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CSA Provides Update on Proposed Climate-Related Disclosure Rules

October 24, 2022


As we reported in our October 2021 Blakes Bulletin: CSA Seeks Comments on Climate-Related Disclosure Rules, on October 18, 2021, the Canadian Securities Administrators (the CSA) issued a notice and request for comment on proposed National Instrument 51-107 – Disclosure of Climate-related Matters and its companion policy (collectively, the Proposed Instrument), which would introduce specific disclosure requirements regarding climate-related matters for most public companies in Canada. The Proposed Instrument is largely based on the disclosure standards prescribed by the Task Force on Climate-related Financial Disclosures (the TCFD Framework).

Since the Proposed Instrument was issued and its comment period closed, following a 30-day extension, on February 16, 2022, several significant developments occurred in the international climate-related disclosure landscape. In particular, on March 21, 2022, the United States Securities and Exchange Commission (the SEC) published its proposed set of rules regarding climate-related disclosure (the Proposed SEC Rules). Then, on March 31, 2022, the International Sustainability Standards Board (the ISSB), an environmental, social and governance (ESG) standard-setting body established by the International Financial Reporting Standards (IFRS) Foundation, issued two proposed international standards for ESG-related disclosure: (i) IFRS S1 – General Requirements for Disclosure of Sustainability-related Financial Information; and (ii) IFRS S2 – Climate-related Disclosures (collectively, the ISSB Drafts).

The Proposed SEC Rules, as presently drafted, will not impact the vast majority of Canadian public companies, as they apply only to domestic U.S. issuers, as well as foreign private issuers that do not report through the multijurisdictional disclosure system. Similarly, the ISSB Drafts are not intended to be binding on Canadian public companies and are instead intended to function as a global guidepost to promote consistency among climate-related disclosure standards across jurisdictions. However, the Proposed SEC Rules and the ISSB Drafts represent two of the most influential climate-related disclosure frameworks, to which we nevertheless expect Canadian public companies to look for guidance in developing their climate-related disclosure. Accordingly, in response to these developments, on October 12, 2022, the CSA provided an update on the status of the Proposed Instrument (the CSA Update).


The CSA advised that they are "actively considering international developments", including the Proposed SEC Rules and the ISSB Drafts, and how they may "impact or further inform" the Proposed Instrument. In particular, the CSA noted that while the Proposed SEC Rules and ISSB Drafts, like the Proposed Instrument, are premised on the TCFD Framework, there are "substantive differences" among the three proposals, which the CSA is continuing to analyze.

Insight as to how the CSA will address these developments in the Proposed Instrument may be drawn from a comment letter (the Comment Letter) the CSA published on July 25, 2022, in response to the issuance of the ISSB Drafts. In the Comment Letter, the CSA praised the ISSB's "progress in developing a global reporting baseline" for sustainability-related disclosure and lauded the ISSB Drafts as "an important step forward" in this regard. However, the CSA also highlighted four areas where, from its perspective, the ISSB Drafts would benefit from certain changes:

i. Primacy of Climate-Related Disclosure

Under the ISSB Drafts, issuers must disclose material information regarding "significant sustainability-related risks and opportunities". The CSA expressed concern that, by using the general term "sustainability-related" (as opposed to the more specific term "climate-related" in the Proposed Instrument), the ISSB Drafts encompass an overly broad range of activities. The CSA's issue with such approach is that it may have the unintended effect of deemphasizing the climate-specific aspects of such disclosure and thereby detract from the ISSB's "climate-first" mandate. The CSA therefore recommended that the ISSB consider the interaction between the ISSB Drafts and topic-specific disclosure standards, as well as prioritize finalizing the aspects of the ISSB Drafts that specifically address climate-related matters.

ii. Scalability and Phasing

The CSA also highlighted the cost and expertise required to comply with several aspects of the ISSB Drafts. For example, the ISSB Drafts would require issuers to engage in "scenario analysis", which involves evaluating the resiliency of their strategic plans to a range of climate-related scenarios, including a 2°C scenario. They would also mandate the disclosure of Scope 1 greenhouse gas (GHG) emissions (all direct GHG emissions by an issuer), Scope 2 GHG emissions (all indirect GHG emissions arising from an issuer's consumption of purchased electricity, heat or steam) and, subject to limited exceptions, Scope 3 GHG emissions (all other indirect GHG emissions of an issuer, other than those described in Scope 2). In contrast, due to the costs associated with preparing such information, as well as concerns regarding its consistency and comparability, the Proposed Instrument does not presently require issuers to conduct a scenario analysis and takes a "comply or explain" approach with respect to GHG emissions disclosure.

In the Comment Letter, the CSA argued that including scalability and phasing elements in the ISSB Drafts would better accommodate the varying needs and capabilities of a diverse range of issuers, and, in turn, promote more widespread adoption of ISSB standards. In particular, the CSA recommended that the scenario analysis and Scope 3 GHG emissions disclosure requirements be either phased in or introduced initially on a non-mandatory basis. Furthermore, the CSA suggested that certain of the more data-intensive disclosure requirements in the ISSB Drafts would benefit from scaling and improved implementation guidance to account for the fact that smaller issuers may lack the resources and expertise required to comply with such obligations.

iii. Industry-Specific Requirements

The ISSB Drafts include a number of industry-specific disclosure requirements, which were developed by the Sustainability Accounting Standards Board (SASB). In the Comment Letter, the CSA noted that such requirements would present "significant challenges" for issuers on account of the volume and specialist nature of information they entail. Consequently, the CSA suggested that the industry-based SASB standards be made optional, with the possibility of mandating such disclosure in the future. The CSA's position on this issue is consistent with the Proposed Instrument, which applies equally to all relevant issuers, irrespective of industry.

iv. International Alignment

Finally, in the Comment Letter, the CSA emphasized the importance of the ISSB cooperating with securities regulators across jurisdictions in order to promote consistency among climate-related reporting standards. In this context, the CSA made specific reference to "key differences" between the ISSB Drafts and the Proposed SEC Rules, noting that a patchwork of regulations could impair the ability of Canadian issuers to "effectively compete in domestic and global capital markets".


As we previously reported, the CSA initially specified December 31, 2022, as being the earliest date on which it expected the Proposed Instrument would come into force. Although the CSA Update did not specifically address timing, given the extent of international developments in the area of climate-related disclosure, as well as the volume of comment letters the CSA received in response to the Proposed Instrument (131 in total), the December 31, 2022, early implementation date is likely off the table.

We expect that the CSA will continue to refine the Proposed Instrument to minimize the "substantive differences" noted in the CSA Update. However, as the CSA has emphasized the role of "international consensus" in its decision-making process, we expect that the CSA will undertake this exercise in collaboration with other regulators. In particular, given that each of the three bodies has a strong influence on global ESG-related disclosure standards, we anticipate that the CSA will work closely with the SEC and the ISSB in furtherance of the goal of developing "a comprehensive global baseline of sustainability disclosures".

To the extent that material differences remain between the Proposed Instrument, on the one hand, and the ISSB Drafts and the Proposed SEC Rules, on the other, the CSA may further reconsider several aspects of the Proposed Instrument, including its lack of required scenario analysis and Scope 3 GHG emissions disclosure. However, based on the Comment Letter (which we note was published following the expiration of the Proposed Instrument's comment period), it appears that the CSA is continuing to approach these issues in a manner that is consistent with the current text of the Proposed Instrument.

We will continue to monitor developments with respect to the Proposed Instrument, the ISSB Drafts and the Proposed SEC Rules.

For further information, please contact:

Jeff Bakker                 +1-403-260-9682
Michael Barrett         +1-403-260-9621
Pascal de Guise        +1-514-982-4119
Kathleen Keilty          +1-604-631-3318
Matthew Merkley      +1-416-863-3328

or any member of our Capital Markets or Environmental groups.