Comparing sustainable finance policies across jurisdictions: to what degree are they cohesive with climate policy?

Julie Segal outlines findings from new research that compares the extent to which Canada, Australia, the European Union and United Kingdom apply sustainable finance policies in tandem with their overall climate commitments, and how cohesively they do so across their financial systems.

Legislating a climate target to achieve net zero emissions by 2050 is considered best practice – but the degree to which it engages with financial policies differs between jurisdictions. Many countries’ climate plans explicitly reference sustainable finance, including in Canada, Australia, the EU and UK. To investigate the extent to which they do so, we identified the most common and important climate-related financial policies in these jurisdictions and then assessed how many of the core policies each of them has committed to and implemented.

Based on a review of expert groups including the Network for Greening the Financial System (NGFS), the United Nations Principles for Responsible Investment (PRI), the G20’s Sustainable Finance Working Group, and the Intergovernmental Panel on Climate Change (IPPC), we identify eight core sustainable finance policies:

1. A directive or mandate for financial authorities to consider climate issues
2. Corporate environmental/social/governance (ESG) disclosure requirements
3. Corporate transition plan requirements
4. Financial institution ESG disclosure requirements
5. Financial institution transition plan requirements
6. Vulnerability assessments and scenario analysis
7. A taxonomy of sustainable projects
8. Greenwashing rules related to claims and labelling

Wide variation in the pace of implementation

While all of the studied jurisdictions include some of these climate-related financial policies within their initial climate plans, the pace of implementation differs significantly. Interestingly, the degree to which a jurisdiction has explicitly identified sustainable finance policies as part of its net zero plan does not seem to correlate with the number of policies it delivers. Often, both the number and type of policies differ between plans and implementation.

In the initial plans to deliver on net zero commitments, Canada has committed to four of the eight core climate-related financial policies, Australia to five, the EU to five, and the UK to all eight.

In a pattern that differs from the commitments, Canada stands out as an outlier for implementing materially fewer policies than the others. Canada has implemented fewer than three of the climate-related financial policies, while the UK has implemented five, Australia six, and the EU nearly all eight. Canada is also, in some cases, the only one to have not implemented certain policies. It is unique among the jurisdictions in that it does not mandate full disclosure requirements across the economy, and does not clarify the mandates of supervisors to include climate considerations. Australia, the UK and the EU have all delivered those core policies.

All four of the jurisdictions, including Canada, have had some form of policy for greenwashing or labelling and for scenario analysis at some point.[1] Transition plans have been advanced in the EU, with Australia and the UK making significant progress on this measure too. Taxonomies have been advanced too in the EU and Australia, but the UK has discarded its taxonomy policy and Canada has moved only slowly to implement its version.

Canada lagging behind on ‘cohesion’

In addition to the distinction between commitments and delivery of sustainable finance policy, we also examined the cohesion of climate-related finance policies. By ‘cohesion’, we consider the degree to which policies were implemented strategically, consistently and comprehensively across different parts of the financial system. We find that here, too, Canada lags behind the other jurisdictions, with a less explicit strategy from directly within the government and with greater fragmentation across different parts of the financial system.

The fragmentation can create friction. For example, in Canada there were repercussions for greenwashing even in the absence of mandatory climate disclosure. Many companies decided to erase their voluntary climate disclosures as a result, and the government responded with a proposal to axe the greenwashing rules, which were one of the few policies Canada had implemented at the time of our research. A cohesive foundation of mandatory reporting and climate transition plans could have prevented the companies from reducing their transparency in response to the greenwashing rules.

Australia and the UK show relatively higher cohesion. The UK’s Treasury coordinated updated remit letters for financial authorities to consider climate issues as a batch, with similar expectations across the various entities. The UK’s disclosure regulations are also similar across different parts of the financial system, including for companies, asset managers and pension funds. In Australia, ESG disclosure requirements are consistent across all types of financial institutions and corporations, with the same comprehensive policy applying to nearly all parts of the Australian financial system.

Risks for Canada

This research originated in part with the hypothesis that Canada trails behind its international peers in implementing climate-related financial policies, which is a claim asserted by both domestic politicians and international organisations. Before becoming Canada’s Prime Minister, Mark Carney raised concerns that Canada was “falling short of international standards” on sustainable finance policy. UN PRI has likewise described the country as being a “low-regulation jurisdiction by international standards” on sustainable finance policy. While the research found that the assertion of Canada lagging behind other jurisdictions is empirically true, it found that this was due to implementation gaps rather than stated intentions.

Being slow to take action on climate-related financial policy could create risks for success in achieving climate goals and for the financial system. Canada’s financial regulators have concluded that, in general for climate policy, “delaying climate policy action increases the overall economic impacts and risks to financial stability” and can create “greater risks of financial market dislocation”. Delays in providing climate finance result in higher costs and risks in the future; underinvestment implies “financial stability implications to come”. Implementing climate-related financial sector policy has long been suggested by regulators as creating an “enabling environment”, a tool to overcome the short-termism of the quarterly investment focus and to increase financing for mitigating climate change. Coordinating action and avoiding fragmentation of climate-related financial policies is important to reduce the risks.

Intention does not always drive implementation

We find that stating the intention of linking financial policy to climate plans does not necessarily drive implementation. While Canada, Australia, the EU and UK all include sustainable finance policies as part of their legislated emission reduction plans, implementation of policies differs from initial commitments.

Our findings on the policies implemented by each jurisdiction are summarised in Table 1.

Table 1. Comparison of key sustainable finance policies

Notes: ⁺ In the UK, entities are expected to report in line with guidance on metrics, targets and transition plans from the Task Force on Climate-related Financial Disclosures (TCFD), and to explain whether any transition plan considers the country net zero commitment of the entity’s headquarters. * In Australia, transition plan disclosure is required if an entity has one. ^x While Canada had greenwashing legislation at the time of research, on 4 November  2025 the government proposed to remove the policy.

Even as the jurisdictions update policies, this research demonstrates the initial cohesion and pace of implementation for each of the four studied jurisdictions. They have each acknowledged sustainable finance policy as important. Whether the intention was to prepare the financial system for risks or to encourage investments away from polluting investments, the core identified policies are quite similar – however, the degree of implementation across jurisdictions differs substantially.

The author’s research was published in ‘Canadian Public Policy’ on 12 November 2025.         

The views in this commentary are those of the author and do not necessarily represent those of the Grantham Research Institute or its funders.

[1] At the time of the research, Canada had a policy to protect against greenwashing which had been implemented by expanding traditional deceptive claim protections. However, the 2025 Canadian budget published on 4 November 2025 proposed to abandon the policy.