Canadian regulators losing grip on ESG standards lead – The Logic

Andrew MacDougall

Aug 23, 2022

As the effects of climate change continue around the world, more investors are demanding transparency from companies on the environmental impacts and risks of their operations. Much of the business world has already joined the sustainability movement, promising to reduce their carbon emissions and invest in greener processes, leading to the incredible growth of the sustainable finance market in recent years. International consensus on standards for measuring and disclosing those commitments, however, has not yet been reached.

The Canadian Securities Administrators released for comment a set of proposed rules for climate-related disclosure requirements last fall. Since then, larger bodies like the International Sustainability Standards Board (ISSB) and the American Securities and Exchange Commission (SEC) have proposed their own — more robust — standards. While some voices contend that Canada should take a wait-and-see approach, taking its cue from whatever the larger international community decides, others would prefer a homegrown plan, with Canada taking a leading role in defining the contours of sustainable finance.

Osler partner Andrew MacDougall, who leads the firm’s corporate governance practice, points out that before any guidelines the ISSB or another body eventually lands on take effect here, Canadian regulators would have to adopt them.

“Just because ISSB adopts a series of proposed disclosure doesn’t mean that it is binding on Canadian companies,” he says. “It becomes binding if it’s adopted by securities regulators as being their rules for disclosure.”

Moving ahead with its own climate disclosure rules, Andrew says, might mean that Canada just has to revise them down the road so that they align with the rest of the world.

“I would sincerely hope that our regulators — if they are comfortable that the new rules are going to come out of the ISSB and the SEC — will wait to see what those final rules look like, and then make a decision as to what to adopt for Canada.”

Andrew adds that Canadian regulators will have to consider unique local factors when determining their disclosure requirements. For example, those international bodies may not understand the complex role Canadian energy companies will play in the country’s energy transition.

“Our oil and gas industry is a big piece of the Canadian economy.”

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