CANADA Trends and Developments Contributed by: Bill Gilliland, Dentons
their impact on an issuer’s business, man - agement needs to undertake some scenario analysis as contemplated within the TCFD recommendations notwithstanding that the Climate Disclosure Proposals do not require disclosure in respect of those scenarios. In turn, boards would need to review that analy- sis. The use of scenario analysis as a tool to assess risks and opportunities is gener - ally understood to offer benefits in situations where the precise timing and magnitude of risks are uncertain, the analysis needs to be forward-looking, and risks (and opportunities) can be high impact where historical experi - ence is not necessarily a guide to the likeli - hood of their future occurrence. • Boards of directors will need to consider the annual timing of preparation of an issuer’s climate-related disclosure. Currently, many issuers are reporting this type of informa - tion in standalone sustainability reports and/ or other documents released throughout the year on different schedules from the typical annual disclosure cycle. • Boards of directors should consider any de facto requirement to disclose GHG emis - sions. They should consider whether there will develop (or maybe already has developed in some cases) a de facto requirement to disclose GHG emissions in their disclosure documents, notwithstanding that the Cli - mate Disclosure Proposals adopt “comply or explain” model allowing issuers to omit that disclosure if they explain why. Access to the various sustainable finance tools or funding from some institutional investors may already require that an issuer discloses its GHG emis - sions. If issuers enter into sustainability-linked financings based on GHG emissions, they will be reporting their GHG emissions to banks and bond holders. Canada’s largest banks (and other Canadian and international finan -
cial institutions) have established net zero emissions targets. To satisfy these require - ments, it seems likely issuers will face more general requirements to provide this GHG emissions disclosure to their banks. Many issuers are already providing GHG emissions information in investor presentations or in separate sustainability reports. Where inves - tors and other stakeholders are asking for this data, it becomes harder to argue the informa - tion is not “material” . • Boards of directors should consider whether the issuer should start early in addressing the disclosure contemplated by the Climate Disclosure Proposals. • Boards of directors will need to monitor the development of climate disclosure ratings and rankings established by third parties. As has occurred in respect of general governance disclosure (see, for example, the CCGG and The Globe and Mail Board Games), bench - marking of issuers’ climate-related disclosure has started. See, for example, the Climate Action 100+ corporate benchmarking which looks at corporate disclosures around cli - mate-related governance, reduction of GHG emissions and public disclosure following the TCFD recommendation. These rankings (and their score cards) are likely to become a con - sideration in the preparation of issuers’ public disclosure documents. Since the CSA’s Proposed Climate Disclo - sure Proposals, the International Sustainability Standards Board (ISSB) has issued a climate- related disclosure standard as well as a gen - eral standard for sustainability-related financial information (ISSB Standards). The Canadian Sustainability Standards Board (CSSB) has also issued its climate-related disclosure stand - ard and general sustainability standard (CSSB Standards), which are substantively the same as
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