On December 16, 2021, the Office of the Prime Minister of Canada (the “PMO”) published its sessional mandate letters to each federal minister, outlining the objectives that a minister is expected to accomplish during the upcoming parliamentary session.
The mandate letters include several objectives across the federal Cabinet to address climate change and mitigate its impact. Of specific note are the mandate letters issued to Deputy Prime Minister and Minister of Finance Chrystia Freeland, and Minister of Environment and Climate Change Steven Guilbeault, who have been assigned shared responsibility for two significant objectives regarding climate-related disclosures (the “Climate Disclosure Objectives”). The first objective involves mandatory climate-related financial disclosures based on the Task Force on Climate-related Financial Disclosures (“TCFD”) framework. The second objective would introduce requirements for certain federally regulated institutions to issue climate-related financial disclosures and net-zero plans.
Contextualizing the Climate Disclosure Objectives
Climate action is a central theme in the PMO’s recent mandate letters. Prime Minister Trudeau prefaces the ministerial objectives in each mandate letter with remarks emphasizing themes and topics of importance for his minority government, as is made evident in the following passage:
The science is clear. Canadians have been clear. We must not only continue taking real climate action, we must also move faster and go further. As Canadians are increasingly experiencing across the country, climate change is an existential threat. Building a cleaner, greener future will require a sustained and collaborative effort from all of us. As Minister, I expect you to seek opportunities within your portfolio to support our whole-of-government effort to reduce emissions, create clean jobs and address the climate-related challenges communities are already facing.
It is clear that Prime Minister Trudeau is seeking a “whole-of-government effort”, with an expectation that efforts to combat the impact of climate change will be undertaken from a multiplicity of perspectives and portfolios across the federal government. The Climate Disclosure Objectives assigned on a shared basis to Ministers Freeland and Guillbeault are one example of the need for not just targeted but shared efforts to combat climate change.
The Climate Disclosure Objectives
With the support of the Minister of Environment and Climate Change, Minister Freeland is asked in her mandate letter to:
- work with provinces and territories to move toward mandatory climate-related financial disclosures based on the TCFD framework; and
- require federally regulated institutions, including financial institutions, pension funds and government agencies, to issue climate-related financial disclosures and net-zero plans.
The Prime Minister’s explicit reference to the TCFD framework is noteworthy because certain regulators and bodies have relied on or stated their intentions to rely on this framework in their disclosure requirements. Securing broad agreement about a common basis for measurement and disclosure is vitally important to the efficacy of any program to address climate change. The proposed National Instrument 51-107 – Disclosure of Climate-related Matters (currently in a period of public consultation) closely aligns with the TCFD recommendations. Similarly, the standards prototypes under review by the International Sustainability Standards Board (“ISSB”), whose creation by the International Financial Reporting Standards Foundation was announced at the 26th United Nations Climate Change Conference of Parties (COP26), are also closely aligned with the TCFD recommendations. We analyzed those developments here and here, respectively.
A net-zero plan explains what an organization has done, is doing, or plans to do in order to balance (or more than offset) the greenhouse gas emissions that it produces across its business and supply chain. Although there is no legislative requirement for federal agencies to require climate-related disclosures or net-zero plans, certain agencies have already begun to engage in sustainability initiatives. By way of example, the Office of the Superintendent of Financial Institutions recently announced its membership in the international Network for Greening the Financial System (“NGFS”): an international group of central banks and supervisors that share best practices and help to develop environment and climate risk management measures in the financial sector. Our analysis of that development may be found here.
The bottom line
The inclusion of the Climate Disclosure Objectives in two high-profile mandate letters sends a strong signal of federal support for the introduction of mandatory climate-related disclosure obligations in Canada. This development aligns with the wider global trend towards mandating and regulating such disclosures, as proposed in other jurisdictions such as the United States (which we reviewed here). Financial institutions and pension funds in Canada would be well advised to proactively consider the development of their climate-related financial disclosures and net-zero plans including the use of the voluntary TCFD framework for disclosures while it remains voluntary.