Canadian regulators up the ante on climate risk reporting for companies and investors

Canadian regulators will publish disclosure guidance on climate-related risks, and will consider whether investors need further disclosure – such as issuers’ greenhouse gas emissions – to inform investment and voting decisions. The Canadian Securities Administrators (CSA) – the umbrella body for Canada’s 13 provincial and territorial securities regulators – has announced the plans in a new document, CSA Staff Notice 51-354 Report on Climate change-related Disclosure Project, published last week. The organisation, which describes itself as one that “co-ordinates and harmonises regulation for the Canadian capital markets”, said it “intends to develop new guidance and initiatives to educate issuers about the disclosure of climate change-related risks, opportunities and financial impacts”.
It added: “The CSA also intends to consider new disclosure requirements regarding non-venture issuers’ corporate governance practices in relation to material business risks,” it continued, citing “emerging or evolving risks and opportunities arising from climate change, potential barriers to free trade, cybersecurity and disruptive technologies” as examples. It said materiality would be “the determining factor” for whether information will be required to be disclosed to investors.
“In addition to these initiatives, the CSA will continue to monitor the quality of issuers’ climate change-related disclosures, best practices in this area and developments in reporting frameworks. The CSA will also continue to assess whether investors require additional types of information, such as disclosure of certain categories of greenhouse gas emissions, to make investment and voting decisions,” the document said. The report is based on findings from a project the CSA has just completed, reviewing current disclosure practices from Canadian issuers in regard to climate-related risks and opportunities. It reviewed disclosure from large issuers listed on the Toronto Stock Exchange, consulted with those issuers, and engaged with investors on the topic.
The organisation said it also compared its domestic expectations with international climate-related disclosure requirements and voluntary frameworks: “We now have a better understanding of the current state of climate change-related disclosure in Canada,” said Louis Morisset, CSA Chair and President, and CEO of the Autorité des marchés financiers. “Moving forward,we will aim to improve the disclosure of risks and related governance and oversight processes, while recognising both investors’ and issuers’ perspectives.” Canada’s voice has been a relatively quiet one in the global discussion around sustainable finance so far, although this is the latest in a series of moves that suggest concerns around climate risk may be gaining traction in the political and financial spheres. Canada is presiding over the G7 this year and it is under pressure from some corners to prioritise climate finance, in anticipation of France – a global champion of the topic – taking the baton next year. Canada has confirmed that “working together on climate change, oceans and clean energy” will be a theme of its leadership. So far, few public announcements have been made, however. Last week, the Government of Canada said it would make the G7 annual summit “an environmentally responsible event”, investing $325,000 in reducing the event’s environmental footprint. “This collaboration is a concrete way of putting words into action,” it claimed.
Senior members of Canada’s Ministry of Finance attended an event in London earlier this year, called The Future of Sustainable Finance at the G7. Germany also prioritised climate change when it presided over the G7 in 2015. Beyond the G7, there are efforts to create a longer-term climate finance initiative, described as a Canadian equivalent to the EU’s High Level Expert Group on Sustainable Finance – which saw market participants and civil society create a set of regulatory recommendations now being mulled by the European Commission. No formal moves have been made to recruit such a group, however. RI also understands that the Office of the Chief Actuary of Canada – part of the country’s Office of the Superintendent of Financial Institutions – is considering the potential value of supporting climate scenario analysis and other related disclosure for pension funds, although this could not be confirmed at the time of publication.
On the investor front, the C$287bn Caisse de dépôt et placement du Québec pension fund made headlines in October when it announced plans to invest C$8bn into low-carbon technologies, slash its carbon footprint and “exercise stronger leadership in accounting for climate risk”, engaging with investee companies on best practice, and taking part in global initiatives on reporting and transparency.