On November 26, 2008, the Canadian Institute of Chartered Accountants (CICA) released its publication Building a Better MD&A: Climate Change Disclosures (the Guide). Building on previous CICA guidance regarding reporting issuers’ ongoing disclosure obligations, the Guide is designed to assist issuers in deciding how to assess the business and financial impact of climate change issues for the purpose of their annual management’s discussion & analysis (MD&A).
The Guide identifies various types of information that investors and analysts are increasingly seeking, including information relating to whether the company has factored climate change issues into its business strategy; whether climate change poses physical, regulatory, reputational or litigation risks to the company; the company’s direct and indirect greenhouse gas (GHG) emissions; whether climate change issues have or are expected to have an impact on a company’s financial operations, cash flow, or financial condition; and what governance processes and resources a company has dedicated to these issues. As part of considering whether any particular information is material and thus to be disclosed, the Guide suggests that management should consider whether the impact of a climate change issue might reasonably be expected to grow over time, potentially making early disclosure of the issue important to long-term investors.
The Guide indicates that companies, in addition to reviewing their securities law requirements and financial statements, might also consider a list of other sources when deciding what information to assess for their MD&A disclosure. Although securities laws do not prescribe a format for presenting this disclosure, the Guide suggests three options when disclosure relates to material climate change issues: (i) as a separate section; (ii) as a subheading within the risk factors section; or (iii) linked to relevant discussions in other parts of the MD&A, such as corporate strategy, capital resources or outlook. According to the Guide, annual MD&A disclosures about climate change are likely to be sufficient. Only material changes to information reported in annual MD&As need be included in interim MD&As.
For further information, please see www.cica.ca/download.cfm?ci_id=47636&la_id=1&re_id=0.