Investor demand for climate-related disclosure, as well as information provided by public companies, has grown dramatically in recent years. This has resulted in incomplete or inconsistent climate-related disclosure. In light of this, on October 18, 2021 the Canadian Securities Administrators ("CSA") published the proposed National Instrument 51-107 Disclosure of Climate-related Matters (the "Proposed Instrument") and its companion policy for a 90-day comment period. The Proposed Instrument would introduce disclosure requirements regarding climate-related matters for reporting issuers. This article summarizes the main components of the Proposed Instrument.
Key Highlights
- The Proposed Instrument covers four climate-related areas: governance; strategy, risk management, and metrics and targets.
- Proposed disclosure requirements will apply to a company's management information circular for governance disclosure, and a company's Annual Information Form ("AIF") or Management's Discussion & Analysis ("MD&A") for disclosure related to strategy, risk management, and metrics and targets.
- The disclosure requirements will be phased-in over a one-year period for nonventure issuers and over a three-year period for venture issuers. It is not anticipated that the Proposed Instrument will come into force prior to December 31, 2022.
- The Proposed Instrument is based on international climate-related disclosure standards.
- Comment period ends on January 17, 2022.
Description
In the spring of 2021, the CSA conducted a review of current public disclosure practices. In its review, the CSA noted specific concerns, including, among others, incompleteness, inconsistency, and limited quantitative information provided in the disclosure. As such, the goal of the Proposed Instrument is to provide clarity to issuers, bring Canadian disclosure standards in line with the expectations of international investors, and generally assist investors in making more informed decisions.
The Proposed Instrument is generally (with some modification) based on disclosure standards set out by the Task Force on Climate-related Financial Disclosure ("TCFD") in its final report of June 2017. The TCFD was established in 2015 by the Financial Stability Board, an international organization based in Switzerland. The CSA felt that the TCFD framework is appropriate since it provides a prevalent framework with global support, with several international jurisdictions working to adopt TCFD recommendations.
The Proposed Instrument contemplates a phased-in transition over one and three-year periods. Non-venture issuers would be required to comply beginning with annual filings in respect of the first financial year beginning after the effective date of the Proposed Instrument. For example, if the Proposed Instrument comes into effect on December 31, 2022, the requirements would apply to annual filings in respect of the financial year ending December 31, 2023. For venture issuers, disclosure requirements would apply beginning with annual filings in respect of the third financial year beginning after the effective date of the Proposed Instrument.
Proposed Disclosure Requirements
The following chart summarizes the disclosure requirements of the Proposed Instrument:
Area |
Related Disclosure Requirements |
Applicable Document |
| Governance |
Reporting issuers would be required to describe the following:
|
Management Information Circular |
| Strategy |
Reporting issuers would be required to describe the following, where such information is material:
|
AIF (or MD&A where the issuer does not file an AIF) |
| Risk Management |
Reporting issuers would be required to describe the following:
|
AIF (or MD&A where the issuer does not file an AIF) |
| Metrics and Targets |
Reporting issuers would be required to disclose:
|
AIF (or MD&A where the issuer does not file an AIF) |
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.