Prioritization is a crucial step in developing a sustainable finance taxonomy. It involves identifying priority sectors and specific economic activities that contribute to sustainability objectives—such as climate change mitigation—that demand urgent attention. While creating a comprehensive, science-based taxonomy is resource-intensive, a prioritization process can help fast-track its development without compromising scientific integrity. This approach ensures a rigorous yet efficient path forward by focusing on a limited number of high-priority sectors and activities.
This report summarizes the findings of a survey conducted by the Smart Prosperity Institute, aimed at supporting the work of the Sustainable Finance Action Council’s (SFAC) Taxonomy Technical Expert Group. The survey had two main objectives:
1) Gather feedback on a draft Prioritization Framework that could guide the identification of priority sectors and activities for a Canadian taxonomy.
2) Collect insights from financial institutions on specific sectors and activities that could inform the prioritization process.
The survey was distributed to 28 financial institutions, including all SFAC member organizations. In total, we received 37 responses from 26 organizations, representing deposit-taking institutions, pension funds, and insurance companies with mandates for client lending and investment portfolio management.
Key Findings:
- Green & transition investment opportunities. Most respondents viewed all industrial sectors included in the survey as having moderate to high green and transition investment opportunities. The utilities, and construction & real estate sectors were identified as the sectors with the highest investment opportunities, with 70% and 68% of respondents respectively rating the opportunities of these sectors as high.
- Capital allocation. While many sectors are perceived as having high investment opportunity, across all industrial sectors, more than 50% of respondents experience moderate or significant challenges allocating capital to green or transition investments. Sectors considered most challenging were mining, quarrying, and oil & gas (74% of respondents) and agriculture, forestry, fishing and hunting (68%).
- Identifying potential green & transition investments. While not all barriers to capital allocation are related to a lack of definitions for green & transition activities, across all industrial sectors included in the survey, more than 50% of respondents find the identification of green & transition activities to be moderately or very challenging. Notably, the mining, quarrying, and oil & gas sectors, as well as the agriculture, forestry, fishing, and hunting sectors, were again the sectors where respondents indicated facing the greatest challenges.
- For prioritization, the survey results identify both potential ‘quick wins’ and challenging sub-sectors worth considering. Within sectors, there are sub-sectors that respondents rated as having high investment opportunities that:
- Are relatively easy to identify green & transition activities within. These sub-sectors are potential ‘quick win’ inclusions in a taxonomy, as they have high investment opportunity, but are also relatively less difficult to define. They represent areas that could be included in an initial version of a taxonomy on a relatively low-effort basis.
- Are challenging to identify green & transition activities within. These sub-sectors may represent particularly interesting and beneficial focus areas, as achieving definitional clarity could at least in part help unlock the green & transition investment opportunities within these sub-sectors.
