The Task Force on Climate-related Financial Disclosures (TCFD) is the global standard for corporate climate reporting. Endorsed by the G7 and G20, more than 2,200 organizations have committed to reporting in alignment with the TCFD, with countries like the UK and New Zealand having introduced mandatory reporting requirements.
In this blog, we look at the current positions of different government and regulatory agencies in Canada on TCFD, and the potential for changes in the future. What are the current requirements for Canadian businesses and Crown corporations to report in alignment with the TCFD?
Support from the Government of Canada
The first significant endorsement of the TCFD in Canada came in June 2019 from the Government of Canada’s Expert Panel on Sustainable Finance, chaired by now-Governor of the Bank of Canada Tiff Macklem. That panel reported to the Minister of Finance and the Minister of Environment and Climate Change.
The Expert Panel recommended in their final report that the Federal Government endorsed a phased ‘comply-or-explain’ approach to the adoption of the TCFD framework, led by Finance Canada in partnership with provincial regulators.
The Government of Canada itself has endorsed the TCFD framework and has taken steps to increase adoption across Canada and through Crown Corporations. In the 2021 budget released this spring, the Federal Government committed to:
- Engage with provinces and territories, “with the objective of making climate disclosures consistent with the Task Force on Climate-related Financial Disclosures, part of regular disclosure practices for a broad spectrum of the Canadian economy;” and
- Require all Crown corporations to adopt TCFD standards as part of corporate reporting, with Crown corporations holding more than $1 billion in assets starting to report on their climate-related financial risks in calendar year 2022, at the latest. Crown corporations with less than $1 billion in assets will be expected to start reporting in calendar year 2024, at the latest.
Canadian Finance Minister Chrystia Freeland signed on in support of the G7 finance ministers’ communique in June 2021, which saw the G7 put its full support behind the TCFD: “We support moving towards mandatory climate-related financial disclosures that provide consistent and decision-useful information for market participants and that are based on the Task Force on Climate-related Financial Disclosures (TCFD) framework, in line with domestic regulatory frameworks.”
Growing support from financial regulators
The Bank of Canada has committed to reporting in alignment with the TCFD. In its Financial System Review report in 2019, the Bank listed climate change for the first time as a vulnerability in Canada’s financial system, referencing the TCFD as a mitigating tool: “The risks faced by the financial system from climate change can be managed most effectively when investors and authorities know what exposures firms face and how they are being managed. The Financial Stability Board’s (FSB) Task Force on Climate-related Financial Disclosures recommends that firms publish climate-related financial information.”
Bank of Canada Governor Tiff Macklem, in a speech to the Public Policy Forum in November 2020, highlighted the need to speed up adoption of TCFD in Canada: “Last month, the Task Force for [on] Climate-related Financial Disclosures released its third status report. It had good things to say about Canada and our country’s support for implementing its recommendations. But, to be frank, we all need to pick up the pace.”
Canada’s Office of the Superintendent of Financial Institutions (OSFI) released a discussion paper titled Navigating Uncertainty in Climate Change: Promoting Preparedness and Resilience to Climate-Related Risks in January 2021. As part of a three-month consultation, it looked at how federally regulated financial institutions define, identify, measure, and build resilience to climate-related risks, and how they currently disclose climate-related risk information, specifically referencing the TCFD.
The consultation closed in April 2021 and OSFI intends to report later in 2021 on the next steps.
Waiting on provincial regulators
In Canada, securities regulation takes place at the provincial level, with all eyes on the Ontario Securities Commission, the largest in Canada. In January 2021, the Ontario Government’s Capital Markets Modernization Task Force Final Report recommended “mandating disclosure of material ESG information, specifically climate-change-related disclosure that is compliant with the TCFD recommendations for issuers.”
In its 2021 budget, released in March, the Government of Ontario stated that based on this recommendation, “the Ontario Securities Commission will begin policy work to inform further regulatory consultation on ESG disclosure later this year.”
How Manifest Climate can help
In our view, mandatory reporting in alignment with the TCFD for publicly traded companies in Canada is a matter of when, not if. The power of the TCFD lies not just in its ability to improve transparency on climate-related risks and opportunities; it’s also a scaffold on which to build the business expertise required to move toward, and navigate in, a low-carbon world, and that remains true whether or not a business decides, or is mandated by law, to disclose its climate risks and opportunities. Manifest Climate is already working with companies that do not have an obligation to make any public disclosures to develop their TCFD expertise, helping them deliver credible, comprehensive climate disclosures.
Whether you are just starting your climate disclosure journey or looking to improve and enhance your current reporting, we can help. Manifest Climate’s mission is to close the information and action gap on climate. We connect artificial intelligence with climate expertise to deliver solutions and empower organizations to rapidly identify climate risks and opportunities and improve climate-related financial disclosures. Contact us today.