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Friday, May 11, 2018

Read online or download the full update here.


On April 5, 2018, the Canadian Securities Administrators (“CSA”) published CSA Staff Notice 51-354 – Report on Climate Change-Related Disclosure Project (“SN 51-354”). SN 51-354 provides a summary of the findings from a CSA project launched in 2017 (the “Project”), which consisted of the CSA’s review of the current disclosure framework with respect to climate change-related information, research on the disclosure regime in other jurisdictions and a report on consultations conducted by the CSA with a wide range of stakeholders, including issuers, professional advisors and investors. In SN 51-354, the CSA also provide their perspective on certain key issues in climate change reporting.  As a result of their work, the CSA view climate change-related risks not as industry specific but rather as a category of risks and opportunities affecting issuers across a wide range of industries.

The objectives of the Project were:

  1. To assess whether current regulatory guidance was sufficient;
  2. To better understand what information investors require in order to make informed decisions; and
  3. To review current disclosures being made by public issuers.

Overview of Disclosure Requirements

Under securities laws in Canada, issuers must disclose any information that is considered material, which may include climate change-related information. For instance, issuers are required to disclose material risks in their annual information form and management’s discussion & analysis. The CSA highlighted a few types of risks that may be related to climate change and their potential impacts on issuers’ business and financial performance. For example, climate change events such as extreme weather could lead to physical risks, which could include damages to issuers’ assets and interruptions to their normal course of business or may have financial impacts such as asset write-offs and reduced revenue. In addition, an unstable regulatory environment with respect to climate change legislation could lead to regulatory risks, which may result in extra compliance requirements and increased costs for issuers. Furthermore, violations to regulatory requirements could also result in reputational risks. Finally, changing market demand for energy efficient products could give rise to business model risk and affect issuers’ bottom line through lower profit and higher capital expenditure.

In addition to the disclosure of risks, the CSA are of the view that issuers are also required to disclose their risk management process and oversight with respect to climate change and environmental issues. This includes disclosure of issuers’ environmental policies and the steps taken to implement them. The CSA note that this could include policies on climate change-related issues and the impact of such policies on issuers’ operations. In addition, issuers’ boards are responsible for adopting a strategic plan that evaluates the risks faced by the business and for the identification of the principal risks faced by the issuers and for the implementation of a risk management process. Lastly, when reviewing the issuers’ continuous disclosure documents, the board, the audit committee and the issuer’s Chief Executive Officer and Chief Financial Officer should consider climate change-related matters.

Work Completed

In connection with the Project, the CSA conducted research on the disclosure regime of climate change-related information in the United States, the United Kingdom and Australia. They also reviewed several voluntary frameworks for sustainability reports or climate change-related information, including the Final Recommendations of the Task Force on Climate-related Financial Disclosure (the “TCFD Recommendations”),  the International Integrated Reporting Framework published by the International Integrated Reporting Council (the “IR Framework”), the Global Standards for Sustainability Reporting published by the Global Reporting Initiative (the “GRI Framework”) and the Climate Risk Technical Bulletin (the “SABA Framework”) published by the Sustainability Accounting Standards Board (“SASB”).

To gain a sense of the current disclosure practices of climate change-related information in Canada, the CSA reviewed the continuous disclosure (“CD”) and voluntary disclosure made by 78 issuers from the S&P/TSX Composite Index. These issuers came from various industries and had a wide range of market capitalization (the “Disclosure Review”).

The CSA also conducted anonymous surveys (the “Survey”) to get feedback from issuers with respect to their current climate change-related disclosure practices, including their governance and risk management processes, the cost and challenges associated with such disclosure and the demand for such disclosure from their investors. All TSX-listed issuers were invited to complete the Survey and the CSA received responses from 97 issuers, representing 13 industries and with market capitalizations ranging from $25 million to over $1 billion.

In addition, the CSA held 50 consultations (the “Consultations”) with a variety of stakeholders, including investors, issuers, advisors and academics. Specifically, the CSA sought users’ views on their need for climate change-related information, the sufficiency of the disclosure made by issuers and the adequacy of the current disclosure regime. The CSA also canvassed issuers’ perspectives on their current disclosure practices and governance and risk management processes with respect to climate change-related information, as well as the challenges they face in providing such disclosure and in complying with regulatory requirements. Other stakeholders, such as legal advisors and academics, provided their views on the collection and presentation of climate change-related disclosure as well as insights into the current trends in this area.

Key Themes

The outcome of the Disclosure Review indicates that 56% of the issuers provided specific climate change-related disclosure in their CD and 85% did so in their voluntary disclosures, with issuers in the oil and gas industry being mostly likely to make such disclosure. The quantity and quality of disclosure increases with the issuer’s market capitalization. The most prevalent risk type related to climate change is regulatory risk, followed by physical risk and market risk. 

A majority of issuers referenced a third-party framework in their voluntary disclosure, with the GRI Framework being the most common one used. The most common type of disclosure made in voluntary disclosure was emissions-related metrics. However, very few disclosed their GHG emissions in their CD.

Based on issuers’ responses to the Survey, the main reasons cited by them for the non-disclosure of climate change-related information were (i) their conclusions that such information was not material, (ii) that a common framework for measurement was lacking, and (iii) a perceived lack of interest from stakeholders. However, responses received by the CSA through the Consultations and the Survey indicate a divergence between the users and issuers on their views as to the materiality of climate change-related risks and opportunities. In general, users consider climate change-related risks to be a conventional business issue that warrants more disclosure and discussion in issuers’ CD. Issuers thematically appear to only disclose information they consider material and omit information that is remote or difficult to measure or quantify.

The CSA also note two main deficiencies in the disclosure of climate change-related information. First, among those that disclosed climate change-related information, only 7% provided specific disclosure regarding the financial impact of such risk. Second, few issuers disclosed details concerning their governance and risk management practice with respect to climate change.

Users’ Perspective

The Consultations reveal that users were generally dissatisfied with the current state of climate change-related disclosure both in terms of the quantity and the quality of the information provided. In particular, users suggested a lack of disclosure of the issuers’ risk management process and governance practices, which made it difficult for them to conduct their analysis on the impact of such risks and in making investment decisions. Although some users suggested that a “comply or explain” approach may be adopted for climate change-related disclosure, the CSA note that this approach is generally not consistent with the general disclosure approach in Canada, which allows issuers to omit negative answers in their disclosure. There was no consensus among the users on whether there should be new prescriptive disclosure requirements on climate change-related disclosure. Many considered it sufficient to supplement the current disclosure regime with additional guidance from the regulators.

Issuers’ Perspective

Issuers’ responses from the Consultations suggest that users demand more climate change-related information from larger issuers in carbon-intensive industries. Furthermore, issuers indicated a strong preference for the current disclosure regime and noted that additional disclosure obligations would discourage companies from becoming reporting issuers in Canada and damage the competitiveness of Canadian issuers in global markets. Several issuers also expressed their concern that placing an emphasis on climate change-related disclosure would detract from other environmental risk disclosure.

In addition, issuers indicated that they faced significant challenges in providing climate change risk disclosure. First, they argue that such disclosure is costly and may not justify the benefits obtained. Second, issuers noted the unsettled regulatory regime in this area posed significant challenges in compliance. Third, several issuers indicated it was difficult to comply with the disclosure requirements of forward-looking information (“FLI”), which requires FLI be based on reasonable assumptions and limited to a certain time period. Last, issuers acknowledged their lack of expertise in climate change-related issues, which has contributed to the difficulty in making decisions related to the existence and scope of such disclosures.


As part of the Project, the CSA reviewed the climate change-related disclosure requirements in the United States, the United Kingdom, and Australia. They found that the disclosure regime in the United States is similar to that of Canada, in that both do not have prescribed disclosure on climate change-related information. This is in contrast to the regimes in the United Kingdom and Australia, where public companies are required to make specific disclosure in this area.

The CSA also reviewed a number of frameworks for voluntary corporate sustainability reporting. Some of these frameworks, such as the IR Framework and the GRI Framework, are more comprehensive in nature and cover a range of sustainability topics. Others, such as the SASB Framework and the TCFD Recommendations, focus more narrowly on the risks and financial impacts to an issue associated with climate change. In particular, the CSA compared the TCFD Recommendations to the current disclosure requirements in Canada and noted that the TCFD Recommendations contain more specific disclosure requirements on the governance and risk management of climate change-related risks. In addition, the TCFD Recommendations provide more specific guidance on climate change-related issues for both financial and non-financial businesses. The TCFD Recommendations also encourage organizations to adopt scenario analysis, such as a “2 °C scenario”, in assessing the readiness and resilience of their business strategies with respect to climate change-related risks.

Potential Future Trends

The CSA note that there are some indications that other frameworks, such as the SASB Framework, may converge with the TCFD Recommendations in the future. The convergence of various disclosure frameworks brings benefits such as enhanced transparency and comparability across different issuers. It would also bring certainty to the disclosure regime and address the demand for climate change-related information from users. However, using a single framework also has its drawbacks. First, users differ in the amount and type of information they need and a single framework approach may not adequately serve their diverse needs. Second, a single framework may take away from issuers the flexibility to provide additional information to their investors voluntarily. Finally, a single framework approach may not yield the intended comparability among issuers and may lead to “boilerplate” disclosure that is of little use to investors.

Future Work by the CSA

The CSA indicate that in the near term, they will focus on the development of guidance and educational initiatives for issuers with respect to the risks and impacts of climate change-related issues. They will also continue to monitor issuers’ disclosure of climate change-related information as well as developments in reporting frameworks worldwide.

With respect to future regulatory actions, the CSA believe that new disclosure requirements may be needed with respect to issuers' governance practices and processes used in the identification, assessment, and management of climate change-related risks. Despite the current disclosure requirement in National Policy 58-201 – Corporate Governance Guidelines (“NP 58-201”), which requires an issuer's board of directors to adopt a written mandate to identify the principal risks of the issuer and to implement appropriate systems to manage these risks, little information was provided by the issuers in these areas. To rectify this issue, the CSA indicated that amendments to Form 58-101F1 and NP 58-201 may be needed and additional guidance may be provided.

If you have any questions with respect to the matters discussed above, please contact Ronald Schwass by email at or Davia Wang by email at

This update is intended as a summary only and should not be regarded or relied upon as advice to any specific client or regarding any specific situation.