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Emmanuel Faber, CEO of Danone, attends the Danone general shareholder assembly in Paris on April 26, 2018.THOMAS SAMSON/Getty Images

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Canada’s securities regulators had looked set to take a soft approach to company disclosures of climate-related data, but they may be forced to get tougher now that more stringent rules are being hashed out globally.

The new International Sustainability Standards Board (ISSB) is in the process of seeking input on rules for such items as minimum requirements for reporting CO2 emissions as part of regular corporate disclosures. The U.S. Securities and Exchange Commission and European Union are also developing new standards.

At the outset, their proposed requirements are more rigorous than what Canadian Securities Administrators floated for public companies. And with a major office of the ISSB open in Montreal, any deficiencies here will be exposed for the world to see.

The chair of the ISSB, Emmanuel Faber, says he has no evidence that Canadian standards, when finalized, will lag those being hammered out elsewhere. But he has taken note of the current discrepancy, especially when it comes to plans for requiring disclosure of the three categories of emissions.

This is a big deal. Under its proposals, the CSA would mandate reporting scope 1 emissions, or those that emanate from a company’s operations; scope 2, from the energy it purchases; and scope 3, from consumers using the products, or from a bank’s borrowers. But it wouldn’t be iron-clad: Companies could be exempted from disclosing any of them if they provide an explanation. As an alternative to that, the CSA said it could also require they report just scope 1 emissions.

These proposals do not go as far as those proposed by the ISSB, which announced its first draft “global baseline” climate and sustainability reporting rules last week. Scope 3 emissions would be part and parcel. The SEC would also include scope 3 emissions, if they are deemed material or part of a corporate net-zero emissions commitment.

“Obviously, scope 1 and potentially 2, and no scope 3, in Canada is not at the same level in terms of disclosure requirements,” Mr. Faber said in an interview on Tuesday from Ottawa, where he was meeting with Bank of Canada Governor Tiff Macklem and Peter Routledge, head of the Office of the Superintendent of Financial Institutions.

Scope 3 emissions are the largest and most difficult to tally. They are particularly tricky in Canada, with its large energy and mining sectors and banks that finance them. But some investors, industry associations and academics have complained that leaving those out would mean some climate-related risks would still be unknown.

The formation of the ISSB was a response to complaints among global investors, financial institutions and regulators that scads of differing standards on environmental, social and governance issues made analysis and comparison a ball of confusion. For climate, the ISSB and CSA are using the Task Force on Climate-related Financial Disclosures, or TCFD, framework as foundations for their draft rules. However, the CSA has taken flak for proposing to leave out key parts.

New international standards could serve to push the agenda in Canada, said Mr. Faber, the former CEO of Paris-based food company Danone SA, known for Activia yogurt and Evian water.

“I think there are probably ways of nudging, encouraging, driving the private sector to adopt supplemental standards – the global baseline basically – compared to what would be mandated here. Otherwise, indeed, it would mean that work would need to become closer to the global baseline to have Canada, as a jurisdiction, to adopt the ISSB first standards,” he said.

The ISSB is urging interested parties around the world to provide input on its draft proposals, and it’s critical for Canadian businesses and associations to take an active role, he said. In addition, they should also make their voices heard with the SEC and the EU, as they are referencing the ISSB work. Canadian companies are directly and indirectly affected by the outcomes.

During the COP26 climate summit in November, the International Financial Reporting Standards Foundation announced Frankfurt as the head office of the ISSB, and it selected Montreal as its North American base. On Wednesday, the IFRS and Chartered Professional Accountants of Canada signed a five-year agreement that gives the city “significant standard-setting responsibilities and associated functions, including a share of board meetings, leadership and resources that reflect the Montreal location’s importance to the ISSB.”

Montreal Mayor Valérie Plante said the decision to locate the office in the city is a testament to its focus on sustainable development.

“We have a crucial role to play in reducing our GHG emissions. Montreal has already taken steps in that direction and it will now be involved in sustainable finance,” she said in a statement to The Globe.

The ISSB’s next tasks will be setting standards for other environmental, social and governance measures, but the newly released report by the UN Intergovernmental Panel on Climate Change shows the importance of dealing with climate measures first, Mr. Faber said. The IPCC report concluded that technologies for cutting emissions are available, but whether they can be scaled up quickly enough to head off a climate disaster remains an open question.

“If we are told by IPCC that the global emissions should peak at the latest by 2025, yes, indeed, it means that probably a disproportionate amount of effort should be put first on climate, then probably climate-related topics and then on broader topics of ESG,” he said.

Jeffrey Jones writes about sustainable finance and the ESG sector for The Globe and Mail. E-mail him at

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