As net zero goes mainstream, sustainable finance is being increasingly recognized for its critical role in supporting the actions needed to transition towards a low-carbon economy and to preserve, maintain and restore biodiversity. The amount of capital needed by both developed and developing countries to finance climate mitigation and adaptation actions is staggering. Hence the essential role that capital markets and financial institutions are being called to play in this 2.0 industrial revolution. On May 10, 2023 Miller Thomson’s ESG and Carbon Finance Group assembled a panel of experts to discuss the role of sustainable finance in the transition to a net-zero economy. As part of this panel we invited Olivier Girardeau from Québec’s Autorité des marchés financier and Ian Charest from the Caisse de dépôt et placement du Québec to discuss this important issue. Below is a recap of the key takeaways from this panel discussion.

1. The Regulator perspective – The Canadian Securities Administrators (CSA) 2022-2025 Business Plan and its four initiatives dealing with environmental, social and governance (ESG) factors are highlighted below:

  • Finalize climate change disclosure rules based on comments received on proposed National Instrument 51-107 Disclosure of Climate-related Matters and take into consideration international developments happening in the United States with the SEC climate-related disclosure proposal and internationally through the International Sustainability Standard Board (ISSB). To this end, the CSA will engage in further targeted consultations as the framework for climate change related disclosure is finalized.
  • Consider potential next steps to incorporate broader diversity in the CSA disclosure framework, building on the 2014 gender based disclosure requirements and guidance with respect to women on boards and in executive officer positions. On April 13, 2023 the CSA published for comments draft amendments to the current framework for diversity disclosure.
  • Continue to monitor the disclosure in regulatory documents and sales communications of investment funds with investment objectives that reference ESG factors or that market themselves as ESG or sustainable funds and other funds that use ESG strategies and to ensure compliance with the guidance issued by the CSA.
  • Incorporate Indigenous Peoples’ issues and perspectives in CSA policy work to enhance consideration of Indigenous Peoples and communities and work to integrate these considerations in relevant areas of securities regulation and CSA policy work, and improve ways for engaging Indigenous groups.

2. The ISSB

The CSA has done a deep dive analysis into the two International Sustainability Standards Board (ISSB) exposure drafts published for comment last year. The CSA submitted a comment letter to the ISSB on its consultation. In very general terms, the ISSB exposure draft is based on the four pillars of disclosure contained in the framework adopted by the Task Force on Climate-related Financial Disclosure (TCFD) in 2017 as is the proposed NI 51-107. Issuers should note, however, that generally speaking the ISSB exposure draft is more prescriptive and detailed than what was proposed by the CSA as it, notably, includes scope 3 emissions disclosure and scenario analysis requirements.

The CSA also reviewed the feedback from Canadian stakeholders on the exposure drafts and noted a few key points. There were 96 comments from Canadian stakeholders that participated in the ISSB consultation. Canadian commenters generally support the establishment of a global baseline. However, many commentators raised concerns regarding the disclosure of GHG emissions. Many commentators noted that it is important to scale the disclosure requirements to accommodate the needs of companies of various sizes. Since then, the CSA has closely followed ISSB’s work and is looking forward to the publication in final form of its general sustainability and climate disclosure standards in June 2023. From the outset, the CSA has supported the ISSB’s stated objective of developing a comparative global baseline, and the CSA will continue to follow their work while working towards disclosure requirements that support the assessment of sustainability-related risks, reduce market fragmentation and contribute to efficient capital markets while considering the needs and capabilities of issuers of different sizes.


The CSA, in a letter sent in March 2022, supported the creation of the Canadian Sustainability Standards Board (CSSB). The CSSB will enhance Canada’s already well-regarded position in the international standard setting ecosystem while providing a key platform for consultation and engaging local perspectives into the international sustainability disclosure standard setting processes. The CSSB will be to sustainability disclosure what the Canadian Accounting Standards Board and Auditing and Assurance Standards Board are to financial information. The CSA is still considering how best to incorporate sustainability disclosure standards into its public company disclosure regime, but the CSSB will certainly be a strong factor for consideration. Work is well underway to establish the CSSB with the recent appointment of Charles Antoine St-Jean as its first chair. The CSSB aims to be operational by June 2023.

4. SEC Climate related-disclosure proposal

The CSA have done a deep dive analysis of the SEC proposal and analyzed all the feedback received from the 37 Canadian stakeholders who submitted comments. As part of this analysis, the CSA found that Canadian commentators generally focused on the necessity to preserve access to the multi-jurisdictional disclosure system (MJDS) so that eligible Canadian issuers could comply with Canadian climate-related disclosure requirements to access United States capital markets. The MJDS allows Canadian issuers to have access to the United States capital markets with Canadian offering documentation. The goal is for Canadian companies to preserve access to the United States capital markets while complying only with Canadian climate-related disclosure requirements. The CSA is very mindful to preserve the MJDS system given the importance of this highly efficient mechanism to facilitate cross border capital flow.

5. An Issuer’s perspective – From Green Bond Framework to Issuance Date

Given Caisse de dépôt et placement’s (CDPQ) sustainable ambition and goals, it was decided from the onset that it wanted a clear transparent green bond framework that would appeal to green investors and allow for a broadening of its investor base. For the CDPQ, it was crucial to be able to fund its large portfolio of green assets with the proceeds of its green bond offerings. Although it was considered, a sustainable bond framework was not chosen by the CDPQ because it was believed to be less aligned with CDPQ’s objectives of optimizing returns for its clients, primarily pension and insurance funds in Québec’s public and quasi-public sectors.

With respect to implementation of the green bond programme, the first step involved the retention of an expert advisory bank that helped in the initial design of the framework. In the second step, the CDPQ engaged an independent provider of second party opinions to attest that the adopted green bond framework was credible, impactful, and aligned with best principles, including, the International Capital Market Association’s (ICMA) green bond principles. Additionally, the establishment of the green bond program required the input of several other external parties such as external counsel and external auditors. Internally, several teams, including sustainable investment teams, accounting, legal and public relations, were involved in the process. Mobilizing internal resources and staff behind this project was easy in part because the objectives of the green bond program were in line with the CDPQ’s environmental goals. The whole process took a few months to implement and was completed in April 2021. The CDPQ is very pleased with its green bond program with two issuances having been completed since its launch in 2021 for an aggregate of CAD2.5 billion.

6. Adding Sustainability Linked Bonds (SLBs) to the Sustainable Asset Mix?

Investing in transition projects is important for the CDPQ. It allows it to maximize its contribution to decarbonizing the real economy. Investing in transition projects is also consistent with CDPQ’s motto which is: “deploying constructive capital.”

In that context, SLBs linked to specific transition projects could be a useful way to channel capital. However, before considering such a path and setting up a transition bond framework, the CDPQ needs to have more transition projects in its investment portfolio that meet its investment criteria. Also, the CDPQ is monitoring the SLB market and will want to see more benchmark issuances and standardization on the SLB-Transition bond market before exploring this new avenue. Finally, as an investor, the CDPQ will want to see more stringent regulatory requirements with respect to the governance/measures used to determine the sustainable performance targets and key performance indicators used to evaluate SLBs. In conclusion, the CDPQ might be interested in participating in the SLB market, but before venturing on this path it will want to make sure that it is clear for all investors that the CDPQ is aligned with the best practice on that market.

7. Practical consideration – The importance of aligning your framework to Taxonomy

In its March 2023 Taxonomy Raodmap Report, the Sustainable Finance Action Council (SFAC) stated: “Taxonomy can provide a standardized approach for benchmarking economic activities that are consistent with domestic and global climate goals.

Basically, what that means is that there is a process of classification of the green or transition economic activities and their level of carbon emission. A taxonomy allows a science-based evidence approach to quantifying and measuring the impact of green projects being financed by green bonds. In Canada, the adoption of a taxonomy is the next big step that will increase transparency and clarity in sustainability financing. Much like the actual pricing of carbon is crucial to the carbon reduction plan towards the net zero goal, taxonomy is crucial to be able to assess the actual impact of an issuer’s use of the green bond proceeds.

The biggest challenge we are seeing is that various countries are developing their own taxonomies (according to the SFAC Taxonomy Roadmap Report, 16 jurisdictions currently have in place a taxonomy with the European Union taxonomy acting as the gold standard). It is important that these taxonomies align, so that there is clarity and certainty in the capital market, otherwise issuers and fund managers might be exposed to various risks and liabilities in various jurisdictions which would ultimately impede the growth of sustainable finance.

As mentioned, Canada, through the work of SFAC, is working on its own taxonomy. In its March 2023, the SFAC announced that we should have a draft Canadian-made taxonomy by Fall 2023. The first phase of Canadian-made taxonomy development has been on defining green activities; the second phase, which is underway, is to broaden taxonomies to define transition activities in the context of higher-emitting sectors. This second phase is more challenging, and of particular strategic interest to Canada, given the importance of resource and industrial sectors to Canada’s economy. Finally, criteria should be set to require taxonomy users to screen out green and transition activities being considered for investment if they do significant harm to other ESG objectives, such as Indigenous reconciliation.

8. Discussion of green and sustainable loan instruments and markets

A green loan is a loan consummated on a private basis and the principal amounts involved are typically smaller than the issuance sizes of green bonds. Green loans are for green projects. They are commonly referred to as use of proceeds loans. The market for green loans is a relatively nascent but emerging space. The green loan market encompasses about 10% of the green finance space. What is important to note is that global financial institutions including Canadian banks increasingly have a dedicated portfolio of credit for green projects and green loans. Becoming a green enabled borrower is important. What constitutes a green project for purposes of accessing green loan capital is a fairly expansive concept, but the important point is that if you are supporting a green project, you might be getting funds that are otherwise not available to other borrowers. Since capital is scarce for many businesses, being able to appeal to a new pool of dedicated financing is critical.

With the eminent adoption of the ISSB general sustainability and climate disclosure standards, financial institutions will have tools to quantify and calculate the green nature of a project with increasing certainty. This will enable lenders to evaluate more easily what constitutes sustainable activities and in turn better reward green borrowers with lower interest rates to reflect the lesser climate financial-related risks associated with such loans.

A social loan is similar to green loans but it aims at financing a social objective rather than finance a green project. To access a social loan, the borrower in question will need to identify social-driven project that require funding. Social loans typically support marginalized, under supported, or diverse communities and include projects aimed at promoting equality, diversity and inclusion (EDI) among other social causes. There are guiding principles for social loans that are similar to green loans. Increasingly social finance entrepreneurs are findings ways to reach communities that normally do not get the money they need. The First Nations communities are an example. For those of you reading this piece, if you have money to spend and are looking for ways to profitably deploy such funds, there are attractive and profitable ways to make loans to those who might readily access needed capital. A social loan captures that segment of the population that might not be able to access loans under normal circumstances.

Finally, a sustainability-linked loan is designed to incentivize the borrower to reach predetermined and ambitious sustainability-based objectives called sustainability performance targets (SPT), the achievement of which to be measured using certain key performance indicators (KPI) (for example, greenhouse gas emissions). The objective of sustainability-linked loans is to allow the borrower to achieve certain sustainability objectives in its organization and thus facilitate a transition to a more sustainable business strategy. Unlike green loans and social loans, sustainability-linked loans can be used for general corporate purposes; they are not use of proceeds loans like green or social loans.

This newsletter is a summary of a panel discussion on Sustainable Finance organized by Miller Thomson’s ESG Carbon Finance Group. Moderator Bruno Caron, Co-chair of the ESG and Carbon Finance Group fostered an engaging dialogue among the following four panelists, Olivier Girardeau, Director of Sustainable Finance and Supervision at Autorité marchés financiers, Ian Charest, Senior Director, Treasury at Caisse de dépôt et placement du Québec, Miller Thomson’s Bernard Blouin, partner in the Capital Markets Group and Jason Kroft, Co-chair of the ESG and Carbon Finance Group.

To view the recording, please click here.