In October 2021, the CSA published a proposed Regulation 51-107 Respecting Disclosure of Climate-related Matters (“Regulation 51-107”). The consultation period, which was supposed to end on January 17 of this year, was extended until February 16, 2022 and the CSA is aiming to have the Regulation 51-107 in force by December 31, 2022.
The primary objectives of this new regulation are to provide clarity to issuers regarding climate-related disclosure, to promote consistency, and to allow issuers to compare themselves. The following is a summary of the proposed new disclosure requirements that will be applicable to reporting issuers, and the corresponding transitional periods.
The proposed new disclosure requirements are based on the 4 key concepts (i.e. governance; strategy; risk management; and metrics and targets) drawn from the Task Force on Climate-related Financial Disclosures (the “TCFD”) recommendations published in June 2017.
- For the governance concept: Regulation 51-107 will impose two new disclosures, the first being a description of the board’s oversight of climate change risks and opportunities and the second being a description of management’s role in assessing and managing climate change risks;
- For the strategy concept: There are two required disclosures: to describe the short-, medium-, and long-term risks and opportunities related to climate change, and to describe the impact of climate change risks and opportunities for business, strategy, and financial planning. However, there will be a duty to disclose only when material information is involved;
- For the risk management concept: The new disclosures are to describe the processes for identifying, assessing and managing climate-related risks, as well as to describe how these processes are integrated into the overall risk management;
- Finally, for the metrics and targets concept: The Regulation 51-107 will require disclosure of metrics used to assess climate-related risks and opportunities in accordance with the issuer’s strategy and risk management process, as well as disclosure of targets used to manage climate-related risks and opportunities and performance against targets. These disclosures will only be required if they contain material information. Disclosure of selected information and metrics related to greenhouse gas emissions is not mandatory. However, an issuer opting out of this must report the reasons for not disclosing such information.
The CSA has opted for a transition period varying between one and three years, depending on the type of issuer:
- A non-venture issuer: Must comply with the Regulation 51-107 for financial years beginning on or after January 1 of the first year following the effective date of the draft Regulation 51-107; and
- A venture issuer: Must comply with the Regulation 51-107 for financial years beginning on or after January 1 of the third year after the effective date of the draft Regulation 51-107.
The current draft Regulation 51-107 does not require issuers to provide a “scenario analysis”, as was recommended in the 2017 TCFD report. The analysis would have described how resilient an issuer’s strategies are to climate-related risks taking into consideration a transition to a lower-carbon economy consistent with a 2°C or lower scenario and increased physical climate related risks.
Upon closing of comments, the CSA will finalize the Regulation. If Regulation 51-107 comes in force by December 31, 2022 as intended by the CSA, selected issuers will need to be in compliance by 2023.
