The umbrella group representing several provincial securities regulators in Canada is looking into how well big, publicly-traded companies are disclosing climate risk to their investors.
While the research began in March, National Observer says it has received scant media attention until recently. “In light of the increased scrutiny being placed upon reporting issuers’ climate-related disclosure, we believe it is appropriate to review the state of such disclosure in Canada,” Canadian Securities Administrators Chair Louis Morisset said at the time.
- Concise headlines. Original content. Timely news and views from a select group of opinion leaders. Special extras.
- Everything you need, nothing you don’t.
- The Weekender: The climate news you need.
CSA members “have noted that many investors want more information about business risks prior to making investment decisions,” the Observer states. “A number of jurisdictions outside Canada have already adopted mandatory requirements for companies to disclose more information about the financial risks they face because of climate change.”
Canadian companies are required to disclose “material” risks to their operations, a provision that covers information a reasonable investor would likely want in making an investment decision, said Karine Péloffy, executive director of the Quebec Environmental Law Centre.
“It’s an objective test that always depends on the facts of the case, but generally speaking it’s always the same idea: if there’s a financial or reputational risk that can affect the value of securities, it needs to be disclosed,” she told the Observer’s Carl Meyer. If a company failed to disclose climate risks that might be detrimental to its business model, “the shareholders then would have potentially a court action open to them if they feel like the value of their investment was affected.”
Meyer notes that Environment and Climate Minister Catherine McKenna’s office is also following the issue. “The financial sector needs to account for the wide range of financial risks posed by climate change and emerging consumer preferences related to climate change,” press secretary Marie-Pascale Des Rosiers wrote in an email. “If these risks and opportunities are not adequately disclosed or understood, they cannot be factored into investment analyses or lending decisions.”