Securities regulators unveil draft climate disclosure requirements

Proposed requirements would put information issuers in line with climate task force requirements and help address costs of reporting

Securities regulators unveil draft climate disclosure requirements

Demonstrating its support for the growing international movement towards mandatory climate reporting standards, the Canadian Securities Administrators (CSA) have launched a consultation on proposed requirements for reporting issuers pertaining to climate-related disclosures.

“We recognize some issuers already share certain climate-related information,” said Louis Morisset, CSA Chair and President and CEO of the Autorité des marchés financiers. “Our proposed requirements will bring those disclosures into a harmonized framework benefitting investors and issuers alike and aligning Canadian capital markets with the global movement towards consistent and comparable standards.”

According to the CSA, the disclosure contemplated in the requirements is largely consistent with recommendations from the Task Force on Climate-related Financial Disclosures (TCFD). Specifically, they consider disclosure by issuers that relate to the TCFD recommendations’ four core elements:

  • Governance, focusing on the oversight of an issuer’s board and the role of its management in assessing and managing risks and opportunities related to climate change;
  • Strategy, which involves short-, medium-, and long-term ramifications on an issuer’s business, strategy, and financial planning;
  • Risk management, which touches on how an issuer identifies, assesses, and managers climate-related risks and integrate them into its overall risk management; and
  • Metrics and targets that issuers use to capture material information when assessing and managing climate-related risks.

By making the information disclosed by issuers more comparable, they are anticipated to assist investors in making informed decisions by enhancing disclosures relating to climate. The requirements are also meant to address costs associated with reporting across multiple disclosure frameworks, help improve issuers’ access to global markets, and facilitate an equal playing field for issuers.

The CSA’s proposed requirements depart slightly from the TCFD recommendations by not requiring a “scenario analysis” describing the resilience of its strategy under different climate-related situations, such as a 2 degrees Celsius or lower scenario.

Issuers would have to disclose their Scope 1, Scope 2, and Scope 3 greenhouse gas (GHG) emissions and their related risks, or their reasons for not doing so. Under an alternative approach put forward by the CSA, issuers would only have to disclose Scope 1 GHG emissions.

The requirements would be introduced through a phased-in process to let companies adjust to the implementation.

“With global momentum building on sustainability-related disclosures in both the public and private sectors, these proposals reflect our vision and expectations for reporting issuers as we move towards a global baseline for such disclosures,” Morriset said.