April 15, 2022
Canada Introduces Mandatory Climate Disclosures for Banks, Insurance Companies Beginning 2024

According to the federal government’s newly released Budget 2022, Canada will require banks and insurance companies to provide disclosures on their climate-related risks and exposures – starting 2024. The budget additionally sets out over $9 billion in funding to address climate change, and plans for a new green bond offering next year.

Last year, Prime Minister Justin Trudeau addressed cabinet ministers directing them to move towards a system of reporting based on the Task Force on Climate-related Financial Disclosures (TCFD). The new reporting requirements represent the first step for Canada switching to a wider set of mandatory climate disclosures. Proposals to require companies and financial institutions to report on climate matters, including the U.S. SEC’s new proposed rules unveiled in March, and the UK government last year have been introduced by other regulators and legislators in several countries recently.

Commencing with a “phased-in” approach, Canada’s financial regulator OSFI will require federally regulated financial institutions to present climate disclosures aligned with the TCFD framework in 2024. Federally regulated entities in Canada include all of the country’s banks, as well as insurance companies, and federally incorporated or registered trust and loan companies, among others.

OSFI will also expect financial institutions to gather and evaluate data on climate risks and emissions from their clients, and the budget notes that the government is committed to moving towards mandatory TCFD reporting “across a broad spectrum of the Canadian economy,’’ the rules however do not yet apply to other companies.

As part of the 9 billion dollars, key areas of investment include over $3 billion to support zero emissions vehicles (ZEV), including purchase incentives and EV charging build-out, more than $1 billion for green buildings and homes, as well as investments in renewable energy, clean agriculture technology, and nature-based climate solutions.

Moreover, green bond issuance over the next year accounts for $5 billion. Canada completed its inaugural sovereign green bond offering last month, raising $5 billion to help finance the country’s investments in green infrastructure and other climate and environmental protection-related projects.

Source: ESG Today