CHAPTER 08 ESG and Climate Change in the Shadow of COVID-19: “E,” “S” & G Are Here to Stay
Growing Acceptance and Importance of ESG Consistent with the past four years’ of Davies Governance Insights reports, this year we again have tracked and discuss Canadian public companies’ growing acceptance of the importance of environmental, social and governance (ESG) issues. In addition, we look at the trend toward more robust reporting of ESG issues, particularly climate-related financial disclosure. Over the next year, we expect that these trends will continue. 159 The varied and often significant effects of COVID-19 on companies have demanded urgent responses from boards and management to minimize these impacts. Nonetheless, ESG attracted heightened scrutiny in 2020, signalling the pronounced and sustained attention that ESG, especially its environmental and social components, will require of issuers in Canada and globally in the decade to come. Convergence of Climate Disclosure Frameworks Towards TCFD The 2017 Final Report: Recommendations of the Task Force on Climate-related Financial Disclosure of the Financial Stability Board’s Task Force on Climate- related Disclosures (TCFD) has emerged as the leading industry standard owing to its widespread support by government, 160 international organizations, 161 and the recent alignment efforts of other leading frameworks. As discussed in Davies Governance Insights 2019 , 162 the TCFD framework encourages disclosure of material information within four key areas: governance, strategy, risk management, and metrics and targets. 163 The TCFD also advocates for the use of scenario analysis to assess the resilience of an issuer’s business and risk-mitigation strategies under different climate-related scenarios. The TCFD recommends that disclosures with respect to strategy and metrics and targets be assessed for their materiality, as determined in a manner consistent with other risks in a company’s regulatory filings; however, it recommends that information in respect of governance and risk management processes be disclosed irrespective of its materiality, as shown in Figure 8-1.
ESG attracted heightened scrutiny in 2020, signalling the pronounced and sustained attention that ESG, especially its environmental and social components, will require of issuers in Canada and globally in the decade to come.
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