With Canadian companies continuing to flout climate risk disclosure regulations, even as many of their global competitors come clean, the CEO of one of the nation’s largest investment managers says the disconnect will come back to burn the economy, particularly as the country struggles to rebuild from the pandemic.
As investors increasingly expect companies to disclose their climate-related risks and opportunities, those that fail to provide such intelligence risk losing business to jurisdictions that have made greater transparency part of their bottom line, writes Roger Beauchemin, president and CEO of Montreal-based Addenda Capital, in a recent op-ed for the Globe and Mail.
With climate change imperilling Canada’s economy, Beauchemin urges businesses to “identify and manage those risks and to align their strategies with Canada’s updated national plan to reduce greenhouse gas emissions.”
Ready and waiting to help are the international Financial Stability Board and its Task Force on Climate-related Financial Disclosures (TCFD), which has “proposed a framework that captures governance, strategy, risk management, and targets and metrics for tracking successes.”
Founded in 2015, the TCFD now enjoys considerable support around the globe, explains Beauchemin, “Its 2020 status report states that more than 1,340 companies with a market capitalization of US$12.6 trillion and financial institutions responsible for assets of US$150 trillion have endorsed the TCFD framework,” alongside “more than 110 governments and regulators.”
Britain and New Zealand, he adds, have gone so far as to introduce “mandatory TCFD-aligned disclosure for companies in their jurisdiction.”
In Canada, the legal framework is ready and waiting.
“Canadian law already requires publicly-traded companies to disclose material climate-related risks,” Beauchemin says. “Last year, the Canadian Securities Administrators issued guidance that climate change is a mainstream business issue and that securities laws require disclosure of material climate-related risks and the management of those risks.”
None of this is proving sufficient, however, with many Canadian companies continuing to draw a heavy veil over matters of climate risk.
Such intransigence is serving the country poorly. “As Canada attempts to rebuild from the economic blow dealt by the COVID-19 pandemic, we cannot afford to risk losing access to investment capital as we fall behind on climate risk disclosure,” Beauchemin writes.
What’s needed is private sector action driven by public sector laws, he says. “The federal government should require federally-regulated companies and financial institutions to disclose management of climate-related risks and opportunities in alignment with the TCFD framework or to explain why they have concluded, after carrying out duly diligent assessment, that climate change does not pose a material risk to their business.”
Provincial governments should follow suit, he adds.
Canadian securities regulators, too, should step in, not waiting on government but instead acting immediately to help companies ensure compliance under existing climate risk disclosure laws. There is already a wealth of resources to assist companies in this task, notes Beauchemin, including the TCFD Knowledge Hub and the University of British Columbia’s Canada Climate Law Initiative, whose “climate governance experts from across the country offer their time free to meet with corporate boards to discuss effective climate governance.”