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Five Key Takeaways from the 19th Annual Disclosure and Governance Seminar

McCarthy Tétrault virtually hosted the 19th Annual Disclosure and Governance Seminar on November 16, 2021 with leading experts from public issuers, institutional investors, securities regulators as well as independent directors to discuss new disclosure and governance rules, trends and best practices. This blog highlights the top five takeaways.

  1. National Instrument 52-112 is the First Mandatory Rule Regulating Disclosure of Non-GAAP Financial Measures

National Instrument 52-112Non-GAAP and Other Financial Measures Disclosure (“NI 52-112”) was published on May 27, 2021 and sets out, after a three year process initiated by the CSA, disclosure requirements for non-GAAP financial measures, non-GAAP ratios and other financial measures.

The rule came into force on August 25, 2021 and applies to reporting issuers for documents filed for  financial years ending on or after October 15, 2021.

NI 52-112 imposes as obligations previous guidance in CSA staff notices on Non-GAAP financial measures and also introduces important changes to disclosure requirements.

Read our detailed analysis of the new requirements introduced by NI 52-112 and its impact for Canadian issuers.

  1. The Harmonization of Sustainability Disclosure through the Creation of the International Sustainability Standards Board at COP26

The International Sustainability Standards Board (“ISSB”) was established on November 3, 2021 and will develop a comprehensive global baseline of high-quality sustainability disclosure standards.

The ISSB announcement is a response to the growing and urgent demand for companies to provide globally consistent and comparable sustainability disclosure.

The Technical Readiness Working Group (“TRWG”) will provide the ISSB with eight recommendations or deliverables for its consideration; the TRWG has already released the first two deliverables, the General Requirements Prototype and the Climate Prototype which aligns with the recommendations of the Task Force on Climate-Related Financial Disclosures (“TCFD”) (“Prototypes”).

The ISSB will commence its work early in 2022, with its first steps to include consideration of the Prototypes which are expected to be adopted by the third quarter of 2022.

Read our detailed analysis of the consequences of the ISSB announcement.

  1. The U.S. Securities and Exchange Commission is Developing a Mandatory Climate Risk Disclosure

The U.S. Securities and Exchange Commission (“SEC”) staff is in the process of developing a mandatory climate risk disclosure rule for public reporting issuers. The proposal is slated to be brought to the SEC for consideration by the end of 2021 and the goal is for  mandatory disclosure requirements to be consistent comparable and “decision-useful” for investors.

The SEC Chair has asked SEC staff to:

  1. consider how companies may disclose their “Scope 1” and “Scope 2” emissions, and whether they should have to disclose “Scope 3” emissions, as set out in the Greenhouse Gas Protocol Corporate Accounting and Reporting Standard (“GHG Protocol”);
  2. consider whether specific industries such as banking, transportation and insurance should be required to disclose certain ESG metrics; and
  3. consider how U.S. companies operating in jurisdictions with climate pledges in place, such as the Paris Agreement, can inform investors about how they are meeting those requirements.

The SEC has adopted an “issuer-focused” approach and, as a result, the proposal will only focus on public companies.

For further information on the SEC’s initiative on climate risk disclosure, see our blog post “The SEC is developing a mandatory climate risk disclosure rule proposal – what does it mean for Canadian firms?

  1. CSA Proposal for a Standardized Climate-Related Disclosure

On October 18, 2021, a few days prior to the opening of COP26, the CSA issued a notice related to proposed National Instrument 51-107 – Disclosure of Climate-Related Matters (“NI 51-107”) for a 90 day comment period. The comment period will end on January 17, 2022. Proposed NI-51-107 is designed to standardize issuers’ climate-related disclosures to allow for a better consistency and comparability of the climate-related risks and opportunities facing Canadian issuers.

Like the Climate Prototype published at the time of the announcement of the setting up of the ISSB, the disclosure requirements in proposed NI 51-107 align with the TCFD recommendations.

NI 51-107 will require climate-related governance disclosure in an issuer's management information circular (Form 51-107A) and annual information form or annual management’s discussion and analysis if the issuer does not file an annual information form (Form 51-107B).

Certain categories of reporting issuers are excluded from the scope of application of the proposal, including, but not limited to, investment funds, issuers of an asset-backed security, designated foreign issuers and SEC foreign issuers.

For further information on the CSA Proposed NI 51-107, see our blog post: New Mandatory Climate Related Disclosure Rule is on the Horizon:  The CSA seeks comments on proposed instrument.

  1. CSA Proposal to Streamline Continuous Disclosure Requirements

On May 20, 2021, the CSA published for comment a notice in respect of certain amendments to National Instrument 51-102 – Continuous Disclosure Obligations (“NI 51-102”). The proposal aims to result in less but more focused disclosure, along with an increased presentation and quality of disclosure.

The final amendments are expected to be published in September 2023 and be effective on December 15, 2023.

Read our detailed analysis of the proposed amendments to NI 51-102.



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