In an open letter, leaders from Canada’s biggest pension funds are asking the Canadian Sustainability Standards Board to reconsider a two-year relief period granted to companies around non-climate disclosures.
“Where sustainability-related factors are material, they have the potential to present material financial impacts to companies’ performance and is important information for boards and investors,” read the letter, signed by representatives from the British Columbia Investment Management Corp., the Canada Pension Plan Investment Board, the Caisse de dépôt et placement du Québec, the Healthcare of Ontario Pension Plan, the Investment Management Corp. of Ontario, the Ontario Municipal Employees Retirement System, the Ontario Teachers’ Pension Plan, the OPSEU Pension Trust, the Public Sector Pension Investment Board and the University Pension Plan.
“We caution that this relief may place Canadian companies at a disadvantage to foreign entities that are reporting across all sustainability-related issues.”
The investment leaders asked the CSSB to instead stick more closely with the international standards created by the International Sustainability Standards Board, which allows issuers the transition relief only for the first reporting period.
The proposed CSSB Standards — disclosure of sustainability-related disclosure standard (CSDS 1) and climate-related disclosures (CSDS 2) — were launched in March and are expected to become voluntarily effective for annual reporting periods starting on or after Jan. 1, 2025.
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The letter also took issue with the approach to scenario analysis framework included in CSDS 2. In the proposed rule, the regulator acknowledges scenario-analysis methodologies are new for Canadian reporting entities and requested feedback on whether transition relief is required for climate resilience disclosure. In the letter, the pension fund representatives said they don’t support a transition relief on scenario analysis and instead stressed how vital this disclosure is.
“Starting preparations early will allow Canadian preparers to enhance their readiness ahead of any potential mandatory application of CSDS standards.”
However, the letter concedes that producing these climate disclosures could be difficult for smaller issuers and that the regulator may choose to offer novel ways to make the process easier like a multi-year implementation. The pension executives warned that future modifications of the Canadian standards have the potential to limit cross-border users’ access to sustainability-related financial information in general-purpose financial reports.