Regulations mandating climate-risk disclosures are required to improve reporting: ISF report

TORONTO, Oct. 27, 2022 (GLOBE NEWSWIRE) -- A new study by the Institute for Sustainable Finance (ISF) demonstrates that the current state of climate-related risk disclosures by Canadian companies is inadequate, which impedes the ability of financial institutions to properly price the opportunities and risks associated with climate change. This presents significant consequences for Canadian competitiveness, the functioning of Canadian markets, and the fight against climate change.

The study, titled “Partial Disclosure: Assessing the state of physical and transition climate risk disclosure in Canada,” by ISF Chair Dr. Sean Cleary and Senior Research Associate Simon Martin, provides a qualitative review and scoring of corporate climate-risk reporting to the leading global standard, the Task Force on Climate-related Financial Disclosures (TCFD). This is combined with interviews with boots on the ground practitioners and experts on where the gaps are and what needs fixing.

The report focuses on disclosures of physical risk, or the costs brought on by environmental damage from climate change, and transition risk, which is created by the changes in the economy produced by efforts to transition to Net Zero. It finds that, to date, capital providers are largely flying blind with regard to several climate-related risks and opportunities in their investment decisions.

Report author, Dr. Sean Cleary said that “the solutions to the issues exposed by this report are complex, but manageable if approached cooperatively, with clarity of intention, and with strong regulatory leadership and support.”

The report finds the following key areas for improvement:

  • Improve the breadth of climate-related reporting in Canada. Less than half of the largest corporations provided meaningful climate-related reports during 2020, and beyond the largest corporations such reporting barely exists at all.
  • Improve the quality of climate-related reporting, which is mediocre on average among the companies that do provide such information.
  • Ensure that reporting is in line with global standards, so as not to disadvantage both our capital providers, and the companies themselves that require capital at favourable market prices to prosper and remain competitive.
  • Improve the accessibility of the data which does exist.
  • Address issues regarding the education and leadership that illustrate the importance of such disclosures, with an increased emphasis on best practices.
  • Improve both the quantity and quality of scenario analysis, which provides critical information to both capital providers and disclosing companies (with respect to their strategies and risk management processes).
  • Address additional information gaps including the data provided by smaller public companies, private companies, municipalities, etc.

The insights from the experts interviewed for this report are powerful. The consensus among interviewees is that Canada has come to recognize the importance of climate-related disclosures and that progress is occurring, but that we have a long way to go in terms of providing the reliable, consistent, comparable and publicly available and accessible climate-related data that is essential. The critical importance of aligning Canadian regulations with evolving global standards such as those proposed by the International Sustainability Standards Board (ISSB) and US Securities and Exchange Commission (SEC) was also emphasized.

A few key quotes:

“The physical risk models are not always grounded in the Canadian reality, and that leaves our companies wary.” — Craig Stewart, Vice President, Climate Change and Federal Issues at Insurance Bureau of Canada. 

“… there’s a difference between what companies are saying and what they’re doing.” — Adam Rochwerg, Manifest Climate

“Quality of data varies significantly and tends to degrade as the size of companies decreases. When you get to privately held companies, which are, of course, the vast majority of Canadian organizations, quality moves from degraded to essentially non-existent.” — Pamela Steer, President and CEO, Chartered Professional Accountants of Canada

“I don’t know how you actually can do strategic planning without thinking through what the various scenarios are.” — Janis Sarra, UBC and Canada Climate Law Initiative

The ISF’s groundwork analysis and interview process both point to recommendations for improvement in climate-related reporting in Canada. They include:

  1. Effective and comprehensive regulation that provides globally consistent standards and makes reporting to such standards mandatory. Proposed disclosure requirements by the Canadian Securities Administrators should be harmonized with tougher and more thorough standards proposed by the International Sustainability Standards Board and US Securities and Exchange Commission.
  2. Improve the availability and accessibility of such data. This includes improving the quantity and quality of data that is provided, as well as improving access to data that already exists.
  3. Improved education and leadership regarding the importance and purpose for both providers and users of climate-related data.

Read more: Partial Disclosure: Assessing the state of physical and transition climate risk disclosure in Canada



The Institute for Sustainable Finance (ISF) is the first-ever multi-disciplinary and collaborative hub in Canada that brings together academia, the private sector and government with the singular focus of increasing Canada’s sustainable finance capacity. Its mission is to align mainstream financial markets with Canada’s transition to a prosperous sustainable economy, including long-term environmental sustainability. Housed at Smith School of Business at Queen’s University, the ISF will fill the gap of relevant data, expertise and business-oriented solutions for sustainable finance. By aligning financial knowledge and tools with climate change imperatives, the ISF will foster Canada’s leadership in the shift to a low-carbon global economy.


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