Canada: Highlights From CSA's Report On Climate Change-Related Disclosure Project

The Canadian Securities Administrators (CSA) recently released Staff Notice 51-354 – Report on Climate change-related Disclosure Project (Report), providing the results of their review of climate change-related disclosure practices and the adequacy of the existing climate change-related disclosure regime in Canada. In addition, the staff notice sets out the CSA's plan for continued evaluation and development of the Canadian securities law regime governing climate change-related disclosure.

The Report is based on a targeted review of the mandatory and voluntary disclosure made by 78 issuers from the S&P/TSX Composite Index, a voluntary anonymous survey marketed to all TSX-listed issuers, focused consultations with users of disclosure (including institutional investors, investor advocates, experts, academics, credit rating agencies and analysts) and a review of regulatory frameworks governing climate change-related disclosure in the United States, United Kingdom and Australia.

The CSA observed a number of patterns with respect to the disclosure practices of issuers in the areas of risk and materiality assessments, voluntary disclosure and governance.

MATERIALITY OF RISKS

The CSA found that while only 56 per cent of issuers provided specific climate change-related disclosure, the prevalence of climate change-related disclosure increased with the size of the issuer, and was most common among issuers in the oil and gas industry. The most common climate change-related risk identified by issuers was regulatory risk, with 90 per cent of the issuers that provided climate change specific disclosure in their MD&A and/or annual information form (AIF) communicating the existence of climate change-related regulatory risk. This result is consistent with the expression by a number of issuers to the CSA that regulatory risk was the most immediate and tangible risk. Of the issuers noting specific climate change-related risks, 43 per cent disclosed a physical risk (acute or chronic), 33 per cent disclosed a market risk, 31 percent disclosed a reputational risk, and 18 per cent disclosed a technological risk. The CSA noted that its survey revealed that many issuers employ too narrow a concept of the nature and extent of climate change-related risks and impacts. For example, a few issuers improperly reasoned that they are not required to disclose climate change-related information because they are not significant emitters of greenhouse gases (GHG) or otherwise contributors to the underlying causes of man-made climate change. The CSA clarified in its Report that the physical impacts of climate change are based largely on geographic location rather than an issuer's own GHG emission level, and that the general requirement to disclose material information requires disclosure of the material climate change-related risks and impacts for an issuer's business in the same way that they require disclosure of other types of material information.

The Report highlights the conflicting views of users and issuers regarding whether the financial impacts of regulatory risk are measurable and ultimately required to be disclosed. While CSA Staff Notice 51-333 – Environmental Reporting Guidance (SN 51-333) and Item 5.1(1)(k) of Form 51-102F2 (AIF Form) require an issuer to disclose the financial and operational effects of environmental protection requirements in the current financial year and the expected effect in future years, the CSA found that in practice, disclosure of specific climate change-related risks was rarely accompanied by detail on the financial impact of such risks. Generally, issuers asserted that often the current impact is immaterial and the uncertainty regarding the future impact precludes the issuer from having a reasonable basis for any assessment of regulatory risks for the purposes of disclosure. In contrast, substantially all of the users consulted by the CSA were dissatisfied with the current state of climate-change related disclosure, noting that in many cases disclosure was either boilerplate or not provided. In particular, a number of users expressed the view that impacts could be measured, for example with regard to national commitments under the Paris Agreement.

VOLUNTARY DISCLOSURE

The CSA observed that most issuers (85 per cent) provided climate change-related disclosure in voluntary reports, and that GHG emissions-related metrics were largely only disclosed in voluntary reports. The CSA found varying interest from users with regard to issuer disclosure of GHG emissions. While some users must disclose the carbon footprint of their portfolios or find the information to be useful for longitudinal analysis, a number of users recognized that GHG emission data may be unreliable and is costly for issuers to produce.

GOVERNANCE

The CSA found that disclosure under National Policy 58-201 Corporate Governance Guidelines (NP 58-201) was generally lacking with respect to the section 3.4 requirement that a board adopt a written mandate acknowledging responsibility for approving a strategic plan taking into account business risks, identifying principal business risks and implementing risk management systems. Specifically, a number of issuers did not provide the level of detail sought under SN 51-333, section 2.3, which states that disclosure should provide insight into the development and periodic review of the issuer's risk profile, integration of risk oversight and management into the issuer's strategic plan, identification of significant elements of risk management, including policies and procedures to manage risk, and the board's assessment of the effectiveness of risk management policies and procedures, as applicable.

NEXT STEPS

The CSA advised that, going forward, they will: (i) provide additional guidance and educational support, (ii) consider new disclosure requirements dealing with corporate governance, and (iii) continue to monitor Canadian issuer disclosure practices with respect to climate change-related disclosure.

In the near term, CSA's focus on the development of further guidance and educational initiatives for issuers with respect to business risks and opportunities and potential financial impacts of climate change is intended to improve issuer disclosure within the existing framework of Canadian securities law. Though new guidance is forthcoming, the Report made clear that where a climate change-related risk could reasonably be expected to have a potential material impact on the issuer at some point in the future, it should be disclosed. This statement appears to be more unequivocal than the guidance previously provided by the CSA in SN 51-333. Any new guidance will build on SN 51-333. Such guidance may deal with specific risk factor disclosure, trends and uncertainties, governance and management oversight and how the CSA view the application of the test for material information in the context of climate change-related disclosure. In addition, the CSA may support educational initiatives including seminars, publications and targeted reviews as part of the periodic continuous disclosure conducted by CSA jurisdictions.

In addition, the CSA will give consideration to new disclosure requirements regarding issuer governance processes relating to oversight and assessment of material risks and opportunities relating to climate change. Advancing additional requirements in this area may require amendments to NP 58-201 and Form 58-101F1. The CSA indicated that application of any new disclosure requirements would, at least initially, be limited to non-venture issuers.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
23 Nov 2018, Other, Toronto, Canada

Cybersecurity, including data privacy and security obligations, has become a critical chapter in every company’s risk management playbook.

28 Nov 2018, Speaking Engagement, Toronto, Canada

Arbitration has a number of advantages and some disadvantages for the resolution of domestic and international commercial disputes.

Similar Articles
Relevancy Powered by MondaqAI
Wildeboer Dellelce LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Wildeboer Dellelce LLP
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions