CANADA Trends and Developments Contributed by: Bill Gilliland, Dentons
ing whether any changes need to be made in board composition to ensure the board has the necessary climate competencies to effec - tively provide this oversight. • Boards of directors should expressly task management with responsibility for assess - ing and managing climate-related risks and opportunities. This will involve the review and revision of role descriptions and mandates. As climate-related disclosure is added to an issuer’s management information circular, annual information form (AIF) or manage - ment’s discussion and analysis (MD&A), the annual and interim CEO/CFO certifications (National Instrument 52-109 Certification of Disclosure in an Issuer’s Annual and Interim Filings) will apply to that climate-related disclosure. Management will need to have designed disclosure controls and proce - dures to provide reasonable assurance that climate-related material information will be made known to the CEO and CFO, and that required disclosure on climate-related matters is made. Boards of directors will need to be comfortable that these controls and proce - dures are in place and have oversight over their effectiveness. • Boards of directors should consider board committee roles in the review and assess - ment of climate-related risks. Boards of directors should consider the mandates of any board committees that have delegated responsibilities around risk review and assessments, and carefully consider where the assessment of climate risks should fit within those board committees, if at all. • Boards of directors should specifically con - sider the role of the audit committee in the review and assessment of climate-related risks and opportunities. The assessment of climate-related risks and opportunities is likely to be done within existing enterprise
risk management systems, often overseen by the audit committee. At a minimum, the audit committee will need to ensure that once climate-related risks and opportunities are assessed, their implications are properly reflected in the issuer’s financial reporting including in assumptions, uncertainties and estimates made in the preparation of financial statements. • Boards of directors should be aware that the Climate Disclosure Proposals require climate-related disclosure to be contained in documents that by law must specifically be reviewed and approved by the board (namely, the corporation’s AIF, management proxy circular and, in some cases, the MD&A). Climate-related disclosure is often made in standalone sustainability or other reports. • Boards of directors will need to assess the materiality of climate-related risks and oppor - tunities. The Climate Disclosure Proposals require an issuer to disclose: (a) climate-related risks and opportunities (short, medium and long-term) and their impact on the issuer’s businesses, strat - egy and financial planning (Strategy); (b) the issuer’s processes for identifying, assessing and managing climate-related risks (Risk Management); and (c) metrics and targets used by an issuer to assess and manage climate-related risks and opportunities (Metrics and Targets) only where the information is “material” ie, where a reasonable investor’s decision to buy, sell or hold securities is likely to be influenced if the information is omitted or misstated. • Boards of directors should consider the need for scenario analysis as contemplated within the TCFD recommendations. They should consider whether in order to properly identify climate-related risks and opportunities, and
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