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Climate Change Disclosures and Investor Stewardship

Reading Time 5 minute read


ESG and Sustainability Bulletin


The Canadian Coalition for Good Governance ("CCGG"), which at last count has 53 Canadian institutional investor members that manage or oversee $4.5 trillion of assets, recently announced two new initiatives that build upon CCGG's previous work and upon events taking place around the world :

  1. Formally supporting the Financial Stability Board's Task Force on Climate-related Financial Disclosures ("TCFD") framework
  2. Encouraging CCGG members and the broader investment community to publicly signal their support of CCGG's Stewardship Principles (PDF)

These new initiatives continue to advance an overall global push for more and better environmental and social reporting by public companies and for stewardship by institutional investors and could help establish new benchmarks for public disclosure expectations and investor stewardship in Canada. Issuers and institutional investors should consider assessing their current practises in light of these initiatives.

Supporting the Financial Stability Board's TCFD Framework

In May 2018, after 18 months of work by CCGG's then newly formed E&S Committee, CCGG published The Directors' E&S Guidebook (PDF) in order to assist public company directors in assessing and overseeing environmental (E) and social (S) factors and to assist issuers in their disclosure of E&S matters. The guidebook outlines 29 principles-based E&S recommendations covering eight key governance areas. The eighth area is called "Disclosures to Shareholders" and CCGG makes the following comment in respect of the TCFD framework:

"CCGG considers the FSB-TCFD's disclosure framework a good model for companies to look to in contemplating their approach [to E&S disclosures to shareholders]. The FSB-TCFD's approach was developed with climate change risk in mind but has applicability across all material business risks and organizational types."

Canada's Expert Panel on Sustainable Finance delivered its final report in June 2019 (the "Expert Panel Report") (PDF) in which it made 15 recommendations to "put Canada and its key industries at the forefront of the transition to a climate-smart economy". In recommendation 5, the Expert Panel Report stated that "[t]houghtful climate-related disclosure enables investors and other stakeholders to see how a company views its resilience to climate change, and to what extent that company is adapting its governance, strategy, risk management practices, and metrics and targets accordingly" and recommended that the federal government "[e]ndorse a phased 'comply-or-explain' approach to adoption of the TCFD framework in Canada".

In May 2020 the Government of Canada announced the Large Employer Emergency Financing Facility as part of its COVID-19 economic response plan. In order to access this financing facility, employers must commit to publish annual climate-related financial disclosure reports consistent with the TCFD framework.

In June 2020, CCGG built on the foregoing by publicly supporting the recommendations of the TCFD, which CCGG stated is "the first time that CCGG has formally recognized a third-party framework as a best practice". CCGG went on to say that it views this move "as an imperative in the drive towards improving the data consistency, quality and usability of climate change disclosures, in the process assisting both issuers and investors" and that CCGG "is recommending that both issuers and investors move toward implementing the recommendations of the TCFD".

Earlier this month, Mark Carney, the United Nations Special Envoy on Climate Action and Finance, suggested that stock exchanges around the world should support an initiative to have listed companies report climate disclosure under the TCFD framework.

Supporting CCGG's Stewardship Principles

In May 2017, CCGG published its Stewardship Principles updating its previous publications from 2010 and 2005. The seven principles in CCGG's May 2017 publication were republished on CCGG's website in May 2020, without changes from 2017. CCGG notes that for institutional investors, "stewardship is the fulfillment of their fiduciary duties to their clients or beneficiaries" and that CCGG "views investor stewardship as the necessary counterpart of the good corporate governance practices expected of corporations". 

CCGG states that "[t]he purpose of stewardship is to focus investors on the sustainable creation of value over the long-term for the benefit of companies, investors, markets and society as a whole". CCGG also states that the seven principles "are aspirational in nature and were created to align with similar codes or principles in other countries while reflecting the unique nature of Canada's capital markets". 

In recommendation 6, the Expert Panel Report stated that "the Canadian Government has a clear opportunity and imperative to clarify that fiduciary duty today does not preclude the consideration of relevant climate change factors. In fact, evolving sustainability principles and international best practice increasingly require such considerations". The Expert Panel Report went on to recommend that the federal government should "[s]upport the development of a Canadian Stewardship Code for investment fiduciaries" and that the code should "outline how fiduciaries should account for climate change and other material ESG matters".

In June 2020, CCGG aimed to "raise the profile" of its stewardship principles and to establish them as "the Canadian standard for stewardship" by asking its members to "publicly endorse the principles" by signing up on CCGG's website and "by opening this endorsement opportunity to non-member investors and the Canadian governance community". CCGG indicates that members will not be required to report against the principles nor will CCGG be monitoring members' compliance. CCGG states that this initiative "is consistent with our on-going efforts to fully integrate E&S matters into our mandate" and that the principles provide a roadmap for CCGG's members and other Canadian investors to follow in order to "enhance the long-term sustainable creation of value so companies and their investors can prosper and, in the process, benefit the market and society as a whole".


Recommendations in the Expert Panel Report, CCGG's public support of the TCFD framework for companies and CCGG's request for Canadian institutional investors to publicly sign on to CCGG's stewardship principles (which include engagement with portfolio companies) will impact Canadian public companies. The federal government has begun the process of implementing at least one of the recommendations in the Expert Panel Report (as evidenced by proposed funding for the Department of Finance and Environment and Climate Change Canada to create a private-public Sustainable Finance Action Council, as indicated on page 147 of the federal government's Economic and Fiscal Snapshot 2020 (PDF) published this month) and it is likely that more of the recommendations will be implemented in the future. Meanwhile CCGG as well as other organizations and institutional investors around the world are pushing for more climate-related financial disclosure by public companies. Accordingly, it would be prudent for boards and management to take note of these two recent CCGG initiatives.

If you have questions, feel free to reach out to your Fasken contact lawyer or to any member of Fasken's ESG and Sustainability group.

Author: Stephen Erlichman, LLM (NYU), MBA (Harvard), RIPC (RIA), Partner, Fasken. From 2011-2018, Stephen also was the Executive Director of CCGG and in that capacity oversaw the creation of CCGG's Stewardship Principles in 2017 and The Directors' E&S Guidebook in 2018, both of which publications are referred to in this bulletin.



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