On November 23, 2021, the Ontario Securities Commission (“OSC”) held OSC Dialogue 2021: Creating Conditions for Growth. As part of this virtual event, which centred a discussion around how capital markets can contribute to sustainable long-term growth during a critical period for the Ontario economy, the OSC hosted a panel discussion entitled Regulating for a Sustainable Future (the “Panel”). The Panel was moderated by Wendy Berman, then Vice-Chair of the OSC, and discussed the steps that Canadian corporations can take, and are taking, to address climate change.

Topics raised by panel members ranged from the regulatory importance of consistent disclosure to the intersection of ESG and capital markets, as well as how climate-related initiatives can support innovation.

The following are key topics and takeaways from the Panel. Please contact Robert Richardson, Will Horne, or Gurvir Sangha for additional information about our ESG and Sustainability Group and how we can support your business.

Climate-related disclosure is critical

A number of panelists spoke of the importance of consistent, comparable climate-related disclosure to help investors and regulatory bodies make informed decisions about the steps a corporation is taking to battle climate change. Without consistency and rigorous requirements for what must be included in climate or ESG-related disclosure, such disclosure might be based on different definitions, models, and approaches. Such inconsistency makes it difficult for investors to determine if corporations are taking meaningful steps towards fighting climate change.

On October 18, 2021, the Canadian Securities Administrators published a proposed national instrument mandating a set of climate-related disclosures and the Canadian business community is currently grappling with what disclosure requirements will be helpful tools for investors and corporations alike. Panelists referenced the recent call for consistent climate-related disclosure in Canada and discussed the importance that such disclosure will also have in requiring corporations to consider what they can, will, and are already doing to ameliorate climate change. McCarthy Tétrault recently reviewed the proposed National Instrument in a blog post, found here.

The net-zero transition is an economic opportunity

The panel also commented on the priority of striving for a just and optimal transition to net-zero corporate practices, climate-related disclosure, and other climate-related goals, while also maintaining economic prosperity. As many panelists highlighted, the two are not mutually exclusive: Canadian society can work towards climate-related goals in business, while also preserving and even enhancing economic health. Such a shift requires creativity and ingenuity, along with rethinking how technological innovations can in fact position Canada to be a leader. A panelist commented that corporations are in the midst of changing their corporate strategies in order to adapt to the need for drastic action. As such, the urgency of the situation will drive businesses, such as those in the energy industry, to innovate in order to de-carbonize and shift their approaches. Just as many critics once looked at wind and solar power as unrealistic (and they are now thriving industries), the panel pointed out that businesses have, and will continue to move forward with, new and innovative climate solutions.

It is critical to have both local and global outlooks

Climate change is a phenomenon that transcends borders. As such, societies should also cooperate multilaterally in pursuing the common goal of reducing our impact on the environment. One panelist underscored that climate-related disclosure is a vital starting point for what we need to do in Canada, but that the monumental challenge of solving climate change is ultimately a global issue. On the subject of international cooperation, the panel pointed to the International Sustainability Standards Board (“ISSB”), which was announced on November 3, 2021. The ISSB is tasked with creating a global baseline for sustainability-related disclosure standards. McCarthy Tétrault discussed the creation of the ISSB and reviewed its initial working mandate in a blog post, found here.

Panelists spoke about the importance of an international effort, while also cautioning that Canada should create sustainability standards that are molded to our unique economy and to our relationship with Indigenous peoples. As such, the conversation highlighted paths forward that include both global and local approaches that are nimble and not overly prescriptive.

Regulators will support the transition

Regulators can help provide a practical framework to level the playing field and guide corporations and their stakeholders toward a just and optimal transition. However, as two panelists commented, regulators alone cannot get the job done. The panel noted that businesses, investors, and governments must work together to create conditions for capital to flow while helping resource-based sectors take steps toward de-carbonization. A multifaceted approach is needed which combines disclosure requirements from regulators with incentives for corporations to innovate and take forward-looking steps to create new products and solutions in a low-carbon, climate-resilient economy.

The bottom line

The Panel facilitated a number of important conversations about the range of complex challenges and opportunities companies face in addressing the dual goals of growth and climate action. Regulators, corporations, and investors are coming together to drive ideas and solutions forward at an accelerating pace. This vital discussion is part of a new business-driven climate paradigm and will undoubtedly be followed by many more conversations of its kind.

The Panel and the broader Dialogue 2021 event were the latest in a series of public-facing efforts by the OSC that engage the topic of ESG and Sustainability. Other such efforts include: