The abrupt turn in the U.S. against efforts to address climate-related risks and the lack of diversity in corporate workforces is coming to Canada — with securities regulators halting their efforts to enhance disclosure to investors in these areas.
The Canadian Securities Administrators (CSA) announced that it’s “pausing” its work on new rules to mandate climate disclosures and expand the existing diversity-related disclosure requirements.
The CSA pointed to policy changes in the U.S. — where the U.S. Securities and Exchange Commission (SEC) recently abandoned its own efforts to beef up climate-related disclosures and the new U.S. administration has attacked diversity initiatives in government, academia and the corporate sector — as the reason for its move.
The Canadian regulators framed this as a competitive issue for domestic issuers and markets.
“In recent months, the global economic and geopolitical landscape has rapidly and significantly changed, resulting in increased uncertainty and rising competitiveness concerns for Canadian issuers,” said Stan Magidson, chair of the CSA and chair and CEO of the Alberta Securities Commission (ASC), in a release.
“In response, the CSA is focusing on initiatives to make Canadian markets more competitive, efficient and resilient.”
By pausing its work on climate and diversity disclosures, companies will be left to comply with existing rules in these areas, but won’t face expanded disclosure requirements.
Last December, the Canadian Sustainability Standards Board (CSSB) issued its first set of sustainability standards, which represented Canada’s effort to adopt the global standards developed by the International Sustainability Standards Board (ISSB) — however, without a CSA rule, those standards remain voluntary.
The regulators’ decision was criticized by environmental groups.
In a statement, Julie Segal, senior manager of climate finance at Environmental Defence Canada, said, “The CSA is being regressive. Postponing requirements for businesses to get prepared for climate change and align with positive climate action will only leave businesses less prepared, investors less informed, and Canada’s economy less competitive. Protecting Canada means requiring full climate risk disclosures and credible transition plans.”
Commenting on the CSA’s announcement, the CSSB said that it remains committed to supporting the voluntary adoption of its standards by Canadian issuers.
“These standards were developed to serve the Canadian public interest, ensuring investors and other parties receive the critical information necessary to assess climate and other sustainability-related risks and opportunities,” said Wendy Berman, incoming chair of the CSSB, in a statement.
“We recognize that regulatory approaches may evolve in response to market conditions, but the demand for credible, comparable sustainability information continues to grow – both globally and at home,” she added.
And, on workplace diversity, companies will still have to make disclosure about the representation of women on their boards and in top executive roles, but requirements to expand these disclosures beyond gender won’t be introduced.
The CSA said that it “will monitor domestic and international regulatory developments with respect to climate-related and diversity-related disclosures and expects to revisit both projects in future years to finalize requirements for issuers.”