CHAPTER 05 Competing Frameworks: Mandatory Climate Disclosure Is (Almost) Here
Our Take: Getting Ahead of Mandatory Disclosure
It is certainly possible that the CSA may opt to chart its own course and require Canadian issuers to provide a level of climate disclosure that is below, but generally consistent with, international standards; however, such a decision would potentially result in inconsistent climate-risk information being provided to investors across jurisdictions. This could undermine the CSA’s stated goal of promoting consistent and comparable climate-related information and data. The challenges faced by the CSA on this issue are similar to those that arose during the development of the federal Extractive Sector Transparency Act , whereby Canada ultimately opted to move forward, rather than wait for the challenges posed to the corresponding U.S. disclosure rules to be resolved. The CSA has confirmed that it will continue to monitor international developments regarding mandatory climate disclosure and that one of the stated goals of the CSA Proposal is to align Canadian disclosure standards with the expectations of international investors. It is therefore reasonable to expect that the CSA will, either in the short or the medium term, rethink its approach to climate disclosure in order to move closer to the transparency of the SEC Proposal or the ISSB Proposal. Furthermore, should the CSA Proposal diverge too greatly from the SEC Proposal, the rationale for the SEC’s plan to exempt Canadian issuers that rely on the multijurisdictional disclosure system from the disclosure requirements set out in the SEC Proposal (see our comment letter) would be
undermined, with the result that cross-listed issuers may have to align their disclosure with the more stringent SEC Proposal. That being said, it would not be surprising to see the CSA move forward with the current version of the draft rules, given the uncertainty over the timing (and fate) of the SEC Proposal and because the CSA Proposal is generally consistent with international trends and can be viewed as presenting a cost-effective and measured balance between the demand for investor-friendly disclosure and issuer exigencies. Despite the uncertainty surrounding the future of both the CSA Proposal and the SEC Proposal, Canadian issuers should be assessing their indirect GHG emissions (both Scope 2 and Scope 3), as well as evaluating the physical risks and transition requirements related to achieving any regulated or voluntary GHG emission-reduction targets in different climate scenarios. Furthermore, issuers who are currently required to disclose audited or verified GHG emissions data under any federal or provincial regulatory regime should ensure that any GHG emissions data disclosed pursuant to the CSA’s final disclosure rules are consistent with such audited or verified data. Finally, issuers must have suitable processes, procedures and personnel in place to gather and analyze key pieces of climate-related information and data to prepare for the mandatory disclosure requirements that remain on the horizon – but that are fast approaching.
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Davies | dwpv.com
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