CSSB Releases Proposed Canadian Sustainability Disclosure Standards

The Canadian Sustainability Standards Board (“CSSB”) released  proposed Canadian sustainability disclosure standards  (the “CSSB Standards”) on March 13, 2024. The CSSB Standards are modelled after the sustainability disclosure standards developed by the International Sustainability Standards Board (“ISSB”) which were released on June 26, 2023. The two ISSB standards include  IFRS S1  General Requirements for Disclosure of Sustainability-related Financial Information (“IFRS S1”) and IFRS S2  Climate-related Disclosures  (“IFRS S2” together with IFRS S1, the “ISSB Standards”). The CSSB has requested feedback on the CSSB Standards  by June 10, 2024 and the adoption of “Proposed Canadian Sustainability Disclosure Standard (CSDS) 1, General Requirements for Disclosure of Sustainability-related Financial Information” (“CSDS 1”) and “Proposed Canadian Sustainability Disclosure Standard (CSDS) 2, Climate-related Disclosures” (“CSDS 2”) will be voluntary until required by Canadian securities regulators.

On March 13, 2024 the Canadian Securities Administrators (“CSA”) issued a statement  welcoming the launch of the CSSB’s consultation on the CSSB Standards  and advising that the feedback that the CSSB receives may help to inform revisions to the CSA’s proposed climate-related disclosure rules (published in October 2021 but currently on hold). The CSA has also advised that in order to become mandatory under Canadian securities legislation, the CSSB Standards must first be incorporated into a CSA rule. Once the CSSB consultation is complete and its standards are finalized, the CSA anticipate seeking comment on a revised rule setting out climate-related disclosure requirements. The CSA proposal will consider the final CSSB Standards and may include modifications appropriate for the Canadian capital markets. The CSA anticipate adopting only those provisions of the CSSB Standards that are necessary to support climate-related disclosures.

The CSSB was established to serve the public interest by setting and maintaining high-quality sustainability disclosure standards for Canadian entities and by contributing to the development of high-quality, internationally recognized sustainability disclosure standards. The CSSB has used IFRS S1 as a baseline to develop CSDS 1 and IFRS S2 as a baseline to develop CSDS 2 with certain modifications to reflect the Canadian public interest.

The CSSB has proposed that entities apply the CSSB Standards for annual reporting periods beginning on or after January 1, 2025 (which is one year later than the effective date of the ISSB Standards). In the first two annual reporting periods, Canadian entities:

• are permitted to disclose information that is limited to climate-related risks and opportunities in accordance with CSDS 2 and to apply the requirements of CSDS 1 only as they relate to the disclosure of climate-related risks and opportunities; and
• are not required to disclose their Scope 3 greenhouse gas emissions.

(Entities are only exempt from these requirements in their first annual reporting period under the ISSB Standards). This transitional relief has been extended to grant Canadian entities more time to prepare for adoption.

In addition, the CSSB released a consultation paper, “Proposed Criteria for Modification Framework” (the “Consultation Paper”). Recognizing the significance of the ISSB Standards, the CSSB has established criteria for modifying the ISSB Standards when formulating CSSB Standards based on them. In fulfilling its role of serving the public interest and upholding the quality of sustainability disclosure in Canada, the CSSB may introduce additions, deletions and/or amendments to an ISSB Standard. To facilitate transparency, the CSSB has released the Consultation Paper, detailing the proposed Criteria for Modification Framework. This Framework outlines the criteria that the CSSB intends to adopt. The CSSB invites feedback from interested and affected parties in Canada to ensure a comprehensive and inclusive review process. The Consultation Paper presents the basis on which the CSSB could introduce changes to the ISSB Standards as issued by the ISSB. These criteria ensure that Canadian standards align with international standards while addressing Canadian public interest.

If you have any questions about how the proposed Canadian sustainability disclosure standards may affect your business, or if you have any questions about environmental, social, and governance (ESG) issues, please contact Stewart Muglich at smuglich@www.ahbl.ca.