On 26 November 2008, the Canadian Performance Reporting Board (CPRB) of the Canadian Institute of Chartered Accountants (CICA) released Building a Better MD&A: Climate Change Disclosures (the “Guide”).1 This supplemental Guide builds on MD&A Disclosure About the Financial Impact of Climate Change and Other Environmental Issues, which was released by the CICA in October 2005. The update takes into account developments such as the Carbon Disclosure Project and Ontario Securities Commission Staff Notice 51-716: Environmental Reporting.

Part 1 of the Guide provides an overview of climate change business issues. Strategic considerations affected by climate change include access to capital, business continuity, new capital expenditures, increased inter-jurisdictional operating complexities, new considerations in mergers and acquisitions and operational costs.

Part 2 outlines investors’ disclosure needs in relation to climate change. The CPRB cautions that, while boilerplate disclosure is not useful, neither is excessive disclosure. According to the CPRB, institutional investors seek climate change disclosure regarding business strategy, risks, greenhouse gas emissions, financial impacts and governance processes. Relevant risks can be physical (e.g., vulnerability to extreme weather), regulatory, reputational or litigation-related.

Part 3 presents a process for identifying material climate change matters. In addition to following the requirements set out in National Instrument 51-102, the CPRB recommends complementing and supplementing MD&A disclosure with disclosure contained in financial statement notes. The CPRB also suggests to issuers that they review, in deciding what to disclose, sources including competitors’ filings, sustainability reports, and board minutes.

Part 4 describes how disclosure on climate change issues should be presented. It proposes three options: presenting the information as a stand-alone section, presenting it as a subheading under Risks, or interspersing the discussion among the various sections. According to the CPRB, institutional investors prefer interspersion, though the CPRB notes that using a separate heading may be optimal until climate change reporting is more widely implemented.

Part 5 discusses the responsibilities of an issuer’s board and management, proposing a list of questions designed to assess materiality and evaluate the adequacy of disclosure generally.