Climate Disclosure In Canada – Are Companies Pulling Back From ESG?

Are companies scaling back their environmental, social and governance (ESG) and climate commitments? Evidence suggests that while some organizations have reduced their public disclosures regarding their climate and sustainability initiatives, relatively few appear to be abandoning these commitments altogether. In Canada, where climate-related disclosure remains largely voluntary, this shift raises important questions about transparency, investor expectations, and the future of climate-related reporting.

Climate Disclosure in Canada

Climate disclosures are documents published by organizations that typically describe the carbon footprint associated with their activities, sustainability initiatives and targets or commitments, and their exposure to climate-related risks. While Canadian securities legislation requires disclosure of climate-related information where such disclosure is “material”, companies in Canada are not as a whole currently subject to a comprehensive mandatory climate-related disclosure regime. As a result, most climate-related reporting in Canada has developed on a voluntary basis.

On April 23, 2025, the Canadian Securities Administrators (CSA) announced that it would pause work on the development of its mandatory climate-related disclosure rule, National Instrument 51-107 – Disclosure of Climate-related Matters. The CSA explained the decision aims to support Canadian markets and issuers amid recent climate-related disclosure developments in the United States and globally.

The Canadian Sustainability Standards Board (CSSB) has introduced the Canadian Sustainability Disclosure Standards (CSDS) as a framework for sustainability reporting. These standards are aligned with international standards and aim to improve consistency and comparability in reporting. However, the CSDS remain voluntary unless mandated by regulators or governments.

Alberta securities law provides safe harbour protections for issuers in certain circumstances, such as when disclosures are made following a reasonable investigation. In 2025, amendments to Alberta’s Securities Act came into force which allow the Alberta Securities Commission (ASC) to expand these existing protections to encompass climate-related disclosures.

Benefits of Sustainability in Corporate Decision-Making

Despite differing perspectives on corporate disclosure and communications, there is a broad consensus among experts that sustainability remains a central consideration in corporate decision-making.

The Science Based Targets initiative (SBTi) reports that setting science-based targets offers companies long-term competitive advantages, including increased investor and stakeholder confidence, enhanced market valuation, and improved resilience against regulatory changes.

Amid regulatory uncertainty, nearly 90 percent of Canadian investors supported continued voluntary disclosure of material climate-related information, citing reputational risks, stakeholder expectations, and long-term value creation.

Retreat from Climate Commitments?

Recent headlines suggest a shift in how companies approach climate commitments and ESG-related initiatives.

The Net-Zero Banking Alliance (NZBA) was launched in 2021 as a collective effort by the global banking industry to reduce carbon emissions. At its peak, the NZBA had nearly 150 corporate members. In January 2025, several banks across Europe and North America withdrew from the NZBA, stating they would continue their climate efforts outside the alliance. In early October 2025, the NZBA disbanded and ceased operations entirely.

There has also been a shift in executive compensation practices. Some companies have reduced or removed explicit links between executive compensation and ESG performance. This shift may reflect concerns among investors that ESG-linked incentives can be easily satisfied without producing meaningful sustainability outcomes.

Academic research has suggested that there is no statistically meaningful association between a firm’s outperformance (or lack of) on its ESG metrics and its past or future ESG score. Effectively, this suggests that ESG performance targets may be skewed to ensure their achievement.

Communicating Climate Pledges to the Public

In contrast, there is some suggestion that companies are simply speaking less about their climate pledges. “Greenhushing” occurs when a company withholds information on its climate strategy out of fear that such disclosures will result in asymmetric criticism or reputational harm. One reason for keeping quiet is the fear of being accused of “greenwashing,” a marketing tactic used to create the impression that a company is sustainable, without actually reducing its environmental impact.

South Pole, a climate consultancy group, documented the greenhushing trend in a survey of over 1,400 companies across 12 countries. The survey first evidenced this in 2022, finding a majority of the companies in 9 of the 14 major sectors surveyed intentionally decreased their climate communications.

Although greenhushing may reduce exposure to consumer and political criticism, the lack of disclosure and publicly available information on ESG and sustainability may raise broader concerns.

Greenhushing limits the sharing of key information that can help companies benchmark their own achievements and climate strategies against peers. Additionally, greenhushing can result in incomplete or inaccurate evaluations of a company’s exposure to climate-related risks. A widespread lack of climate-related disclosure may risk creating the perception that these issues have become less pressing, potentially slowing progress on decarbonization and the energy transition.

Notwithstanding concerns about reduced climate-related disclosure, many companies seem to be expanding their climate commitments rather than shrinking them. Research indicates that a significant proportion of firms have either maintained or accelerated sustainability initiatives, while only a minority have scaled them back.

A 2025 study from Harvard analyzed 75 top international companies before and after the 2024 U.S. election. Only 13 percent scaled back their sustainability efforts or their public messages on green issues, while 32 percent actually increased such efforts.

Similarly, PwC’s latest State of Decarbonization report suggests that companies are modifying how they communicate sustainability efforts instead of abandoning them altogether. According to the report, 82 percent of companies kept their climate commitments steady or accelerated the timelines for achieving them. The remaining 18 percent of companies decreased their climate ambitions due to higher costs, decreased capital, and policy uncertainty.

Looking Ahead

As the ESG disclosure landscape shifts, the real question for companies is not whether to advance or abandon their sustainability commitments, but how to communicate them. The evidence suggests that many are rethinking their messaging rather than withdrawing.

Absent a wholesale exodus from ESG and sustainability commitments, corporate stakeholders may find it helpful to remember that saying less does not necessarily mean that a corporation is doing less. When packaged thoughtfully, sustainability can continue to offer strategic and financial opportunities. In Canada, where such disclosures remain voluntary for most businesses, intentional disclosures may be positioned as a competitive advantage and a source of consumer trust.

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