Canadian regulator launches consultation on DE&I disclosure amendments

The Canadian Securities Administrators (CSA) has launched a consultation on proposed amendments to corporate diversity disclosure rules relating to board and executive diversity.

The CSA said on Thursday the proposed amendments are intended to prompt “meaningful disclosure” about how issuers select candidates for nomination to the board and how diversity is incorporated into the process.

The changes would only be applicable to non-venture issuers for now, but the CSA said it is consulting on whether it will develop amendments applicable to venture issuers in the project’s second phase.

The revisions would require disclosure on diversity components beyond female representation, while also retaining requirements from 2014 regarding women. These include reporting annually on board representation policies, disclosing issuers’ targets on female board and executive officer representation, and reporting on the number of women on the board and in executive officer positions.

The Canadian regulator has developed two distinct approaches to build on the current disclosure requirements and is seeking feedback on both proposals.

The first would see issuers disclose how they tackle diversity with respect to the board and executive officers, but would not mandate disclosure of any specific groups other than women. The CSA said this method is intended to provide flexibility with regards to how diversity is addressed by issuers.

The second approach would require mandatory reporting on the representation of five designated groups including women, Indigenous peoples, people from an ethnic minority background, disabled people and LGBTQ+ persons, on boards and in executive officer positions.

An issuer may also choose to voluntarily provide disclosure beyond the designated groups. The information collected must be based on voluntary self-disclosure by directors and executive officers.

In addition, the revision would require disclosure regarding any written strategy, policies and measurable objectives relating to diversity on an issuer’s board.

The regulator revealed that the British Columbia Securities Commission, the Alberta Securities Commission, the Financial and Consumer Affairs Authority of Saskatchewan and the Office of the Superintendent of Securities Northwest Territories support the first approach, while the Ontario Securities Commission supports the second.

The CSA has also proposed changes to existing guidelines on board nominations, relevant to all issuers. Though not prescriptive, the regulator has encouraged issuers to follow the guidance which requires a written policy regarding director nomination process, succession planning and term limits, a diversity policy, and targets for board and executive officer diversity.

The regulator is asking for feedback on the proposals by 12 July.

In 2020, Canada saw the development of several diversity initiatives. As of January 2020, distributing corporations governed by the Canada Business Corporations Act (CBCA) are required to provide prescribed diversity disclosure with respect to women, Indigenous peoples, persons with disabilities and members of visible minorities in connection with their annual meeting of shareholders held on or after such date.

In October 2020, institutional investors managing more than $2.3 trillion in assets signed the Canadian Investor Statement on Diversity and Inclusion, an initiative to combat systemic inequities and advancing diversity and inclusion efforts.