Sustainable Grids: Powering the Transition

Global electricity demand is entering a new phase of accelerated growth. What the IEA has termed the “Age of Electricity” is being driven by the convergence of electrification, digitalisation, industrial policy, and growing concerns over energy sovereignty and security. Demand growth over the next five years is projected to be around 50% higher than the average growth observed over the previous decade, requiring a step change in the speed at which grids and enabling infrastructure are planned, permitted, financed and deployed. Infrastructure that would typically take a decade to plan, permit, finance and build must now happen in far less time to keep pace with load growth and renewables deployment.

National Bank of Canada’s updated Sustainability Insurance Framework shows how strong, science-based criteria like the Climate Bonds standard can help financial institutions respond to this shift. By expanding its scope to include electricity transmission and distribution, alongside climate adaptation and resilience, NBC acknowledges that modern and resilient grids are fundamental to integrating renewable energy, advancing electrification, and delivering economy-wide decarbonisation across diverse markets such as Canada.

According to the International Energy Agency (IEA), annual global investment in electricity grids remained broadly stagnant at around USD300bn for much of the past decade before rising to approximately USD400bn in 2024. While this marks important progress, grid investment still falls well short of the levels required to support the rapid growth in electricity demand, electrification, and renewable energy deployment. The IEA estimates that annual grid investment needs to increase by around 50%, reaching close to USD600bn per year by 2030. Encouragingly, there are signs of momentum. At COP30, members of the Utilities for Net Zero Alliance (UNEZA) announced upgraded investment plans expected to mobilise more than USD1tn in energy transition spending by 2030, including USD1.24tn in grids and storage for every dollar invested in renewable generation.

Global Taxonomies - An Evolving Landscape

With more than 60 taxonomies in place or under development worldwide, financial institutions are increasingly focusing on taxonomy implementation and interoperability. Transmission and Distribution (T&D) of electricity is now widely recognised as a common activity in global taxonomies. However, regional context remains a key consideration.

The Australian Sustainable Finance Taxonomy, released by the Australian Sustainable Finance Institute (ASFI) in June 2025, includes electricity generation and supply as one of its six core sectors for which net‑zero‑aligned technical screening criteria were developed. By classifying electricity system activities within an eligible sector, the taxonomy ensures that investment in grid infrastructure – such as transmission lines, distribution networks, and related system assets – can be considered aligned with Australia’s transition objectives when they meet the defined climate‑mitigation criteria.

The Hong Kong Taxonomy for Sustainable Finance explicitly includes electricity transmission as an eligible activity within its expanded Phase 2A framework. By incorporating electricity transmission – alongside other energy‑system functions such as district cooling – the taxonomy provides standardised, science‑based criteria that allow these grid‑related activities to qualify for sustainable finance.

Both taxonomies explicitly referenced the Climate Bonds Taxonomy as one of the key benchmarks used to inform their technical criteria to ensure interoperability with global frameworks, including the Common Ground Taxonomy, the EU Taxonomy and the ASEAN Taxonomy.

Climate Bonds Initiative Taxonomies and Criteria Can Support Financial Institutions 

As a new member of the Climate Bonds Initiative Supporter Network, National Bank of Canada (NBC) has drawn on Climate Bonds standards to inform updates to its 2026 Sustainability Issuance Framework across several eligible categories. The eligible use-of-proceeds categories are guided by internationally recognised, science-based climate criteria, incorporating elements of Climate Bonds sector guidance, where appropriate, to help support alignment with climate mitigation and adaptation objectives.

Transmission and Distribution of Electricity was added to NBC’s updated Framework as an eligible use of proceeds under the Low-Carbon Energy category.

Climate Bonds is currently in the process of updating the Electrical Grids and Storage Criteria, with publication expected in September 2026. The revised criteria are intended to go beyond the current framework, which primarily recognises electricity systems that are already substantially decarbonised and therefore follows a largely backward-looking approach based mainly on current system emissions intensity and performance metrics. This approach is still reflected in many existing taxonomy frameworks and climate finance rules, largely inspired by the EU Taxonomy framework.

 The current update Climate Bonds is developing for the grids standard criteria reflects the growing recognition that electrification and power sector decarbonisation are central pillars of the global energy transition, and that grid infrastructure plays a fundamental enabling role in this process. Expanding and modernising transmission and distribution networks, improving system flexibility, and supporting storage deployment are essential to integrate renewable energy and enable the large-scale electrification of transport, buildings, and industry.

 The revised criteria therefore seek to better recognise and enable the investments needed to support the transition of power systems that are not yet fully decarbonised, particularly in regions where grid infrastructure remains one of the main barriers to renewable energy integration and broader system transformation. The underlying rationale is that grid investments made today will be instrumental in enabling deep decarbonisation over the next 10–20 years, even in systems that currently still have relatively high emissions intensity.

In this sense, the revised framework seeks to combine both perspectives: maintaining the importance of current system performance and decarbonisation levels, while also incorporating a forward-looking, transition-oriented approach based on credible future system decarbonisation pathways. While recognising highly decarbonised grids remains important, if grid infrastructure is fundamentally understood as an enabler of the transition, an approach that does not adequately consider future system transformation risks overlooking the strategic role that grids play in achieving long-term decarbonisation objectives.

A key element of the revised approach is that this forward-looking eligibility would only apply within the context of robust, credible, and transparent power sector decarbonisation pathways. In practice, this means that countries, regions, or power systems would need to demonstrate clear transition and decarbonisation plans, including targets, policies, and investment strategies consistent with long-term power sector decarbonisation objectives. The intention is to ensure that grid investments are assessed not in isolation, but as part of an overall credible transition framework capable of delivering substantial emissions reductions over time.

This direction is already reflected in emerging taxonomies such as the Australian Sustainable Finance Taxonomy, where grid investments can be considered eligible when they are aligned with a credible decarbonisation and transition plan for the power system. The revised CBI criteria aim to align with this broader evolution in climate finance frameworks and with the Green Grids Initiative Climate Finance Principles, which emphasise that current climate finance rules, based predominantly on backward-looking criteria, risk excluding more than 60% of grids globally from access to transition finance. 

This approach is especially relevant in Canada, where electricity systems differ significantly by province. Québec’s grid, for example, is largely decarbonised, with more than 90% of electricity generated from hydroelectric power and an emissions intensity of approximately 1.9 g CO₂e/kWh in 2023. Alberta, by contrast, had a grid emissions intensity of 440 g CO₂e/kWh in 2023. However, Alberta accounted for more than 92% of Canada’s renewable energy and energy storage capacity growth that year, reflecting strong momentum in renewable deployment, on both the solar and wind fronts, and on associated grid investment needs.

By considering both current grid emissions intensity and the trajectory of renewable growth, the Climate Bonds criteria enable a practical and context-sensitive approach to assessing eligibility. This is particularly important in large, geographically diverse markets where decarbonisation pathways differ across regions. Additionally, the criteria recognise infrastructure that directly connects renewable energy projects to the grid. 

NBC has also added Climate Change Adaptation & Resilience as a new eligible category, supporting assets that reduce climate change vulnerability or increase the adaptive capacity of assets and communities, in line with the Climate Bonds Resilience Taxonomy (September 2024), and which is particularly material for physical infrastructures, including electricity T&D networks.

Looking Ahead – Current Limitations and the Need for Innovation 

Challenges remain in enabling sustainable finance in transitioning areas and large, geographically diverse countries.

• Canada presents unique realities considering that several northern territories and Indigenous communities are not connected to national power or natural gas grids. Therefore, renewable energy systems must be designed to operate reliably under isolated conditions.
• Canada’s sustainable finance landscape is rapidly evolving, and several recent initiatives – especially those involving Indigenous participation – show how sustainable bonds could become powerful tools to bring large‑scale, long‑term capital to remote and Indigenous communities.

CBI announced that it will be updating its Electrical Grids and Storage criteria in the months ahead. These initiatives could enable a wider variety of activities across the electricity system to qualify under sustainable finance frameworks and unlock capital that support decarbonisation.

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