Canadian regulators shift focus to competitiveness, stalling mandatory ESG rules for public companies
Canada’s provincial securities commissions have suspended efforts to make climate-related disclosure mandatory for public companies and paused proposed amendments to existing diversity rules, The Globe and Mail reported.
According to the Canadian Securities Administrators (CSA), the suspensions are due to “the changing global economic and geopolitical landscape.”
In a press release, CSA Chair and Alberta Securities Commission Chair Stan Magidson said Canadian companies are facing “increased uncertainty and rising competitiveness concerns” due to global developments.
He stated, “In response, the CSA is focusing on initiatives to make Canadian markets more competitive, efficient and resilient.”
The halt represents a shift in focus by Canadian regulators, who earlier this month announced other measures aimed at reducing regulatory burdens, including easing capital-raising and IPO requirements.
As per the CSA press release, securities legislation already requires issuers to disclose material climate-related risks.
However, the CSA has paused the development of a new mandatory rule, instead encouraging companies to refer to the voluntary standards issued by the Canadian Sustainability Standards Board (CSSB) in December 2024.
On diversity, the CSA said it would pause amendments intended to expand existing requirements.
These proposed changes would have included disclosures related to Indigenous Peoples, racialized persons, people with disabilities, and LGBTQ+ individuals in leadership.
Non-venture issuers remain obligated to disclose the representation of women on boards and in executive positions under National Instrument 58-101.
The CSSB, in a separate press release, responded by reaffirming its commitment to supporting the Canadian market through the continued promotion of CSDS 1 and CSDS 2.
“These standards were developed to serve the Canadian public interest,” said incoming Chair Wendy Berman. “We recognize that regulatory approaches may evolve in response to market conditions, but the demand for credible, comparable sustainability information continues to grow – both globally and at home.”
Berman noted the CSSB will continue coordinating with regulators, investors, and other stakeholders to help Canadian entities remain competitive and meet rising expectations.
As reported by The Globe and Mail, several investors and ESG advocates criticized the pause.
Barbara Zvan, CEO of University Pension Plan Ontario and a former member of the Sustainable Finance Action Council, called the halt “extremely disappointing,” especially given that other jurisdictions have moved ahead with climate disclosure rules.
“This is done because it’s material risk assessment, and yet we’re saying there’s no rush,” said Zvan.
She also pointed out the inconsistency of the delay given Canada’s calls for more foreign investment and domestic pension investment.
Katie Dunphy, ESG reporting leader at KPMG, said the decision may frustrate companies that have already invested in aligning with CSSB standards.
“As we continue to see the climate disruption and climate events, in my opinion, we will see an evolution of this,” she said.
Kevin Thomas, CEO of the Shareholder Association for Research and Education, said the lack of mandatory rules shifts the risk onto investors.
“Let’s be smart about it. Forgoing new rules on climate disclosures just shifts that burden onto investors who have to make best guesses about their exposure to climate-related risks,” he said in comments to The Globe and Mail.
The CSA said it plans to revisit both the climate and diversity disclosure initiatives in the future and will provide issuers with appropriate notice ahead of any status changes.
It will also continue monitoring disclosure practices and address misleading information, including greenwashing.
