Scotiabank Creates Canada’s First Defence Issuance Framework
Scotiabank sets a new framework for financing Canadian defence, infrastructure and strategic technologies.
Scotiabank has published its Canadian Defence Issuance Framework, becoming the first organization in Canada to establish a dedicated framework for labelled defence issuances. The framework allows the Bank to issue Canadian Defence Instruments, including Canadian Defence Bonds, in the future and sets out how proceeds would be used, governed and reported. The publication itself is not a securities issuance.
The framework reflects Canada's growing focus on defence capability, domestic industrial capacity, critical infrastructure and strategic technologies. It is informed by Canada's Defence Industrial Strategy, Our North, Strong and Free, NATO commitments and broader efforts to strengthen security, resilience and sovereign capabilities.
What the Framework Covers
Use of Proceeds: Proceeds from future Defence Instruments would be used exclusively to finance or refinance eligible loans originated by Scotiabank or certain subsidiaries. Eligible financing can include general purpose loans to qualifying defence and security companies and dedicated purpose loans such as project, export and trade finance. For general purpose lending, the eligible amount is based on the share of the company's activities linked to defence. Where defence represents at least 50 per cent of revenue, capital expenditure, operating cash flow or another reasonable measure, the full financing may qualify.
Eligible Entities: Eligible entities can include public institutions and public or private companies of any size, provided they are headquartered in Canada or listed on a Canadian stock exchange. They must also demonstrate meaningful participation in the Canadian defence and security sector through recognized industry associations, government procurement or defence programmes, or involvement in eligible defence activities.
Eligible Activities: The framework covers both core defence and supporting infrastructure.
Core defence includes aerospace, naval and maritime systems, land systems, ammunition and weapons, cyber and electronic systems, and space and satellite capabilities.
Defence and security related activities include critical infrastructure, Arctic and remote infrastructure, telecommunications, critical minerals, rare earth materials, logistics, engineering services, secure cloud and data infrastructure, artificial intelligence, quantum technology, advanced semiconductors, emergency management and civil protection.
Dual use technologies can also qualify where they directly support defence, security or resilience objectives.
Exclusions and Risk Controls: The framework excludes illegal activities and counterparties involved in weapons prohibited under international conventions ratified by Canada, including cluster munitions, antipersonnel mines, biological weapons and chemical weapons. Activities directly related to nuclear weapons and their dedicated delivery systems are not contemplated for inclusion in the Defence Asset Portfolio. Other activities with higher legal, sanctions, human rights, financial crime or reputational risks may be subject to enhanced review and escalation.
Governance and Allocation: Scotiabank will assess each financing against the framework's eligibility criteria, including the entity, activity, end use, end user, geography, export controls and sanctions. Oversight will sit across the Bank's Asset and Liability Committee, Defence Steering Committee and Defence Sub Committee, with business teams and Defence Coordinators responsible for assessing individual transactions. Scotiabank will maintain a Defence Asset Portfolio and review it at least every six months. It aims to allocate an amount equal to the proceeds of each Defence Instrument within 24 months of issuance.
Reporting and External Review: Scotiabank plans to publish annual reporting while Defence Instruments remain outstanding, covering areas such as proceeds raised, amounts allocated, unallocated balances and the types of entities financed. The framework has also received an independent assessment from Sustainable Fitch, which found that its governance, transparency and eligibility approach is aligned with emerging defence financing practices and Canadian defence priorities. Scotiabank also intends to obtain annual independent verification of how proceeds are allocated.
🚨 What This Signals for the Canadian Financial Sector
The framework creates a dedicated funding structure for defence financing in Canada, with defined rules around eligible borrowers, activities, exclusions, governance and reporting.
Its scope also shows that defence financing is moving beyond traditional military equipment into critical infrastructure, supply chains, strategic technologies, Arctic capabilities and civil security.
Scotiabank has also clearly separated the framework from sustainable finance. Defence instruments issued under it are not classified as sustainable finance transactions, reflecting the fact that defence financing remains an emerging market without a single universal taxonomy.
For Canadian financial institutions, the framework provides an early example of how defence related capital can be structured with clearer eligibility rules, governance and disclosure as investment in the sector expands.
