In the face of mounting environmental and social challenges, regulators around the world are introducing climate-related reporting requirements at an ever-increasing pace.
In the latest landmark ruling, the U.S. Securities and Exchange Commission last month approved its highly anticipated rules mandating material climate risk disclosures by public companies. Despite its subsequent decision to pause implementation amid a series of legal challenges, the SEC is holding its ground on the new climate disclosure requirements. At the same time, regulations continue to emerge everywhere from Europe to Singapore further signalling that enhanced sustainability disclosure is here to stay.
What’s in store for Canada’s capital markets?
The Canadian Securities Administrators (CSA) is also taking measures toward developing country-specific rules for sustainability disclosures and monitoring international developments in this area.
As recommended by the independent review committee on standards setting in Canada, the Canadian Sustainability Standards Board (CSSB) was formed to ensure that the global standards developed by the International Sustainability Standards Board (ISSB) are fit for purpose for the Canadian context. The CSSB recently released its first disclosure standards for public consultation, with the aim to issue the finalized recommendations in mid-September.
It is anticipated that the CSA will then open a consultation on regulation for Canadian capital markets and that the CSA will focus on those standards that support climate-related disclosures, as seen with other global regulators.
Organizations such as Chartered Professional Accountants of Canada (CPA Canada) have been vocal supporters of the value of mandatory disclosure regimes for improving corporate transparency and accountability.
Business and finance have a major role to play in advancing sustainability standards and should rightfully have a voice in shaping their adoption for the Canadian market. The accounting profession has a particularly unique opportunity to lead the charge in the development, implementation, and assurance of sustainability and climate-related reporting and disclosures.
“With a long history of ensuring that organizations assess and manage risk and report trustworthy information in the capital markets, Canadian CPAs will be instrumental in helping companies build credible sustainability strategies and transition plans,” says Pamela Steer, CPA Canada’s president and CEO. “These are deliverables that businesses across all sectors and industries should be prepared to produce in the foreseeable future.”
Another Canadian regulator, the Office of the Superintendent of Financial Institutions which oversees Federally Regulated Financial Institutions (FRFI) and pension plans released guidance for FRFIs on climate-related disclosures in March 2023.
You can't manage what you can't measure
In an increasingly interconnected global economy, harmonized reporting frameworks are imperative for Canadian companies to remain competitive and attract investment. However, without the systems in place to collect relevant and accurate climate-related data, businesses risk flying blind when charting their course toward a sustainable future. Likewise, shareholders and other stakeholders require reliable and comparable data to effectively assess an organization’s true impact.
EY Canada’s 2023 Climate Risk Disclosure Barometer confirms that only 26 per cent of the more than 1,500 companies analyzed are incorporating the quantitative impacts of climate-related risks in their financial statements.
However, the changing rules and requirements are creating an increased need to empower both the users and preparers of climate-related information with best practices for disclosing sustainability performance.
CPA Canada has stepped up to the challenge, acknowledging the pivotal role that CPAs play in driving sustainable business practices and facilitating informed decision-making. The CPA profession has been active in the sustainability space for more than 20 years, raising awareness about the impact of environmental, social and governance factors on maintaining a healthy economy.
“Our collective strength positions the Canadian accounting profession and Canada as a whole to adapt to shifting regulatory frameworks and stakeholder preferences, but we still have a long way to go to drive meaningful climate action” says Steer.
Tools of the trade
As the national accounting body and an ISSB capacity building partner, CPA Canada produces a wealth of practical tools and resources to support CPAs and other business leaders in navigating the obligations and challenges that go hand in hand with rapidly evolving mandatory disclosures.
CPA Canada’s virtual ESG Symposium this June will bring together industry experts, thought leaders, and practitioners to explore trends and opportunities for championing sustainable economic growth and social development. The third annual ESG Symposium will lean into the theme of Action and Accountability to prepare and inspire CPAs and the broader business community on the role of good governance and controls in business accountability.
CPA Canada is also helping to build capacity for sustainability reporting through its highly regarded ESG Certificate program. Unique in the breadth and depth of material covered the program is designed to help CPAs and financial leaders harness the skills they already have in applying controls and rigour to financial information for use in the realm of sustainability.
To get started on your own journey to comprehensive climate-related reporting, visit cpacanada.ca.
