The Canadian Securities Administrators released guidance this week to assist reporting issuers, other than investment funds, on continuous disclosure requirements relating to environmental matters. The notice is specifically intended to clarify existing disclosure obligations (rather than create new ones), including with respect to the determination of materiality, risk oversight and management and the impact of IFRS adoption. The guidance document also considers the various levels of oversight to which environmental disclosure is subject (by way of oversight of financial statements generally), namely the issuer's audit committee, board of directors and CEO and CFO. Of particular interest are the examples of specific disclosure included in the guidance.

With respect to materiality, the CSA's guidance states that "[i]nformation relating to environmental matters is likely material if a reasonable investor's decision whether or not to buy, sell or hold securities of the issuer would likely be influenced or changed if the information was omitted or misstated." A non-exhaustive list of principles to assist in determining materiality is also provided, while the guidance clarifies that there is no bright-line test. Rather, the materiality of specific information can vary between industries and issuers and will be affected by the particular facts of the case, time of reporting, and trends, demands, commitments, events and uncertainties. In cases of doubt, however, the CSA advise on erring on the side of materiality.

The guidance further addresses the key disclosure requirements of NI 51-102, namely: (i) environmental risks, including litigation, physical, regulatory, reputational risks and risks relating to business model) and which should be disclosed in a meaningful way; (ii) the impact of environmental trends or uncertainties; (iii) environmental liabilities, including with respect to remediation and obligations to pay fines or damages; (iv) asset retirement obligations; and (v) financial and operational effects of environmental protection requirements. According to the CSA, such material risks should be disclosed in a meaningful way by disclosing not only the risk, but the factual basis for it, while avoiding boilerplate language.

Guidance is also provided regarding the issues that audit committees, boards and certifying officers should consider in fulfilling their oversight functions, namely: (i) the environmental matters that are reasonably likely to impact the issuer's business and operations in the foreseeable future; (ii) the magnitude, sources and nature of the issuer's current and anticipated environmental risks and liabilities; (iii) the impact of environmental matters (including likely matters) on revenues, expenditures and cash flows; (iv) the impact that environmental matters have on the issuer's financial conditions and liquidity; and (v) the assessment that management has made regarding the materiality to investors about the information on environmental matters, and whether the disclosures made in the financial statements, MD&A and AIF are consistent with this assessment.

As discussed in our post of December 18, 2009, such guidance has been contemplated for the better part of a year.