Skip to main content
Open this photo in gallery:

Buildings are upended on a riverbank as a man paddles a kayak through floodwater following a major rain event in Halifax on July 22.Darren Calabrese/The Canadian Press

An expert panel advising Ottawa on sustainable finance is calling for mandatory corporate reporting of climate-related information “without undue delay,” but a report it commissioned shows companies still face big gaps in data, including risks tied to physical damage.

A year of destructive wildfires, heat waves and floods across the country is adding urgency to developing systems for gauging and disclosing potential damage to assets across regions and industries, said one of the authors of the report, prepared by the Smart Prosperity Institute for the Sustainable Finance Action Council (SFAC).

“This might be the worst year now it seems, but going down the line, this might possibly be the best year, because as we progress, wildfires and flooding etc. – these things will continue to evolve,” said Anik Islam, senior research associate with Smart Prosperity, a think tank based at the University of Ottawa. “In terms of what we’ve been hearing from our stakeholders, like the consultations we have been having with investors and regulators, they are demanding the data be available.”

Wildfires have consumed more than 13.4 million hectares of forests, along with numerous residential and commercial buildings and other infrastructure in British Columbia, Northwest Territories, Alberta, Quebec and elsewhere this year. Flooding has caused costly damage in several Eastern Canadian locales.

Smart Prosperity conducted its research with the help of several financial institutions and pension funds. Its research also concentrated on risks tied to the shift to a low-carbon economy, greenhouse-gas emissions disclosure, finance and insurance-related emissions, net-zero planning as well as analysis of potential climate scenarios.

Besides a need to beef up data for reporting physical hazards, it found a dearth of standardized metrics to assess the business risks tied to the energy transition. That includes potential changes to public policy and market shifts away from high-carbon activities.

In February, SFAC, which is made up of 25 experts from the banking, insurance and pension sectors, urged Deputy Prime Minister Chrystia Freeland and Environment Minister Steven Guilbeault to establish mandatory climate-related disclosures “without undue delay.” It noted that various regulatory bodies, including the Office of the Superintendent of Financial Institutions and Canadian Securities Administrators, have rules in the works.

In a letter to the ministers, council chair Kathy Bardswick said this is “an urgent and critical issue” and warned Canadian business could be left behind as other jurisdictions proceed with adopting a wide range of disclosure measures, including those developed by the International Sustainability Standards Board.

“Smart Prosperity Institute’s report underpins the recommendations SFAC has provided to Canada in regard to climate-related financial disclosures. Namely, that we should be working toward near-complete coverage of our economy, with disclosures substantially aligned with ISSB,” Ms. Bardswick said in a statement to The Globe and Mail. “Ultimately, this is about safeguarding Canada’s competitiveness.”

The council has also been in charge of developing a catalogue for determining which investments in Canada can be certified as green or transitionary, though that work has been in limbo for several months as Ottawa has yet to consent to moving it to the next stage.

With regard to gaps in available information on physical risks, data and metrics must be developed from scratch or existing frameworks tailored to Canadian industries and regions, and this could prove to be tricky and costly, Mr. Islam said.

“Some templates are out there, provided by third-party data providers. But it would depend on the situation and the company, and obviously not all corporations can afford to get them from third-party data providers,” he said.

“It is important to build capacity in this area for corporations, and that’s one of the recurring messages in our report in terms of stakeholders coming together.”

He noted that researchers at the University of Waterloo’s Intact Centre on Climate Adaptation have developed a system that spells out potential trouble spots for specific sectors stemming from changing climate and extreme weather. The developers have said they hope its use becomes commonplace.

Meanwhile, Smart Prosperity report found Corporate Canada is relatively advanced in gathering and disclosing data on scope 1 and 2 emissions – those that stem from companies’ own operations and the power they consume. Reporting scope 3 – emissions from corporate supply chains – is advancing, but not yet to the extent of the other scopes.

Banks largely follow international financial-sector protocols with regard to financed emissions, or those reported by their corporate borrowers. Also, models used for planning based on ranges of possible future climate scenarios are also well understood, the report said.

Follow related authors and topics

Authors and topics you follow will be added to your personal news feed in Following.

Interact with The Globe