Summary Report of Private Sector Perspectives on Enhanced Climate Related Financial Disclosures

Final Report
September 16, 2021

Table of Contents

Executive Summary

This report provides a baseline of information on the state of play on climate-related financial disclosures in Canada, drawing exclusively on publicly available reports and pre-work submissions prepared for the Sustainable Finance Action Council (SFAC) in advance of its inaugural meeting in June 2021. This summary is intended to assist the SFAC as it begins to execute the Disclosure aspects of its overall mandate.

There is considerable momentum both here in Canada and globally to provide investors, insurers and lenders with the enhanced climate-related financial disclosures they are increasingly seeking, in support of sound capital allocation decision making. To be of value, such disclosures must be comparable, credible, relevant and robust, based on sound information that is both historical and forward looking. No jurisdiction will suggest it has 'arrived' at an ideal state related to these criteria but most, including Canada, agree that we cannot and should not wait for the ideal. We need to enhance our disclosure commitments and capabilities over time, identifying a path forward that achieves ongoing progress to the ideal while adding true value along the way. At the same time, we must maintain a sense of urgency demanding considerable progress within reasonable timeframes.

Progress is being made. As this report outlines, two significant milestones have been met in Canada. First, there is now support within private financial services sectors (banking, insurance, pensions) for enhanced disclosure based on the Task Force on Climate-related Financial Disclosure Framework (TCFD). While it is not unanimous, the level of support is significant enough to suggest that the "whether or what" considerations related to disclosure are largely answered though the 'how' considerations are not. Second, there is also increasing effort by a growing number of organizations and institutions to incorporate some aspects of the TCFD framework in reporting processes. While much more is needed, it is encouraging to see how much genuine effort is being spent.

As this report also outlines, major challenges and uncertainties exist related to the 'how' of Canada's disclosure journey. Stakeholders have provided perspectives and feedback on Canada's overall readiness, barriers to overcome and potential impacts to be considered. Consensus suggests consideration for a phased-in approach allowing for flexibility, safeguards where required, the ability to enhance access and usability of required data, and assurance that genuine value is generated by the efforts required. Given Canada's economic dependence on our resource industries and our need to ensure we find and keep competitive advantage where critically important for a prosperous country, thoughtful transition considerations are also essential components of a successful path forward.

Finally, Canada's disclosure pathway may, in fact, be a series of pathways, recognizing the governance and regulatory relationships and accountabilities related to disclosure. While this report does not delve into such considerations, we recognize the importance of these considerations in the work SFAC will undertake.

As noted earlier, this report does not provide much new perspective. It did not commission new engagement or outreach but rather gathered together major historical viewpoints and analyses to provide a baseline for SFAC's future work. The challenges and barriers outlined in this report will require further analyses with recommended responses. In addition, a broader effort to engage multiple private sector perspectives, issuer and non-issuer, and public sector expectations will also be required.

1.0 Introduction

The Government of Canada formally launched the Sustainable Finance Action Council (SFAC) in May 2021, with a mandate to bring together public and private sector financial expertise to support the growth of a strong, well-functioning, sustainable finance market. One of the SFAC's early emphases is on enhancing climate-related financial disclosures in Canada's public and private sectors, aligned with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). Appendix A outlines the TCFD Framework.

The SFAC's inaugural meeting took place on June 11, 2021. In advance of this meeting council members were asked to provide feedback on the foundational market infrastructure needed to attract and scale sustainable finance in Canada:

  1. Climate-related Financial Disclosures: Building upon the Government of Canada's commitment to TCFD (Budget 2021) by enhancing disclosure to achieve as broad as possible coverage across the economy in the near term.
  2. Taxonomy: Defining economic activities eligible for investment that are green or would support high-emitting companies in their transition to lower/net zero emissions.
  3. Data: Improving climate data and analytics to support investors and corporate issuers.

The above three areas of focus were presented as initial priorities for the SFAC and a series of questions (see Appendix B) were prepared to guide SFAC representative responses.

This report focuses on the first of the above three priority areas – Climate-related financial disclosures. It is intended to summarize key findings of SFAC pre-work submissions and public materials, with a focus on:

The report is organized into three primary sections. Drawing in part on certain publicly available reports, section 2.0 provides background information on domestic and international momentum for context. The section includes insight on what has changed in recent years in terms of political will and market acceptance of the need to address climate change and increase climate-related financial disclosures. Information is provided on the rise in investor demand for these disclosures, and jurisdictional initiatives in support of TCFD-alignment.

Section 3.0 provides an overview of the public material and pre-work submissions. It includes information on the progress Canadian companies have made in recent years on climate-related financial disclosures aligned with the TCFD Framework and summarizes common themes emerging from the various reports.

Section 4.0 provides insight on market readiness, barriers and impacts associated with climate-related financial disclosures in Canada.

Given scope and timelines, the report is limited to a review of publicly available material and SFAC pre-work submissions. It offers a baseline, or foundation, of the state of play in Canada on climate-related financial disclosures, intended to assist the SFAC in defining its next steps. The report does not draw on any "new" consultations or engagement with interested and impacted stakeholder groups in Canada. Nor does it include new primary research comparing and contrasting the approaches to disclosure being contemplated in other jurisdictions, and among standard-setting bodies and decision-making authorities.

2.0 Domestic and International Momentum

Climate change poses risks to and provides opportunities for all sectors of the economy. These include physical risks related to more frequent or severe weather events and risks related to the transition to a low carbon economy. The risks associated with the transition can result in challenges to asset values due to any number of business pressures: higher costs of doing business, policy risks (e.g., increased regulatory burden), or technology risks (e.g., reduced demand for a certain product). While climate change will increasingly bring disruptions to industry, companies are recognizing the potential for prosperity in a low carbon economy. The Global Commission on the Economy and Climate estimates that by 2030, the global market for low-carbon solutions will be worth $26 trillion, creating strong growth and as many as 65 million jobs around the world.

In 2016, the global Financial Stability Board, under the leadership of Mark Carney, commissioned the Taskforce on Climate-related Financial Disclosures (TCFD) to develop recommendations on how financial and non-financial companies could put forward more consistent and comparable disclosures of the financial risks and opportunities related to climate change. The objective underlying this initiative was that a more robust bottom-up view of climate resiliency and systemic risks and opportunities would promote more informed credit, investment, and insurance underwriting decisions. The voluntary framework, published in 2017, was based on four pillars: governance, strategy, risk management, and metrics and targets.

Since then, investor demand for enhanced disclosure of climate-related financial risks suggests that voluntary reporting may no longer be adequate. Climate change is a systemic issue, and physical and transition risks will likely impact organizations regardless of their GHG emissions intensity. In this light, mandatory reporting may address the imbalance where the energy sector has seen a greater take-up of TCFD reporting, whereas other sectors that receive less attention on climate issues are less likely to produce this reporting.Footnote 1 The EU was first to act in January 2019, releasing Guidelines on Reporting Climate Related Information, which was a supplement to the broader Guidelines for Non-Financial Reporting. Other countries, such as New Zealand and the UK, have announced plans to make TCFD-aligned disclosures mandatory over the next few years. More recently, the U.S. has signalled momentum to enhance climate-related financial disclosures with the Securities and Exchange Commission preparing a proposal to revise public company disclosure requirements to cover a range of ESG issues. Additional details on developments in other jurisdictions can be found in Appendix C.

To date, the TCFD framework has been endorsed by approximately 2,400 organizations and companies globally, including some of Canada's largest financial institutions and the Government of Canada, in Budget 2019. 97 of the TCFD signatories are Canadian, including 61 from the financial sector (7 deposit-taking institutions, 6 insurance companies, and 11 pension plans). The number of Canadian signatories has grown from 17 in 2017 and 44 in 2019 to its current level. In November 2020, the CEOs of Canada's eight leading pension plan investment managers called on all companies to measure and disclose their performance on industry-relevant ESG factors by leveraging the TCFD framework and the Sustainability Accounting Standards Board (SASB) standards. Additionally, in June 2020, 15 Canadian universities signed a charter on investing to address climate change, in which they agreed to abide by certain principles and practices that acknowledge the challenges posed by climate change.Footnote 2

In Budget 2021, the Government of Canada further announced that federal crown corporations will demonstrate climate leadership by adopting TCFD standards as an element of their corporate reporting. The Government of Canada, alongside its G7 and G20 counterparts, has also committed to move toward mandatory TCFD-aligned disclosures, in line with domestic regulatory frameworks, and supports the IFRS Foundation's proposal to establish an International Sustainability Standards Board (ISSB). The proposed ISSB would develop sustainability reporting standards in relation to climate and other environmental, social, and governance factors. It would, as a first priority, develop a climate reporting standard in conformity with the TCFD Framework. Canada has notified the IFRS Foundation of its interest in hosting the ISSB.

The FSB Roadmap for Addressing Climate-Related Financial Risks was released on July 7, 2021. Related to the Roadmap's first objective – the establishment of a global minimum standard for disclosures on climate-related risks – the FSB is unequivocal in its support for the IFRS Foundation's proposal to establish the ISSB.

Material risks and opportunities associated with climate change must be recognized, priced and mitigated or companies risk losing access to national and international capital flows. International developments and domestic initiatives, such as the Expert Panel on Sustainable Finance, and more recently the SFAC, recognize that establishing critical market infrastructures for sustainable finance, such as enhanced climate-related financial disclosures, will enable the mobilization of private capital toward a low-carbon economy.

The TCFD Framework is the leading framework globally for climate-related financial disclosures, recognizing that other frameworks are also in use for broader ESG reporting:

3.0 Overview of Public Reports and Pre-Work Submissions

The material reviewed in preparing this report can be divided into two categories. The first includes publicly available reports that are more academic in nature, looking at the situation in Canada and abroad more or less objectively. They assess Canada's progress on climate-related financial disclosures (compared to other jurisdictions in some cases) and make observations that are reasonably dispassionate. The reports mainly provide high level analysis on the reporting in Canada (i.e., which firms report, which elements of reporting are most prevalent) rather than in depth assessments of its quality. In general, there appear to be few comprehensive studies of Canadian companies' experience with TCFD disclosures.

The second group of reports consists of a handful of publicly available responses recently provided to regulatory bodies, or decision-making authorities that have sought input on climate-related financial disclosures and how best to proceed. This group also includes the pre-work submissions provided in advance of the SFAC's inaugural meeting.

Despite the different perspectives, the views expressed in all of the above reports – the issues and trends, as well as challenges, opportunities and possible solutions – are quite similar. In general, there is overall agreement with regards to "what" needs to be done and "why" – a big picture consensus of sorts. "How" to proceed is where the uncertainty emerges, with alternatives and competing priorities, particularly with respect to implementation, clouding the way forward.

Drawing from the first group of (the more academic) public reports, section 3.1 assesses the state of play in Canada, i.e. the progress Canadian companies have made in recent years on climate-related financial disclosures and alignment with TCFD.

Section 3.2 provides a brief overview of the second group of reports, including a synopsis of some of the key themes that emerged from the comments these entities provided in response to calls for input.

The key points from all of the above material are further unpacked in section 4.0, focusing on market readiness, barriers and impacts associated with enhanced climate-related financial disclosures.

3.1 Progress in Canada on Climate-Related Financial Disclosures and Alignment with TCFD

The public reports assessing the progress of Canadian companies' climate-related disclosures yield a mix of more or less favourable results, depending on the lens used for the review, assessment criteria, the sector being reviewed, the size of the company, or other factors. Some of these public reports focus exclusively on GHG reporting, others focus on alignment with TCFD recommendations, while others look at (or at least comment on) ESG reporting more broadly.

EY, The Chartered Professional Accountants Canada (CPA), the Global Risk Institute in Financial Services, the Institute for Sustainable Finance (ISF) and Millani have all conducted relevant studies on Canadian companies' progress in enhancing their climate-related disclosures.

The above reports generally conclude that Canadian companies' climate-related financial disclosures have been improving in recent years, but more needs to be done to address various challenges and to ensure Canada is ready for a rapidly evolving landscape, with increasing demands by stakeholders. As well, the reports also raise the potential effect climate risks can have on access to capital.

The EY Global Climate Risk Disclosure Barometer assesses disclosures made by more than 1,100 companies in 42 countries, including 56 Canadian companies. The study found that Canadian companies, on average, disclosed information on 85% of the TCFD recommendations, comparable to Africa, the US, and western/northern Europe, but lagging Japan and the UK. By this metric, Canadian companies were ahead of the global average by 15%. The quality of Canadian disclosures, i.e., the extent to which they addressed every element of the TCFD recommendation, was measured at 51%, 9% higher than the global average but below the results for the US, UK, western/northern Europe. Canada's results for the quality metric had improved relative to the 2019 study, which EY attributed to increased investor interest, federal government support for TCFD, and a group of asset owners calling for better disclosure.

In reviewing 40 TSX companies across sectors in 2016 and 2019, CPA Canada notes that climate-related disclosures have improved in the intervening years, however, investor demands are not yet being satisfied. The 2019 CPA report notes that the TCFD recommendations are being "widely recognized and implemented", but that alignment is only partial. Almost all of the companies reviewed provided some TCFD aligned disclosures.

Based on a much larger review of 228 TSX companies, the results of the Millani study are less encouraging in terms of TCFD adoption and alignment. The report states that the majority of companies reviewed (54%) made no mention of TCFD in their reporting. Twenty-three percent indicated that they were aligned with the TCFD recommendations, with the balance planning to align or mentioning TCFD in some way. These results likely reflect the fact that much smaller companies were included in the larger sample size and these companies have lagged in terms of climate-related disclosures.

The Global Risk Institute looked more specifically at 58 Canadian financial firms over a 3-year period (2017-2019) and concluded that less than half (25) were publicly disclosing in alignment with the TCFD framework. These results were enough for the report to conclude that Canadian financial firms are early adopters relative to other Canadian firms and on par among their peers globally.

The Institute for Sustainable Finance reviewed a similar number of TSX companies as Millani but focused exclusively on GHG emissions reporting. GHG reporting (Scope 1, 2 and 3) is a key component of the TCFD framework and particularly important in the Canadian context. The ISF report notes that the S&P/TSX Composite Index, which includes 200 of the largest publicly listed companies in Canada, is approximately 25% higher (in relative terms) than the S&P 500 Index and 68% higher than the Dow Jones World Sustainability Index (Global Equities). The percentage of Canadian companies reporting their GHG emissions (67%) was found to be lagging behind Europe (79%) and the UK (99%), but approximately equal to the US. The percentage of large Canadian companies failing to report on GHG emissions and the fact that only 65 companies obtain third party verification of these reports underscore the extent to which institutional investors must estimate the carbon intensity of their portfolios, posing a challenge for the transition to net-zero. On the positive side, the authors estimate that a substantial proportion of total TSX GHG emissions would be eliminated if the 60 companies with emission reduction targets achieved their targets (-17.3% reduction over 2019 levels by 2030).

Based on their analyses of the current state in Canada, the above reports offer recommendations to financial sector participants as well as policy considerations. Millani states that "delaying alignment with TCFD recommendations will make it more challenging to meet investor and regulatory expectations". CPA Canada, in turn, suggests that companies improve their climate-related disclosures by engaging peers, investors and other stakeholders on best practices. The CPA report also emphasizes increasing "climate literacy" and understanding of the regulatory landscape as climate disclosures continue to evolve, and indicates the importance of executive support and increased board engagement on these issues moving forward.

The Global Risk Institute report recommendations share similar themes to the ones referenced above but also discusses a role for policymakers in improving on the current state. This report, focusing on the Canadian financial sector, suggests that firms should improve the internal consistency of their reporting, balance reporting on opportunities with information about climate risks and impacts, innovate to reflect the complex and interconnected layers of climate risk, set and report on targets, and emphasize engagement at the senior executive and Board levels. To drive change at the firm level, the report speaks to the value of investors' consistent engagement and communication of expectations. The Global Risk Institute also acknowledges that policymakers should clarify requirements for mandatory and voluntary disclosure and provide foundation elements needed by firms where necessary, such as guidance on scenario analysis.

While the EY report did not specifically focus on recommendations for Canadian companies, it offered broad recommendations for firms to focus on analyzing the extent of the risks and opportunities they are facing as a result of climate change, how this should be reflected in organization strategy and execution, and how these factors should be communicated to the market.

Overall, there is no shortage of advice on what needs to be done to improve the quality and quantity of climate-related disclosures. The details of implementation remain as key outstanding issues, with work being required to set reporting requirements, define materiality, and determine a consensus on what constitutes "decision useful" information.

These issues tend to be addressed more specifically in the second group of reports where various stakeholders have responded directly to calls for input from regulatory bodies or decision-making authorities attempting to make progress on the way forward.

3.2 Input to Regulatory Bodies / Decision-Making Authorities – Other Public Reports and Pre-Work Submissions

As mentioned above, there is some consensus related to what needs to be done but uncertainty regarding how. Timing, level of detail, accountability, alignment, authority and definitions are among the technical issues that need to be resolved.

Canadian Input to the Expert Panel on Sustainable Finance and Other Reporting Initiatives

With this in mind, various initiatives have been launched with a view to soliciting responses to key questions and issues on how best to proceed with enhanced climate-related reporting. For example:

SFAC Pre-Work Submissions

More recently, the SFAC requested input from its participating organizations on the foundational infrastructure needed to attract and scale sustainable finance in Canada.

The pre-work submissions were quite succinct and generally followed the line of questioning outlined in Appendix B. As such, the comments centred around the three initial priorities of the SFAC, including: (i) disclosure aligned with the TCFD recommendations; (ii) taxonomy considerations for Canada; and, (iii) better access to reliable and consistent data and analytics.

The feedback provided from SFAC organizations (19/25) is the latest in the Canadian context from stakeholders keenly interested and involved in shaping a uniquely Canadian response to the challenge of climate-related financial disclosures that will be accepted and respected at home and abroad.

Highlights from the Public Reports and Pre-Work Submissions

As mentioned above, many of the key themes (issues, challenges, recommendations) that emerged from the public reports and pre-work submissions were quite similar and tended to focus on implementation issues, given the nature of the consultations. Some of the key themes include:

4.0 Market Readiness, Barriers and Impacts Associated with Enhanced Climate-Related Financial Disclosures

Drawing from all of the public material and pre-work submissions, this section converts the main points summarized above into insights on market readiness, barriers and impacts associated with enhanced climate-related disclosures aligned with the TCFD Framework. The following chart provides a roadmap, with supporting rationale to guide further discussion related to these key themes.

Market Readiness

Issues affecting market readiness for enhanced climate-related disclosures

  • Smaller Issuers Challenged
  • Mandatory vs. Voluntary Disclosure

Examples of conditions or requirements that help achieve market readiness

  • Phasing / Timing
  • Flexibility
  • Comply or Explain / Safe Harbour

Examples of required sophistication in the market holding back market readiness; these represent a required maturation process as opposed to simple barriers to be overcome

  • Maturity
  • Data Integration / Inter-connections
  • Scenario Analysis
  • Scope 1,2,3 Emissions
  • Materiality
  • Governance

Lack of agreement – consensus barriers to overcome

  • Multiple Disclosure Approaches/Methodologies
  • Taxonomy Issues

Organizational – clear (easily understood) structural barriers to overcome

  • Regulatory Landscape
  • Third Party Data Providers
  • Centralized Data Hub

Key Points on Market Readiness

To increase broader market acceptance of, and readiness for an enhanced, mandatory reporting regime, the public material and pre-work submissions outlined what would be required, for companies of all sizes, to be able to move towards compliance.

Key Points on Barriers

There was broad agreement in the submissions on a number of barriers to be overcome to allow for the implementation of enhanced climate-related financial disclosures. These can be organized into two sub-groups: (i) consensus-related barriers, where agreement on how to proceed would help clear the path; and (ii) structural barriers, where changes (improvements) in the way companies are organized and do things would eliminate unnecessary friction on the path forward.

Consensus Barriers

While there is broad consensus that Canada should align with international efforts related to 'green' taxonomy, with specific reference to the significant work done by the EU, squaring this thinking with the notion of a "transition" taxonomy uniquely tailored to Canada's economic reality is more complicated, posing challenges for downstream reporting requirements.

Structural Barriers

Separate and distinct from the above consensus-related barriers are the following structural barriers.

Key Points Spanning Market Readiness and Barriers

The public material and pre-work submissions include a number of key points that could be understood as commentary on either the market's readiness to enhance climate-related disclosures or as barriers to moving forward. These issues tend to imply that the level of analytical sophistication in the market needs to increase to enable the provision of meaningful "decision-useful" climate-related disclosures. As such, they are barriers of sorts, but also acknowledge that the market can only move so fast towards full alignment with the TCFD Framework, given the evolving nature of some of the methodological challenges.

5.0 Conclusion

Investors, insurers, and lenders are keen to enhance their understanding of and response to both the risks and opportunities of climate change and the world's march towards net-zero 2050. There is substantial global momentum on the need for climate-related financial disclosures that are comparable, credible, relevant and robust.

While it is not unanimous, the level of support in Canada is significant enough to suggest that the 'whether or what' considerations related to enhanced climate-related financial disclosure are largely answered though the 'how' considerations are not. More work is required to determine the impacts associated with enhanced climate-related financial disclosure requirements. The SFAC's Disclosure Technical Expert Group will work to collect perspectives on how Canadian financial sector participants and non-financial corporations can best move to adopt climate disclosure requirements, in Canada and internationally. Through this exercise, market participants and stakeholders will provide their views on the impacts of implementing enhanced climate disclosures that are either market driven (e.g., out of expectations from domestic or international investors) or spurred by actions from official sector bodies (e.g., changes to regulations or supervisory practices, international adoption of taxonomies or signals about cross-border carbon tariffs).

This report is intended to help the SFAC take stock of the state of play in Canada in support of its future work as it contributes to Canada's commitment to being a full participant on the road to a decarbonized future.

Appendix A – Task Force on Climate Related Disclosures (TCFD) Framework

To help identify the information needed by investors, lenders, and insurance underwriters to appropriately assess and price material climate-related risks and opportunities, the Financial Stability Board established an industry-led Task Force on Climate-related Financial Disclosures in 2017.

The TCFD recommendations were submitted to the G20, consisting of a set of voluntary disclosures focused on making climate change-related information consistent, comparable, reliable, clear, and decision-useful.

The TCFD Framework has become industry best practice for reporting on climate-related risks and opportunities. Other disclosure frameworks, including the Carbon Disclosure Project (CDP) and the Sustainability Accounting Standards Board (SASB), have also aligned with these recommendations.

Climate-Related Risks, Opportunities and Financial Impacts

Risks – The TCFD divided climate-related risks into:

Transitioning to a lower-carbon economy entails extensive policy, legal, technology, and market changes to address mitigation and adaptation requirements related to climate change. Physical risks can be event driven (acute) or longer-term shifts (chronic) in climate patterns. Physical risks may have financial implications for organizations, such as direct damage to assets and indirect impacts from supply chain disruption.

Opportunities – Climate-related opportunities include efforts to mitigate and adapt through resource efficiency and cost savings, the adoption of low-emission energy sources, the development of new products and services, and building resilience along the supply chain. Climate-related opportunities will vary depending on the region, market, and industry in which an organization operates.

As outlined below, climate-related risks and opportunities can affect organizations' revenues and expenditures, estimates of future cash flows, as well as their assets and liabilities in a number of ways.

Figure 1
Climate-Related Risks, Opportunities and Financial Impacts
Figure 1: Climate-Related Risks, Opportunities and Financial Impacts
Text version

The image shows that the following factors may have financial implications for organizations:

  • Risks
    • Transition
      • Policy and legal
      • Technology
      • Market
      • Reputation
    • Physical
      • Acute
      • Chronic
  • Opportunities
    • Resource efficiency
    • Energy source
    • Products/Services
    • Markets
    • Resilience

In turn, it can affect the following:

  • Income statement
    • Revenues
    • Expenditures
  • Balance sheet
    • Assets
    • Liabilities
    • Capital

To fulfill its remit, the Task Force developed the following four widely adoptable recommendations on climate-related financial disclosures applicable to organizations across sectors and jurisdictions.


Disclose the organization's governance around climate-related risks and opportunities.

Recommended Disclosures
  1. Describe the board's oversight of climate-related risks and opportunities.
  2. Describe management's role in assessing and managing climate-related risks and opportunities.

Disclose the actual and potential impacts of climate-related risks and opportunities on the organization's businesses, strategy, and financial planningwhere such information is material.

Recommended Disclosures
  1. Describe the climate-related risks and opportunities the organization has identified over the short, medium, and long term.
  2. Describe the impact of climate-related risks and opportunities on the organization's businesses, strategy, and financial planning.
  3. Describe the resilience of the organization's strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario.
Risk Management

Disclose how the organization identifies, assesses, and manages climate-related risks.

Recommended Disclosures
  1. Describe the organization's processes for identifying and assessing climate-related risks.
  2. Describe the organization's processes for managing climate-related risks.
  3. Describe how processes for identifying, assessing, and managing climate-related risks are integrated into the organization's overall risk management.
Metrics and Targets

Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material.

Recommended Disclosures
  1. Disclose the metrics used by the organization to assess climate-related risks and opportunities in line with its strategy and risk management process.
  2. Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the related risks.
  3. Describe the targets used by the organization to manage climate-related risks and opportunities and performance against targets.

Appendix B – Questions Guiding SFAC Pre-Work Submissions

  1. The Sustainable Finance Action Council (SFAC) is mandated overall to provide financial sector input on the foundational market infrastructure needed to attract and scale sustainable finance in Canada, building on the current strengths and successes of our financial sector. Our mandate suggests three initial high priority areas of focus: disclosure aligned with the TCFD recommendations; taxonomy considerations for Canada; and better access to reliable and consistent data and analytics in support of sustainable finance efforts.
    • Do these initial priorities adequately address the key requirements for Canada to strengthen its ability to align with global developments appropriately, while balancing the economic opportunities it is best positioned to embrace? Is there a need to further prioritize within these three areas of focus?
    • Are we missing a critical additional area of focus that should be added to our work plan?
    • How would you define success for the SFAC given this mandate? Can you share specific key success indicators we should adopt as we develop our work plan?
  2. Focusing on Disclosure:
    • How would you define our current state of play in Canada? What are the top of mind or key barriers and concerns related to enhancing both coverage and quality of disclosure? How do approaches need to change to incorporate more inclusive considerations related to environmental, social and governance factors? How well does the TCFD framework address these considerations?
    • Recognizing the global momentum related to mandatory disclosure aligned with the TCFD framework, what are the mechanisms you would need to see developed and the milestones achieved for you to advocate for a mandatory regime in Canada?
  3. Focusing on Taxonomy:
    • Work has been underway for two years to define a transition taxonomy for Canada that reflects the need to address Canada's challenges and opportunities, while recognizing the need to align appropriately with global development and be viewed as credible. How do we get this initiative over the finish line?
    • In addition to defining a Canadian transition taxonomy, how important is it to develop a made-in-Canada 'green' taxonomy or are our needs better served by aligning with global green taxonomy development efforts?
  4. Focusing on Data:
    • Data access, quality and coverage is increasingly being highlighted as a barrier to implementing successful sustainable finance decision making and enhancing support for green investments. What do you see as a priority to ensure data is available to support integration of sustainability into the decision-making process? What is the one key ask you would have, the one key area of focus you would want to see on our work plan?

Appendix C – TCFD framework in various jurisdictions

The following chart from the Millani report illustrates how some jurisdictions are increasingly relying on the TCFD recommendations as a framework for climate-related disclosure for both issuers and financial institutions.

Figure 2
The rise of mandatory TCFD reporting
Figure 2: The rise of mandatory TCFD reporting
Text version
January 2019 EU integrates TCFD recommendations into non-binding 2019 guidelines for corporate disclosures of climate-related information
June 2019 Canada's Expert Panel on Sustainable Finance recommends Finance Canada to define and pursue a 'Canadian approach' to TCFD implementation
September 2020 New Zealand requires TCFD reporting for banks, asset managers, insurance companies, crown corporations, and publicly listed equity and debt issuer
November 2020 UK FCA announces intent to require TCFD disclosure for corporate issuers
January 2021 Ontario Capital Markets Modernization Taskforce supports mandatory TCFD reporting
March 2021 The Securities and Exchange Commission begins examining mandatory TCFD-aligned climate reporting
April 2021 Canada Crown corporations required to adopt TCFD disclosure
May 2021 Canada launches Sustainable Finance Action Council with focus on enhancing TCFD-aligned disclosure
June 2021 G7 finance ministers back mandatory TCFD reporting for issuers and financial institutions
January 2022 The EU Sustainable Finance Disclosure Regulation (SFDR) requires asset managers to report on climate change mitigation and adaptation

In addition to the above, a sampling of related international initiatives demonstrating ongoing momentum on climate-related disclosures and TCFD alignment include:


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