December 19, 2025

By Caelan Welch

Yesterday, the Government of Canada announced the next steps to create a made-in-Canada sustainable finance taxonomy.

Sustainable finance taxonomies are informational tools that can help steer capital toward sustainability-aligned investments and help build a climate-resilient, competitive economy. They can also support a range of policy uses to support our broader economic competitiveness, from structuring sustainability-linked bonds for high GHG-emitting sectors to informing corporate transition plans and the investment decisions of Canada’s public financing institutions such as the Canada Infrastructure Bank and the Canada Growth Fund.

Countries with taxonomies and other key pieces of the climate information architecture are better positioned to identify climate risks and opportunities, strengthen market transparency, attract global capital and build economic and trade competitiveness. That’s why nearly 70 regional and national jurisdictions have adopted or are developing a sustainable finance taxonomy. Canada can draw from these international examples.

What is a sustainable finance taxonomy?

A taxonomy is a system of classification used to identify economic activities that contribute to Canada’s sustainability objectives, such as green hydrogen production or solar energy generation. By using a taxonomy (and the criteria it outlines), investors, lenders, companies, policy makers and other stakeholders can more easily identify whether an activity is sustainable or not.

Without such clarity, decisionmakers struggle to distinguish genuine sustainability efforts from greenwashing, and investors lack the confidence to fund the scale of the transition that is needed. For more on what taxonomies are and why they matter, see our explainer on Canada's taxonomy and what it means for “green” and “transition” finance.

Notably, the Canadian approach will include green and transition activity categories, recognizing that decarbonizing Canada's emissions-intensive sectors is just as important as scaling investments in already low-carbon activities. A rigorous, science-based taxonomy could also give Canada the policy framework it needs to encourage private-sector investments that help us match the scale of those being made by our trading partners.

The global landscape

At the Smart Prosperity Institute, our Sustainable Finance team focuses on research to support Canada’s transition to a low-carbon, climate-resilient and competitive economy. As part of our work, we’re tracking taxonomy progress worldwide to understand the varying approaches to development and design that are emerging (e.g., governance models, eligibility approaches, use cases). The interactive global taxonomy map that we’ve released (see above) shows the current state of play across nearly 70 regional and national jurisdictions.

This landscape continues to evolve rapidly. Today, 44 jurisdictions have taxonomies in place, including major trading partners like the E.U. and Japan. An additional 24 jurisdictions have taxonomies underway, drafts publicly available or have indicated that they’re considering developing one. This momentum reflects mounting recognition among policymakers and regulators that taxonomies are foundational tools for mobilizing capital toward low-carbon and broader sustainability goals.

This is a significant change from when I first started tracking taxonomy as part of my thesis. Canada is pursuing a taxonomy as the push for taxonomies rises around the globe. While countries are progressing at their own pace, they’ve learned from early adopters like the E.U. and organizations like the Climate Bonds Initiative. Despite lagging our peers in this space, Canada’s efforts in creating a roadmap through the Sustainable Finance Action Council have informed taxonomy development in other countries.

Looking ahead

We’ll continue to update this map as the landscape evolves, so check back regularly for the latest developments. Planned improvements to the tracker include capturing the sustainability objectives covered by each taxonomy (e.g., climate mitigation, biodiversity, circular economy), their overall scope (e.g., green, transition, social) and release years to more clearly illustrate progress.