/files/publications/leveraging-sustainable-finance-canada.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{bak2019leveraging, author = {Bak, Céline}, title = {{Leveraging Sustainable Finance Leadership in Canada}}, institution = {International Institute for Sustainable Development}, year = {2019}, month = jan, url = {https://www.iisd.org/system/files/publications/leveraging-sustainable-finance-canada.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }