Canada legal framework limits sustainable investing

PRI recommends policy changes to facilitate consideration of climate risks

Canadian investors may be interpreting their legal duties in ways that discourage them from considering sustainability impact goals, the Principles for Responsible Investment (PRI) has found.

Canadian investment law permits, and in some circumstances requires, investors to consider pursuing improved sustainability outcomes as a means to achieve financial returns and protect financial value, but narrow interpretations of existing laws and reluctance to change established practices mean Canada’s investors still limit themselves from pursuing sustainability impacts, the PRI said.

The global sustainable investing body has therefore recommended a set of policy changes, including phasing in reporting in line with recommendations by the Task Force on Climate-related Financial Disclosures and with the climate disclosure standard currently being developed by the International Sustainability Standards Board.

“By providing investors with legal clarity and enabling policies, Canada can emerge as a leader when it comes to responsible investing,” said David Atkin, CEO of the PRI.

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The PRI, in partnership with the United Nations Environment Programme Finance Initiative and the Generation Foundation, set out its findings last week in its Canada Legal Framework for Impact policy report, making recommendations initially for pension funds “due to the complexity of the Canadian legal framework” but also applying to all institutional investors.

These include facilitating consideration of climate-related risks and opportunities via legislation and regulatory guidance, introducing sustainable finance tools that enable investing for sustainability, and exploring measures to encourage consideration of retail investors’ views on sustainability issues.

Atkin said: “This report roadmaps immediate policy steps to enable Canadian investors to consider sustainability issues, contribute to positive sustainability impacts, and protect long-term returns from the threat of system-level risks.”


Natasha Turner

Natasha was global editor at ESG Clarity, part of Mark Allen Financial, and a financial journalist for seven years. She has been shortlisted for Story of the Year and Investment Journalist of the Year...