CSA Issues Staff Notice on Reporting of Climate Change-related Risks

The Canadian Securities Administrators (CSA) issued Staff Notice 51-358 Reporting of Climate Change-related Risks (the Notice) on August 1, 2019, with the objective of updating issuers on approaches to preparing disclosure of material climate change-related risks. The Notice reinforces and expands on CSA Staff Notice 51-333 Environmental Reporting Guidance, issued in 2010. The Notice was motivated by (i) increased investor interest, (ii) room for improvement in disclosure, and (iii) domestic and global developments, including the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and domestic voluntary disclosure frameworks. The Notices recognizes that climate change-related disclosure allows issuers to inform investors about the sustainability of their business and provide insights into how issuers have mitigated or adapted to climate risks. It addresses several key areas of climate change-related disclosure, including: Roles and responsibilities of board and management. Boards and management should take appropriate steps to understand and assess the materiality of climate risks to their business. The Notice encourages boards and management to adopt relevant, clear, and understandable entity-specific disclosure that assists investors in understanding how the issuer’s business is specifically affected by all material risks resulting from climate change. The Notice provides a set of select questions for boards and management to help inform their consideration of these risks. Importance of materiality. Materiality determines what information must be disclosed in continuous disclosure. The Notice advises issuers to ask whether omitting or misstating a climate risk would influence a reasonable investor’s decision to buy, sell, or hold their securities. The Notice recognizes that climate risks are difficult to quantify, but encourages issuers to carefully consider if they have any material exposure to climate risks, irrespective of whether they operate in carbon-intensive industries. Climate risks. The Notice groups climate risks into the following categories:

  • Physical risks

  • Acute (event-driven); and

  • Chronic (driven by longer-term shifts in climate patterns).

  • Transitional risks, including:

  • Reputational risks;

  • Market risks;

  • Regulatory risks;

  • Policy risks;

  • Legal risks; and

  • Technology risks.

Voluntary disclosure and Forward-Looking Information. Separate and apart from disclosure required by securities legislation, the Notice recognizes that voluntary disclosure and Forward-Looking Information provide useful information to investors both within and beyond an issuer’s regulatory filings. Voluntary disclosure (including through sustainability reports) can provide useful information to investors and should be prepared with the same rigour as the issuer’s regulatory filings. Issuers should consider the following in preparing such voluntary climate-related disclosure:

  • Material information required to be in regulatory filings;

  • The duty to ensure there are no misrepresentations; and

  • The duty to ensure there is no obscuring of material information.

Please contact Lisa DeMarco at lisa@demarcoallan.com should you wish to discuss the contents of this bulletin.

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