Five-Minute Brief: Q+P's 2025 Outlook

As we look to the year ahead, significant developments are poised to shape the ESG, sustainable finance and climate landscapes. Here are five areas we are monitoring closely with implications for businesses, investors and policymakers in the year ahead.

1. Competition Bureau Releases Guidance on New Greenwashing Legislation

In June 2024, the federal government amended the Competition Act targeting greenwashing, the practice of misrepresenting the extent to which a product, service or organization is environmentally friendly, sustainable or ethical, and/or mischaracterizing associated positive outcomes or impacts. These rules place the onus on businesses to substantiate climate-related statements and adhere to “internationally recognized methodologies” that are adequate and proper for the specific claim and backed by two or more nations.

The Competition Bureau released enforcement guidance at the end of 2024 intending to provide clarity on how companies will need to interpret the provisions and comply. This guidance emphasizes the need for testing or substantiation prior to making environmental claims. For example, net-zero claims must be supported by a credible transition plan with interim targets and meaningful steps to make progress, using recognized methodologies like the GHG Protocol or Science Based Targets initiative (SBTi). This enhanced regulatory oversight is intended to combat deceptive marketing and comes with significant financial penalties for misrepresentations.

Businesses operating in Canada should review their disclosures to ensure all claims are factual and based on evidence-backed goals, realistic plans and concrete actions to make progress. They should also ensure that claims are not only accurate but avoid creating misleading impressions. We will be monitoring how the case law develops and how the Bureau proceeds with its enforcement action.

2. Adoption of the Canadian Sustainability Standards Board’s (CSSB) Final CSDS Standards

In June 2023, the International Sustainability Standards Board (ISSB) issued its first two IFRS Sustainability Disclosure Standards, IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures, which jurisdictions around the world have begun adopting into their legal and regulatory frameworks (read more here).

In Canada, the CSSB has now finalized its Canadian Sustainability Disclosure Standards (CSDSs) 1 and 2. The standards are intended to promote consistent, comparable and detailed disclosures on sustainability and climate-related risks and opportunities to equip providers of capital with material information necessary to allocate capital in informed, effective manners. Aligned with IFRS S1 and S2, the CSDSs contain minor modifications and several transition reliefs owing, according to the CSSB, to the Canadian market’s general readiness for sustainability disclosures.

The CSDSs will not be mandatory until the Canadian Securities Administrators (CSA) incorporates them into a rule. To date, the CSA has indicated that they may adopt or adapt parts of the standards, focusing first on climate-related disclosures. In the interim, they are effective for voluntary annual reporting starting January 1, 2025 (read more here).

Entities should identify, assess and prepare to bridge gaps in organizational practices and existing disclosure. For our part, Q+P helped many proactive clients in 2024 develop their IFRS S1 and S2 gap analyses and conduct materiality assessments to determine which risks and opportunities to include in forthcoming mandatory disclosures.

3. Canada’s Sustainable Finance Taxonomy for Priority Sectors

In October 2024, the Government of Canada announced the development of its sustainable finance taxonomy, which aims to provide Canadian capital markets with clarity about business activities that are aligned with 1.5°C decarbonization pathways and the transition to a net-zero economy. This year, the framework will define which economic activities are “green” or “transition” for three of five priority sectors, including: 1) Electricity, 2) Transportation, 3) Buildings, 4) Agriculture and forestry and 5) Heavy industry.

The taxonomy will establish science-based criteria for qualifying investments in these sectors, including net-zero targets and credible transition plans. This initiative will require collaboration among industry, Indigenous partners, civil society and regulators to ensure it is scientifically robust and aligned with Canada’s climate goals. The taxonomy’s finalization will provide much-needed clarity for investors seeking to align their portfolios with climate objectives and direct capital accordingly. Read more about our perspectives on the taxonomy here.

4. Geopolitical Shifts and International Agreements

Geopolitical shifts continue to punctuate the global market. The forthcoming inauguration of Donald Trump as U.S. President has sparked concerns over potential federal rollbacks of climate policies. However, cities, states and businesses are likely to maintain momentum on climate action, as they did during Mr. Trump’s last presidency. In Europe, political changes in France and Germany add uncertainty to the European Union’s climate leadership, a jurisdiction known for its expansive sustainability and climate commitments and related regulation.

Meanwhile, all Paris Agreement signatories must submit updated Nationally Determined Contributions (NDCs) by February 2025. NDCs are national climate commitments that countries submit every five years to outline their climate actions and establish targets for reducing GHG emissions. The new NDCs are expected to include updated targets for 2030 and new targets for 2035 to reflect the Global Stocktake’s recommendations to align with the Paris Agreement’s 1.5°C goal. Canada recently released their 2035 emissions reduction target of 45-50% from a 2005 baseline, representing a modest, additional 1% per year reduction on average compared to the 2030 target.

COP30 in Belém, Brazil in November will serve as an important forum for advancing these targets and addressing efforts to expand climate financing for developing nations. For Canadian businesses with global operations or supply chains, these international developments could influence trade policies, carbon border adjustments and market expectations. Monitoring these trends will be crucial for anticipating risks and opportunities in a highly interconnected, increasingly polarized world.

5. 2025 Federal Election and Potential Impacts on Climate Policy  

Canadians will go to the polls in 2025, with important implications for sustainability and climate policies. In recent years, the Canadian federal government has introduced several climate-focused measures, including the Greenhouse Gas Pollution Pricing Act, a Clean Technology Investment Tax Credit, vehicle emissions standards, as well as proposed Clean Electricity Regulations and an Oil and Gas Sector Emissions Cap. A new government could reprioritize these efforts or signal a change in direction, and we anticipate 2025 will be punctuated with ample speculation.

Canadian capital markets participants recognize their fiduciary duty to manage material risks and opportunities, including those that are sustainability and climate-related, within evolving, complex governmental, political and economic realities. That said, we know the velocity and orderliness of progress requires strong governmental alignment and supportive policy. Now more than ever, strong leadership is required from both the public and private sectors to support Canadian economic competitiveness in a net-zero future. In its absence, we expect an increase in greenhushing – a deliberate lack of transparency designed to avoid scrutiny – and/or reneging on climate commitments; both losing strategies. We anticipate the global transition to net-zero and the adoption of international standards will leave unprepared organizations competitively isolated, while those who maintain their momentum will reap the rewards of competitive differentiation, both domestically and abroad.

Corporates and investors should actively manage their ESG and climate strategies to ensure they are resilient to shifts in regulations and market dynamics, also known as transition risks. The election outcome could reshape Canada’s approach to climate action and sustainability for years to come.

Ready to Navigate 2025?

At Quinn+Partners, we advise businesses and investors to embrace sustainability and the climate transition, and excel in a changing world. If you are ready to take the next step, please get in touch