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Canadian Companies Pushed to Green Up Their Disclosure to Investors

Canada's stock exchanges list some of the most energy-intensive companies in the world, including hundreds of miners, like Barrick Gold and Teck Resources. The Toronto Stock Exchanges alone have handled more than 80% of worldwide mining equity transactions over the past five years.
by Jim CoburnSocial Finance Blog Posted on Mar 22, 2011

Canada's stock exchanges list some of the most energy-intensive companies in the world, including hundreds of miners, like Barrick Gold and Teck Resources.  The Toronto Stock Exchanges alone have handled more than 80% of worldwide mining equity transactions over the past five years.

These companies have a huge environmental footprint - oil sands extraction and upgrading, for example, produce significantly more greenhouse gas emissions and adverse water impacts than the production of conventional oil in Canada or the U.S.  Yet the vast majority of companies are failing to address and disclose the significant environmental risks and opportunities they face, exposing their shareholders to unnecessary risks.

This inaction spurred U.S. and Canadian investors to ask Canadian regulators to improve climate change reporting.

In October, securities regulators in Canada responded, spotlighting this weak environmental disclosure in time to affect new filings coming out this quarter.  The Canadian Securities Administrators' new "Environmental Reporting Guidance" - if strongly enforced - will push companies to disclose information that is essential to investors' decisions.

The CSA guidance covers climate change issues, but it also captures a broad range of other environmental issues, including “air, land, water and waste.” It instructs companies to “err on the side of materiality”: if there's doubt about whether a particular fact matters to their investors, companies should report it.

The guidance also advises companies to disclose how their boards manage environmental issues, including “the implementation of appropriate systems to manage those risks.” This should spur companies like Kinross Gold, which already discloses information about board responsibility for the environment on its website, to include this information in their financial filings.

The guidance also suggests companies provide information relating to environmental systems, including “investments in productive capacity that embody new ‘green’ or more energy-efficient technologies.” Companies like Suncor Energy, Canada’s largest oil and gas company, which has plans to control its greenhouse gas emissions, should now include such information in their financial filings.

This new disclosure will positively affect investment decisions because environmental information will be easier to find, making comparisons between companies much more practical. For companies that have failed to tackle environmental issues, this new guidance is an important wake up call that investors worldwide are now looking carefully at these risks.

Read the post at Social Finance Blog

Meet the Expert

Jim Coburn

Jim Coburn directs Ceres’ efforts to improve mandatory climate and sustainability risk disclosure by corporations. Drawing from his legal background, Jim helps to develop rules and guidance on reporting that strengthen corporate risk management practices and improve investor decisions. He most recently played an integral role in leading the initiative that resulted in the SEC’s issuance of groundbreaking climate disclosure guidance for corporations in 2010.

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