Are Mandatory Climate Risk Disclosures on the Horizon in Canada?

By Carol Aziz, PhD, PEng, Ramboll Canada Inc.

Climate-related risks and opportunities are expected to grow in the coming years. As the world warms, more extreme weather and increased flooding, wildfire, drought, and sea level rise are expected to more regularly disrupt supply chains and increase the need for abrupt policy responses.

In 2015, the G20’s Financial Stability Board established the Task Force on Climate-related Financial Disclosures (TCFD). In 2017, they released voluntary guidelines for disclosing climate-related risks and opportunities to influence investment decisions and capital allocation [1]. By understanding present and future climate risk and opportunities, companies can choose to minimize risk and capitalize on opportunities, while shareholders can choose to invest in companies with lower climate risk and lower carbon emissions, thus accelerating the transition to a climate-resilient and low carbon economy.

Because these guidelines are voluntary, they have not been widely nor uniformly adopted. The 2019 TCFD Second Status report showed that while disclosures had increased over the preceding three years, the presented information was insufficient for investors to understand the financial impact of climate-related issues on companies [2]. Mandatory disclosure and more specific guidance appear to be needed to drive more complete, consistent, comparable, and decision-useful climate disclosures.

In Canada, there have been some signals that climate risk disclosure may become mandatory. The Canadian government’s Expert Panel on Sustainable Finance released a report in 2019, which advocated for TCFD implementation under a mandatory regime [3]. In addition, it is now mandatory for Canadian companies that are Principles of Responsible Investment (PRI) signatories to report certain climate indicators [4]. Mandatory climate-related financial disclosure is now also part of the Canadian government’s pandemic response. The Trudeau government recently announced that they would provide bridge loans to large and medium sized companies; however, the loans require that companies publish annual climate-related disclosure reports, including how their future operations will support environmental sustainability and national climate goals [5]. 

Since mandatory disclosure appears to be on the horizon, Canadian companies should start voluntarily disclosing now to better prepare for mandatory climate risk disclosure in the coming years . 

Here’s how Ramboll can help:

·        Ramboll conducts climate risk assessments to analyze climate risks and opportunities, including both high-level risk screening and detailed assessments.

·        We perform forward-looking scenario analyses as required by the TCFD to support climate risk disclosures.

·        We can assist with CDP disclosure reporting.

·        We can provide recommendations to mitigate risk and adapt to climate change.

For information, please contact: Dr. Carol Aziz, Ramboll Canada – [email protected]

References

1. TCFD, Final Report – Recommendations of the Task Force on Climate-related Financial Disclosures, June 2017

2. TCFD, Task Force on Climate-related Financial Disclosures, Status Report, June 2019

3. Government of Canada, Final Report of the Expert Panel on Sustainable Finance, Mobilizing Finance for Sustainable Growth, 2019.

4. PRI, TCFD-based reporting to become mandatory for PRI signatories in 2020.Feb. 18, 2019 https://www.unpri.org/news-and-press/tcfd-based-reporting-to-become-mandatory-for-pri-signatories-in-2020/4116.article [retrieved May 28, 2020]

5 A. Wherry, CBC News, Pandemic or not, Canada still faces a climate crisis – and the clock is ticking, May 13, 2020.