Draft Regulation 51-107 respecting Disclosure of Climate-related Matters

DRAFT REGULATION 51-107 RESPECTING DISCLOSURE OF CLIMATE-RELATED MATTERS Securities Act (chapter V-1.1, s. 331.1, para. 1°, 3°, 8°, 11°, 14°, 19.3°, 19.5°, 20° and 34°)

CHAPTER 1
DEFINITIONS AND INTERPRETATION

Definitions

1. In this Regulation,
   "Scope 1" means all direct greenhouse gas (GHG) emissions of an issuer; "Scope 2" means all indirect GHG emissions resulting from the consumption of purchased electricity, steam, heating or cooling by an issuer; "Scope 3" means all other indirect GHG emissions of an issuer, except those covered in the definition of "Scope 2"; "emerging issuer" means an emerging issuer as defined in National Instrument 58-101 Disclosure of Corporate Governance Practices (chapter V-1.1, r. 32); "SEC-registered foreign issuer" means a foreign issuer registered with the SEC as defined in National Instrument 71-102 Prospectus and Registration Exceptions and Foreign Issuer Exemptions (chapter V-1.1, r. 37); "specified foreign issuer" means a specified foreign issuer as defined in National Instrument 71-102 Prospectus and Registration Exceptions and Foreign Issuer Exemptions; "subsidiary" means a subsidiary as defined in National Instrument 52-110 Audit Committees (chapter V-1.1, r. 28); "GHG" means greenhouse gases; "market" means a market as defined in National Instrument 51-102 Continuous Disclosure Obligations (chapter V-1.1, r. 24); "U.S. market" means a U.S. market as defined in National Instrument 51-102 Continuous Disclosure Obligations; "GHG reporting standard" means the GHG Protocol or a comparable standard for the calculation and reporting of GHG emissions; "annual information form" means an annual information form as defined in National Instrument 51-102 Continuous Disclosure Obligations; "GHG Protocol" means the standard for the calculation and reporting of GHG emissions of companies and organizations developed by the World Resources Institute and the World Business Council for Sustainable Development; "management report" means a management report as defined in National Instrument 51-102 Continuous Disclosure Obligations; "asset-backed security" means an asset-backed security as defined in National Instrument 51-102 Continuous Disclosure Obligations.

Scope
2. This Regulation applies to every reporting issuer that is not one of the following:
a) an investment fund; b) an asset-backed security issuer; c) a specified foreign issuer or an SEC-registered foreign issuer; d) an exchangeable security issuer that is exempt under section 13.3 of National Instrument 51-102 Continuous Disclosure Obligations (chapter V-1.1, r. 24); e) a credit-supported issuer that is exempt under section 13.4 of National Instrument 51-102 Continuous Disclosure Obligations; f) an issuer that is a subsidiary meeting the following conditions:
i) it has no equity securities, other than non-convertible and non-participating preferred shares, traded on a market; ii) its parent company meets one of the following conditions:
A) it is subject to this Regulation;
B) it is an issuer whose securities are listed or traded on a U.S. market and it complies with the governance disclosure requirements of that market.

CHAPTER 2
DISCLOSURE OBLIGATIONS

Disclosure Obligations Regarding Climate Change Governance
3. 1) A reporting issuer whose management solicits proxies for the election of directors must provide the information set out in Appendix 51-107A in its proxy solicitation material.
2) A reporting issuer that does not send proxy solicitation material to security holders must provide the information set out in Appendix 51-107A in its annual information form or, if it does not file one, in its annual management report.

Disclosure Obligations Regarding Climate Change Strategies, Risk Management, and Measures and Targets
4. 1) A reporting issuer must provide the information set out in Appendix 51-107B in its annual information form or, if it does not file one, in its annual management report.
2) A reporting issuer that provides information on GHG emissions set out in Appendix 51-107B in its annual information form or annual management report must calculate and report those emissions according to a GHG reporting standard.

CHAPTER 3
EXEMPTION AND COMING INTO FORCE

Exemption
5. 1) The chief executive officer, except in Quebec, or the securities regulatory authority may grant an exemption from the application of all or part of this Regulation, subject to such conditions or restrictions as may be imposed in the exemption.
2) Despite subsection (1), in Ontario, only the chief executive officer may grant such an exemption.
3) Except in Ontario, this exemption is granted in accordance with the Act referred to in Appendix B to National Instrument 14-101 Definitions (chapter V-1.1, r. 3), with respect to the name of the relevant jurisdiction.

Coming into Force and Transitional Provisions
6. 1) This Regulation comes into force on (insert here the date of coming into force of this Regulation).
2) This Regulation applies to the following periods:
a) in the case of a reporting issuer other than an emerging issuer, to each fiscal year open on or after (January 1 of the first year following (insert here the date)); b) in the case of an emerging issuer, to each fiscal year open on or after (January 1 of the third year following (insert here the date)).

APPENDIX 51-107A
CLIMATE CHANGE GOVERNANCE INFORMATION

1. Governance
   a) Describe the oversight by the board of directors of climate-related risks and opportunities. b) Describe the role of management in assessing and managing climate-related risks and opportunities.

INSTRUCTION:
This Appendix applies to all entities, whether incorporated or unincorporated. Any reference to a characteristic of an entity incorporated as a corporation, such as the board of directors, also applies to the equivalent characteristic of an unincorporated entity. Income trusts must provide information considering that certain functions of a corporation, its directors, and its officers may be performed by the trustees, directors, or officers of a subsidiary of the trust, or by the directors, officers, or employees of a management company. In the case of an income trust, the term "issuer" means both the trust and the underlying entities, including the operating entity.

APPENDIX 51-107B
CLIMATE CHANGE STRATEGIES, RISK MANAGEMENT, AND MEASURES AND TARGETS INFORMATION

1. Strategy
   a) Describe the short-, medium-, and long-term climate-related risks and opportunities identified by the issuer. b) Describe the impact of climate-related risks and opportunities on the issuer's business, strategy, and financial planning.

2. Risk Management
   a) Describe the processes used by the issuer to identify and assess climate-related risks. b) Describe the processes used by the issuer to manage climate-related risks. c) Describe how the processes used to identify, assess, and manage climate-related risks are integrated into the issuer's overall risk management processes.

3. Measures and Targets
   a) Disclose the measures used by the issuer to assess climate-related risks and opportunities in accordance with its strategy and risk management process. b) Describe the targets used by the issuer to manage climate-related risks and opportunities and its performance against those targets.

4. GHG Emissions
   a) Disclose the following information:
   i) the issuer's Scope 1 GHG emissions and the risks associated with them, or the reasons for omitting this information; ii) the issuer's Scope 2 GHG emissions and the risks associated with them, or the reasons for omitting this information; iii) the issuer's Scope 3 GHG emissions and the risks associated with them, or the reasons for omitting this information. b) Indicate the standard followed by the issuer to calculate and report the GHG emissions referred to in paragraph (a). c) If the standard referred to in paragraph (b) is not the GHG Protocol, explain how it is comparable to the GHG Protocol.

The CSA is also seeking comments on another option that would require issuers to report their Scope 1 GHG emissions:
a) when the information is material, or b) in all cases. Under this option, reporting of Scope 2 and Scope 3 GHG emissions would not be mandatory. Issuers would therefore have to choose to report either Scope 2 and Scope 3 GHG emissions and their associated risks, or the reasons for omitting them. The following text would provide for the mandatory reporting of Scope 1 GHG emissions in all cases.

GHG Emissions a) Disclose the following information:
i) the issuer's Scope 1 GHG emissions and the risks associated with them; ii) the issuer's Scope 2 GHG emissions and the risks associated with them, or the reasons for omitting this information; iii) the issuer's Scope 3 GHG emissions and the risks associated with them, or the reasons for omitting this information. b) Indicate the standard followed by the issuer to calculate and report the GHG emissions referred to in paragraph (a). c) If the standard referred to in paragraph (b) is not the GHG Protocol, explain how it is comparable to the GHG Protocol.

INSTRUCTIONS:

1. This Appendix applies to all entities, whether incorporated or unincorporated. Income trusts must provide information considering that certain functions of a corporation, its directors, and its officers may be performed by the trustees, directors, or officers of a subsidiary of the trust, or by the directors, officers, or employees of a management company. In the case of an income trust, the term "issuer" means both the trust and the underlying entities, including the operating entity.
2. It is not mandatory to provide immaterial information regarding items 1 and 3. Exercise judgment to determine whether a given item of information is material to the issuer. Would the decision of a reasonable investor to purchase, sell, or hold the issuer's securities likely be different if the information in question were omitted or misstated? If so, the information is likely material.
3. The issuer may incorporate the information to be provided under item 4 by reference to another document. It must clearly identify the document or any excerpt from it that it incorporates by reference. Unless the referenced document or excerpt has already been filed in its SEDAR profile, it must be filed at the same time as the document containing the information required by this Appendix.