Last year, the international Sustainability Standards Board (ISSB) released its inaugural set of global reporting standards, setting the stage for enhanced climate disclosure. That framework took in January. What does this mean for Canada’s capital markets?

The ISSB’s standards are meant to be a global reporting baseline that national regulators adopt, improving transparency for investors. Here’s a breakdown of how the global standards are filtering down to Canada’s capital markets:


The ISSB standards, released in June 2023, aim to establish commonly used disclosures for climate-related risks and opportunities. The standards were designed to facilitate sustainability reporting as part of financial statements and were developed to be incorporated into International Financial Reporting Standards (IFRS).

IFRS S1 establishes disclosure requirements for sustainability-related risks. IFRS S2 sets out specific climate disclosures for companies, including Scope 1 emissions (produced directly by a company), Scope 2 (created by a company’s power consumption) and Scope 3 (all downstream emissions generated by a company).


With ISSB adoption underway, last year the G20-backed Taskforce on Nature-related Financial Disclosures (TNFD) issued its final recommendations on how companies should disclose nature-related risks. The aim of the voluntary, industry-led standards is to help investors consider nature-based risks and to shift capital toward efforts that protect forms of natural capital, such as biodiversity. (See story Adjusting portfolios to manage climate risks.) More than 100 financial firms around the world have committed to the TNFD recommendations.


In 2022, Canada’s accounting and auditing oversight bodies approved the formation of the Canadian Sustainability Standards Board to establish the ISSB standards in Canada. In March of this year, the CSSB released its draft standards — Canadian Sustainability Disclosure Standards 1 and 2 — based on the ISSB’s standards but with proposed modifications. Those include transition provisions to determine when the standards take effect in Canada. The consultation runs until June, and the standards will inform provincial regulators’ approaches.


The International Organization of Securities Commissions (IOSCO) endorsed the ISSB’s final standards and called on regulators around the world to adopt them.


The Canadian Securities Administrators were among the first regulators to propose enhanced climate standards, but their effort stalled waiting for the final ISSB standards and U.S. rules. In July 2023, after the final ISSB standards were released, the CSA said it intended to carry out further consultations to adapt the global standards for the Canadian context.

Rather than requiring mandatory disclosure, the CSA’s initial proposals in 2021 allowed companies to choose whether to report their greenhouse-gas emissions (Scope 1, 2 and 3) or explain why they’re not revealing that information. (The CSA also consulted on mandating Scope 1 disclosures.) The initial proposals wouldn’t require companies to provide investors with scenario analyses that assess climate risks under different hypothetical futures.

The CSA has yet to propose rules requiring ESG or climate-focused disclosure for investment funds, although it issued guidance in 2022 that aims to ensure funds aren’t misleading investors. It updated that guidance earlier this month.


In March 2022, the U.S. Securities and Exchange Commission (SEC) proposed rules requiring companies to disclose climate-related risks, transition plans and emissions data. The regulator proposed to mandate Scope 1 and 2 emissions reporting and to require reporting of Scope 3 emissions where “material.” Earlier this month, the SEC voted to scale back rules related to Scope 3 emissions. The SEC’s rules are likely to influence Canada’s adoption of the ISSB standards.

Also in 2022, the SEC unveiled proposals to increase disclosure requirements for investment funds.


The Office of the Superintendent of Financial Institutions (OSFI) issued principles-based guidance last year for how federally regulated banks and insurers should address climate-related risks. The guidelines aim to ensure financial firms: address climate-related risks to their business models; have adequate governance and risk management processes to deal with these risks; and can withstand a range of possible climate risk scenarios. Firms will be expected to carry out their own internal climate scenario analysis, and OSFI will also subject them to standardized climate scenario exercises to give the regulator insight into aggregate exposures and to compare firms’ approaches. The guidelines take effect by the end of fiscal 2024 for the large banks and insurers, and by the end of fiscal 2025 for smaller firms. OSFI said the guidance will evolve as climate data improves and global standards are adopted.

Read the original article online to see a visual breakdown of how the regulatory bodies are responding to the ISSB standards.

This article appears in the March issue of Investment Executive. Subscribe to the print edition, read the digital edition or read the articles online.