An iceberg gounded near an old fishing stage

A review of climate change-related disclosure by the Canadian Securities Administrators’ (CSA) has identified room for improvement.

Although the review didn’t prompt any corrective actions, the CSA says in its report published Thursday, it revealed variation in the disclosure practices of companies, and uncovered widespread dissatisfaction among investors and analysts.

Last year, the CSA launched its review of climate change-related disclosure from 78 companies from the S&P/TSX composite index. It also carried out an online survey of 97 companies, and engaged in consultations with companies, investors, advisors, investor advocates, academics, rating agencies, and analysts.

Almost all of the users that the CSA consulted were “dissatisfied with the state of climate change-related disclosure and believe that improvements are needed,” the report says.

Investors and analysts told the regulators that disclosure in this area is either not provided or incomplete, or it’s viewed as vague and boilerplate.

“They also found the climate change-related disclosure provided by issuers often lacked clarity and consistency, which limited their ability to compare such disclosure between issuers. Certain users told us these deficiencies negatively impacted their ability to make voting and investment decisions,” the report says.

As a result, the CSA is considering work in several areas, including possible new disclosure requirements, and added guidance.

“Our consultations revealed a clear need for more information about the governance processes used to identify, assess and manage material risks and opportunities related to climate change. This includes the board’s responsibility for oversight. We are considering new disclosure requirements that address this,” says Huston Loke, director of corporate finance at the Ontario Securities Commission (OSC).

In particular, the CSA will consider new disclosure requirements relating to issuers’ governance and oversight of material business risks and opportunities generally, including climate change, as well as cybersecurity, disruptive technologies and impediments to free trade.

The CSA will be also develop new guidance, and will consider possible initiatives to better educate issuers on the disclosure of climate change-related risks, opportunities and financial impacts.

This new climate change guidance could cover:

  • legal/regulatory, physical, transitional and reputational risks;
  • the impact on revenues, expenses, cash flows, assets and liabilities;
  • the trends and uncertainties stemming from climate change; and
  • the governance and management oversight of risks.

The CSA will also consider launching various initiatives, such as seminars and publications (along with continuous disclosure reviews) to help educate issuers on their disclosure obligations in this area.

Looking ahead, the CSA expects that interest in this sort of disclosure will only grow. It plans to continue to track the ongoing development of climate change-related disclosure practices, issuers’ disclosure, and investors’ evolving needs.