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Highlights from CSA’s Report on Climate Change-Related Disclosure Project

By Ross A. Bentley and Rachel Fridhandler  
April 16, 2018

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.


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.


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.


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.


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.

For further information, please contact:

Trevor Rowles                           403-260-9750
Ross Bentley                            403-260-9720
Rachel Fridhandler                    403-260-9758

or any other member of our Capital Markets group.