Canada's Top Pension Investment Managers Support CSSB
The body in charge of sustainability accounting in Canada has issued its first standards, sticking closely to international guidelines but giving companies extra time to adopt some contentious provisions for emissions reporting, scenario analysis and timing of disclosures.
The Canadian Sustainability Standards Board said the additional time, or transition relief, for those measures will help strike a balance between providing investors the data they’ve demanded to make informed decisions and not putting companies at a competitive disadvantage as they take on additional reporting.
Major institutional investors on Wednesday welcomed the standards and urged companies to adopt them without delay, while environmental advocates expressed disappointment about the extended implementation periods.
The guidelines are based on those developed by the International Sustainability Standards Board to replace a mishmash of reporting templates for environmental and social risks with a global baseline. The CSSB started its work in 2023 to tailor those rules to an economy heavy in resource extraction and in small and medium-sized businesses.
The CSSB said its initial standards preserve the baseline by making sure all the provisions come into effect after its transition periods end. The guidelines follow months of public consultation on a draft it released early this year.
“What this means for Canada is we now have the first set of Canadian sustainability disclosure standards. They’re voluntary at this stage,” Bruce Marchand (featured above), interim chair of the CSSB, said in an interview. “We believe that with the transition relief that we’ve now included in response to what we heard from all of the respondents, that these are practical and able to be implemented.”
Sustainable investing professionals have been waiting for the standards. The new guidelines, along with a green and transitionary investment taxonomy recently approved by Ottawa, are aimed at adding certainty to sustainable investments, avoiding greenwashing and bolstering Canada’s ability to compete for green capital, their authors say.
The standards prescribe how to report key sustainability and climate metrics, including carbon emissions, risks and opportunities tied to environmental issues, analysis of potential policy options, and other items.
The rules are voluntary, though Canadian Securities Administrators, which represents provincial and territorial securities commissions, said it will use them to determine a future set of compulsory measures, starting with climate-related reporting.
The CSA said in a statement that it aims to issue rules that balance investor demands for consistent disclosures while contributing to efficient capital markets and keeping the capabilities of public companies of different sizes in mind. It will study the feedback the CSSB received, while also conducting its own consultation.
The regulator also said it plans to monitor events in the U.S. closely, given the interconnectedness of the two markets. With the change in administrations in Washington, the fate of planned climate reporting rules set by the Securities and Exchange Commission is now a major question mark.
Where the CSSB standards differ from the international ones is the time granted for adoption of some of the measures that faced opposition from many companies that submitted comments to the process.
For Scope 3 emissions – greenhouse gases that stem from a company’s supply chain and end use of its products – the CSSB is allowing until Jan. 1, 2028, to begin tallying and reporting that data. That is three years beyond what is prescribed by the ISSB.
Where the ISSB calls for sustainability and climate reports to be issued with annual financial statements, the CSSB has decided companies can also conform to that standard by 2028. In the interim, companies can issue those reports nine months from their financials in the first year, and in the subsequent two years they are allowed a six-month gap.
For climate resilience, the CSSB is not granting companies transition relief for qualitative scenario analysis – how companies could fare under a range of potential policy, price and physical outcomes. But it is offering three years to develop and implement quantitative analysis – number crunching associated with that analysis.
“Part of the reason for that is to acknowledge what is required to accomplish that. There’s expertise required, resources required, methodologies to be matured, process implications and so on,” Mr. Marchand said.
Ten of the largest Canadian pension funds, including Canada Pension Plan Investment Board, Caisse de dépôt et placement du Québec and Ontario Teachers’ Pension Plan, said the new standards offer a robust framework that will boost the competitiveness of Canadian companies in the race for global capital.
However, Sonia li Trottier, the director of the Canada Climate Law Initiative, lamented the additional time granted for implementation, saying companies have long known they would have to eventually disclose the data. “One year of relief is enough time, as there have been many years of guidance on climate-related disclosure and methodologies,” she said in a statement.
Earlier today, the University Pension Plan Ontario issued a press release stating leading Canadian pension plan investment managers support CSSB standards:
TORONTO, December 18, 2024– Ten of Canada’s largest pension investors and investment managers, representing more than $2.25 trillion in assets under management, today affirm their support for both the Canadian Sustainability Disclosure Standards (CSDS) from the Canadian Sustainability Standards Board (CSSB): General Requirements for Disclosure of Sustainability-related Financial Information (CSDS 1) and Climate-related Disclosures (CSDS 2), collectively the CSSB Standards.
The CSSB standards establish a robust framework for the Canadian market, while addressing specific Canadian circumstances. Alignment with a global baseline is important for the competitiveness of Canadian companies in global capital markets and for Canadian directors to discharge their duties to the companies they oversee. We also believe that this will reduce the reporting burden for Canadian entities that operate or raise capital in multiple jurisdictions.
For major institutional investors, complete, comparable sustainability-related information is a key part of making informed investment decisions. The CSSB’s standards address both general sustainability-related disclosures and climate-specific requirements, thus providing a framework to access this critical information.
While we recognize the need to make modifications to address Canadian-specific considerations, we encourage Canadian issuers to not delay the measurement and reporting of material sustainability-related information, particularly where “reasonable and supportable information is available to the entity at the reporting date without undue cost or effort.” For effective capital allocation decisions, investors depend on standardized disclosure across the full spectrum of material sustainability risks and opportunities.
As part of our mandates, our objectives are to deliver long-term, risk-adjusted returns that help support retirement and benefit security for millions of Canadians. We believe these standards will strengthen the Canadian market’s sustainability disclosure infrastructure and improve the quality of information available to investors, stakeholders and regulators. We call on corporate leaders to adopt CSDS 1 and CSDS 2 to ensure the transparency and comparability needed to make investment decisions that will contribute to a more prosperous future for our clients and beneficiaries.
ABOUT:
British Columbia Investment Management Corporation (BCI)
Gross AUM $250.4 billion (as at March 31, 2024)
Media: Olga Petrycki, Tel: +1 778 410 7310, Email: media@bci.ca
AboutCDPQ (Caisse de dépôt et placement du Québec)
AUM $452.0 billion (as at June 30, 2024)
Media: Media Relations team, Tel. : + 1 514 847 5493, Email: medias@cdpq.com
AboutCanada Pension Plan Investment Board (CPPIB)
AUM $675.1 billion (as at September 30, 2024)
Media: Frank Switzer, Tel: +1 (416) 523 8039, Email: fswitzer@cppib.com
AboutHealthcare of Ontario Pension Plan (HOOPP)
AUM $112.6 billion (as at December 31, 2023)
Media: Scott White, Email: swhite2@hoopp.com
AboutInvestment Management Corporation of Ontario (IMCO)
AUM $77.4 billion (as at December 31, 2023)
Media: Neil Murphy, Tel: +1 (416) 898 3917, Email: neil.murphy@imcoinvest.com
AboutOntario Municipal Employees Retirement System (OMERS)
AUM $133.6 billion (as at June 30, 2024)
Media: Don Peat, Tel: +1 (416) 815 4433, Email: media@omers.com
AboutOntario Teachers’ Pension Plan (OTPP)
AUM $255.8 billion (as at June 30, 2024)
Media: Dan Madge, Tel: +1 (416) 419 1437, Email: media@otpp.com
AboutOPSEU Pension Plan Trust Fund (OPTrust)
AUM $25.0 billion (as at December 31, 2023)
Media: Jason White, Tel. : +1 (416) 201 1527, Email : jwhite@optrust.com
AboutPublic Sector Pension Investment Board (PSP Investments)
AUM $264.9 billion (as at March 31, 2024)
Media: Maria Constantinescu, Tel: +1 (514) 218 3795, Email: media@investpsp.ca
AboutUniversity Pension Plan (UPP)
AUM $11.7 billion (as at December 31, 2023)
Media: Zandra Alexander, Tel: +1 (647) 454 2612, Email: media@universitypensionplan.ca
About
Why are ten of Canada’s largest pension investors and investment managers, representing more than $2.25 trillion in assets under management, affirming their support for the Canadian Sustainability Disclosure Standards (CSDS) from the Canadian Sustainability Standards Board (CSSB)?
In short, the world is heading there and if Canadian companies plan on remaining competitive, they too need to adopt these standards and the sooner they do so, the better off they and their investors will be over the long run.
Are there difficulties or obstacles? You bet. The Globe and Mail article points out two of them -- Scope 3 emissions and climate resilience -- and I'm certain there are other issues.
But companies have plenty of time to adopt the new standards and once they do, investors will have much better data to gauge climate related risks across their public and private market portfolios.
Again, Canadian companies are starving for capital, they can ill-afford to sit back and not adopt these new standards and expect to remain competitive on the international scene (most European companies are way ahead of them).
Global institutional investors are demanding uniform climate-related disclosure so the fact that Canada's ten largest pension investment managers are throwing their support behind this shouldn't surprise us in the least.
Again, the world is heading there and either Canadian companies follow suit or risk being left behind, it's that simple.
And large Canadian investors have a fiduciary duty in ensuring all their portfolio companies are competitive when it comes to climate related disclosure as it impacts their enterprise value.
Companies that disclose more in terms of climate risks will be worth more over the long run.
In related news, OMERS announced the launch of OMERS Climate Taxonomy, a purpose-built classification system to assess the exposure of our investments to climate risk and opportunities:
This approach groups business activities by applying a climate lens, enabling us to classify our portfolio assets into five distinct categories.
The taxonomy will be used as a key tool to support our Climate Action Plan (CAP), which outlines our commitment to reach zero by 2050. As of 2023, we've reported $21 billion in green investments, with a goal to reach $30 billion by 2030.
You can learn more on OMERS' Climate Action Plan and Climate Taxonomy here.
Below, a quick overview on the essentials of the Canadian Sustainability Standards Board (CSSB) and what it means for your business. Whether you're a large corporation or a small business, understanding the CSSB is crucial for staying ahead in today's sustainability-focused world.
Also 360EnergyInc hosts Dave and Lysandra as they welcome Gregory Carli, the global leader in sustainability, resilience, and ESG at GHD, for an enlightening discussion on the new Canadian sustainability disclosure standards (excellent insights).
Lastly, Behdad Bahrami, Edgecom Energy's CEO & Founder, and Demian Newman, CEO and Founder of GreenWorks ESG discuss the latest draft of the CSSB’s Canadian Sustainability Disclosure Standards and decode what it means for your company (more excellent insights).
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