Canadian Lawyer

August 2023

The most widely read magazine for Canadian lawyers

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Page 37 of 51

36 FEATURE ESG As mandatory environmental, social, and governance disclosure deadlines approach in Canada, Michael McKiernan examines how in-house counsel can prepare Dawn of a new age in ESG disclosure AS AN era of mandatory ESG disclosure dawns, 2023 looks set to go down in Canadian corporate history, according to Conor Chell. "This is the year that everything changes, from a disclosure perspective," says Chell, the Calgary-based head of the ESG practice group at MLT Aikins LLP. He says the final countdown has already begun to the deadline for Canada's first set of mandatory environmental, social, and governance- specific disclosures. Assuming events proceed as scheduled, that honour will go to institutions covered by S-211, The Fighting Against Forced Labour and Child Labour in Supply Chains Act, which received Royal Assent in May 2023. Under that federal law, cer tain government agencies and private companies – many of them in the mining and apparel manufacturing industries – must report by May 2024 on their efforts to prevent forced or child labour use in their supply chains. Subsequently, at the end of the 2024 fiscal year, some of Canada's largest banks and insurers will join the club of mandatory ESG reportees. Under the Office of the Superintendent of Financial Institutions' regulation B-15, they must conduct stress testing to assess the potential impact of climate change on their risk management and governance strategies. Larger institutions must also disclose their annual Scope 1 and 2 greenhouse gas emissions, with Scope 3 numbers to follow by the end of 2025 – the same date the broader disclosure requirements kick in for smaller OFSI-regulated businesses. And public companies may not have much longer to wait, as the next wave of mandatory ESG disclosure swells at the Canadian Securities Administrators. The group's long-awaited though not-yet-implemented National Instrument 51-107 would force reporting issuers to make environmental disclosures broadly in line with the Task Force on Climate-related Financial Disclosures (TCFD) framework – standards associated with a G20-affiliated group. Although the first round of mandatory disclosures will not be made until after the new year, Chell explains that they will relate to data collected this year, making 2023 a year-zero baseline to which all future data sets will be compared. "What that means is that companies are having to adapt to mandatory regimes right now, in real-time," he says. "Up until now, virtually all ESG disclosure has been made voluntarily, which means that companies have had unlimited discretion in terms of the topics they pick and the manner in which it happens." Chell adds that the transition from voluntary to mandatory ESG reporting is risky for businesses and may even lead to a "For many making voluntary disclosures, there has not been a real focus on ensuring that the data is robust or accurate" Conor Chell, MLT Aikins LLP 889 Total number of US and global climate litigation cases launched between 2008 and 2015 1,538 Total number of US and global climate litigation cases launched since 2016 CLIMATE LITIGATION ON THE RISE SINCE THE 2015 PARIS AGREEMENT Data from Sabin Center for Climate Change Law as of August 2023

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