Canadian Sustainability Standards Board publishes sustainability and climate-related disclosure exposure drafts

On March 13, the Canadian Sustainability Standards Board (CSSB) published two Canadian sustainability standard exposure drafts – CSDS 1, General Requirements for Disclosure of Sustainability-related Financial Information and CSDS 2, Climate-related Disclosures (Draft Canadian Standards). The Draft Canadian Standards can be found here.

The Draft Canadian Standards are nearly identical to general sustainability and climate-focussed disclosure standards published by the International Sustainability Standards Board (ISSB) in June 2023 and intended as a global baseline for sustainability disclosure. The one distinction highlighted by the CSSB is the inclusion in the Draft Canadian Standards of longer transitional relief than is contemplated in the ISSB standards.

CSDS 2, which deals with climate-related disclosures, requires “an entity to disclose information about climate-related risks and opportunities that could reasonably be expected to affect the entity’s cash flows, its access to finance or cost of capital over the short, medium or long term.” CSDS 2 goes further in some cases than proposed National Instrument 51-107 – Disclosure of Climate-related Matters (Proposed 51-107), published by the Canadian Securities Administrators in October 2021, and the climate disclosure rules approved by the US Securities and Exchange Commission on March 6, 2024. 

In particular, CSDS 2 requires disclosure of a climate-resilience scenario analysis, which was not required by Proposed 51-107, and disclosure of Scope 3 GHG emissions, which was notably absent from the SEC rules and was included as optional in Proposed 51-107. The CSSB is particularly interested in receiving comments on those two topics. 

Along with the Draft Canadian Standards, the CSSB published for comment a “Proposed Criteria for Modification Framework” that sets out the criteria the CSSB will consider for deviating from the ISSB standards when creating comparable Canadian standards. These criteria are limited in number and include situations where deviation is necessary to comply with Canadian law or to “serve the Canadian public interest and maintain the quality of sustainability disclosure in Canada.”

CSA response

The Draft Canadian Standards will not become mandatory until they are incorporated into a CSA rule. The CSA sent out a news release following the publication of the Draft Canadian Standards stating that once those are finalized, the CSA anticipates seeking comments on a revised CSA rule for climate-related disclosure. The news release noted that, “The CSA proposal will consider the final CSSB standards and may include modifications appropriate for the Canadian capital markets. The CSA anticipates adopting only those provisions of the sustainability standards that are necessary to support climate-related disclosures.” As such, broader sustainability disclosure will remain largely voluntary.

The deadline to provide comments to the CSSB on the Draft Canadian Standards and the Proposed Criteria for Modification Framework is June 10, 2024.