Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to globeandmail.com
Just $1.99per week for the first 24weeks
Just $1.99per week for the first 24weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

There’s a lot that can be said about climate risk. Canadian companies are still trying to get up to speed on saying it.

The Canadian Securities Administrators, an umbrella group of provincial regulators, has updated its guidance on disclosure of climate change-related risks, with time for companies to punch up their annual reports next spring.

The group says the guidance, released this year, was necessary because Canadian companies had problems following the previous environmental reporting guidance, released in 2010. A 2018 review of disclosures by the CSA found that while 56 per cent of Canadian companies followed the original guidance, 22 per cent used “boilerplate” language (indistinct and unhelpful, in other words) and another 22 per cent didn’t address climate at all.

Story continues below advertisement

When companies did address climate change risks, they often focused on what would happen if environmental regulations increased, the CSA said. Energy companies had the most disclosure, while many companies in other industries failed to make any mentions of climate risk.

Some argued climate risk wasn’t “material.” The CSA defines information as material “if a reasonable investor’s decision whether to buy, sell or hold securities in an issuer would likely be influenced or changed if the information in question was omitted or misstated.”

Limited or absent climate disclosure seems increasingly out of step with what institutional investors are demanding. Regulatory risk is just one element of what climate change can mean for a business’ bottom line, and, ultimately, its value.

“It’s not just a tick-the-box paragraph of words,” says Deborah Orida, global head of active equities at Canada Pension Plan Investment Board. “We’re trying to incorporate our risks into financial sensitivities. And it’s not as simple as just carbon. It’s very company- and fact-specific.”

With better disclosure, “You can consider specifically where the assets of the company are located, how they will be impacted by climate change. Whether it’s rising sea levels, or increasing severity of storms, or changes in policy regulation, you can incorporate that into your projections or your sensitivities on the financial returns from that investment.”

In 2015, the Financial Stability Board, an international body that monitors and makes recommendations about the global financial system, formed a task force on climate-related financial disclosures with Canadian Mark Carney, governor of the Bank of England, playing a leading role. The group has issued a series of reports and guidelines.

“Although that framework of recommendations was voluntary, the uptake has been quite substantial," says KPMG partner Bill Murphy, the accounting firm’s Canada practice leader for climate change and sustainability.

Story continues below advertisement

“The regulators and stock exchanges and central bankers are saying, ‘We need to get a handle on this. We need to get information from the financial intermediaries, be they banks, insurance companies or institutional investors, on what the potentially systemic climate risks are, both from a transition and a physical risk perspective.' And those financial intermediaries, in turn, are saying, ‘We need that information from the corporate clients that we lend to, insure and invest in.’"

And if the information isn’t forthcoming or is perceived as inaccurate, the stakes are getting higher.

New York’s attorney-general sued Exxon in 2018, alleging it caused investors to lose up to US$1.6-billion by falsely telling them it had properly evaluated the impact of future climate regulations on its business, particularly the Alberta oil sands reserves held by its Calgary-based subsidiary Imperial Oil Ltd.

In closing arguments at trial this month, an attorney for Exxon called the case "a cruel joke ... because the reputations of a lot of people have been hurt and disparaged by the bringing of the complaint.”

A group of Canadian energy executives, concerned about the import of the Exxon suit, has been discussing the issues raised for more than a year, looking into engineering and accounting solutions to the problem. “This is impacting oil sands producers’ stock market valuations and access to capital markets,” says David Robinson, a Calgary-based consultant advocating on the issue.

KPMG’s Mr. Murphy said he wouldn’t opine on the merits of the New York case against Exxon, but “the litigation risk is going to increase because of these types of lawsuits. I can certainly recommend boards be paying particular attention, as litigation risk could become as significant as the strategic and reputational risks.”

Story continues below advertisement

With a report from Reuters

Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow the author of this article:

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies