New Sustainability Disclosure Standards and implications for Canadian corporates

Bindu Dhaliwal: Welcome to The Sustainability Agenda, a podcast series focusing on the evolving complexities of the sustainability landscape. I’m your host, Bindu Dhaliwal. Please join me as we explore today’s most pressing issues with special guests that give you some new perspectives and help you make sense of what really matters.

Charles-Antoine St-Jean: I think at the moment everybody’s dealing with the alphabet soup to see of the various framework that reduce the number of those to a single set. The second is it’s also levelling the playing field for all Canadians and entities, and it’s also enabling the successful, efficient allocation of capital.

Bindu Dhaliwal: Today we have with us Charles-Antoine St-Jean, current Chair of the Canadian Sustainability Standards Board, which is working with the International Sustainability Standards Board to support the uptake on the recent ISSB standards in Canada. And on today’s episode we’ll be discussing the ISSB Sustainability disclosure standards, which were just recently released on June 26th of this year and which have been developed to deliver a comprehensive baseline of sustainability related financial disclosures for the capital markets. Hello, Charles-Antoine, thank you for being with us on today’s episode.

Charles-Antoine St-Jean: Thank you very much, Bindu. Very pleased to be with you this morning.

Bindu Dhaliwal: Before we get into the details, Charles-Antoine, I wanted to really talk about for those who may not be aware how and why was the ISSB and the CSSB launched. A lot of S’s in there. Remind everybody, the ISSB is the International Sustainability Standards Board and the CSSB, the C being Canadian Sustainability Standards Board. So Charles-Antoine, maybe you can give us some perspective on purposes and why they were launched.

Charles-Antoine St-Jean: So thank you, Bindu, for the question. And say the reason why the ISSB and CSSB was launched is very much to bring a common standard to help companies achieve sustainability goals in a way that will instill investors’ confidence. I think that was a need that everybody’s been looking for some time. And so that’s the main reason why it was launched. And the decision to establish the CSSB was done after receiving a very, very strong support from the market. Voices from across the country, across all industries, the preparers, the investors told us it was the right move. Canada is really taking a lead in establishing the National Sustainability Standard Board and so Canada hoped to be a model for how the other countries will interact with the ISSB. What’s probably the most important reason why CSSB was created is really to help Canada make it an easier place to invest. And it’s for Canadian investors to international investors and market participants to enable us to say, to attract foreign direct investment that will help the city further the development of our economy and help us fund the transition for these new standards. So there’s a number of reasons why it was created, Very, very pleased to see that we’re now in business.

Bindu Dhaliwal: Yes. And as a member of CSSB, I’m really excited about where this is going. And we’ll talk in a second about the actual role of CSSB. But maybe we could just go back to on June 20th, 2023, of this year, the ISSB, after much consultation, released a sustainability disclosure standards. And so maybe you could just give us an overview of what we call as S1 and S2 standards that were released and how the two components may be coordinated.

Charles-Antoine St-Jean: Okay. So thank you again, Bindu, for the question. So on the 26th of June, the ISSB released S1 and S2. S2 is very much built around the climate focus standard, very much built into consolidated TCFD, the recommendation, the SASB standard, the CDSB framework, the Integrated reporting framework and the world economic metrics to streamline the sustainability disclosure that the focus is on climate. S1 is the basic to say of all the standards, that will help the city will require companies to communicate the sustainability risks and opportunities they face over the short, medium and long term. The requirement is of S1 is designed to ensure that companies provide investors information relevant for decision making, while S2 sets out to set the specific climate related disclosure and is really designed as it to be used in conjunction with S1. And both standard, like I mentioned a minute ago, are based on the recommendation of the Task Force on Climate Related Financial disclosure. So S2 is the thematic, if you like to say, of the first thematic standard from the ISSB focusing on climate while S1 gives you the fundamentals and the basics for how all of these sustainability standards will be working going forward.

Bindu Dhaliwal: I think it’s important to note that as we see other regional directives, as I’ll call you, like the EU directive that’s come out recently, or even some of the potential securities regulators, the idea is that the people are referencing that the future will look to these frameworks and their guidance will look to these frameworks as well. So I think it’s a really important moment in sort of the sustainability disclosure standards space. So now maybe we can go back to the role of the CSSB. We have these standards that have come down from up above, so to speak. And what’s the role of CSSB practically in terms of what’s going to happen in Canada?

Charles-Antoine St-Jean: The role of CSSB is multiple. First is very much to say to work with the ISSB to support the uptake of ISSB standards in Canada and to highlight to the key issues that are important for the Canadian context and also to facilitate the interoperability of the ISSB standard with any other forthcoming CSSB standards. So Canada, the CSSB is very much there to help represent the voice of Canada in the crafting of the future sustainability standard, but also to help to see with the implementation of those standards. I should say this, that the CSSB is also a member of the Sustainability Standard Advisory Forum, which supports these mutual objectives. Canada is one of the 13 countries that is working to support the ISSB and that journey. But I would like to say that the IFRS sustainability disclosure standard are not mandatory yet in Canada. They might be in the future, but the decision to say how it will be made should be understood that the CSSB will review the ISSB global baseline standard for use in Canada. And as part of this process, the CSSB will consider whether further requirements are needed to reflect Canadian interests and priorities. Step two: Canada’s regulators and legislators will consider whether and over what time frame the CSSB standard should be mandated. But until further decisions are made, the standard would apply to whomever chooses to use them on a voluntary basis. And the ISSB has developed many resources to help companies to get educated on how to do so. So step one, we review the global and step two is for Canada’s regulators and legislators to consider whether and over what time frame the CSSB standard should be mandated.

Bindu Dhaliwal: Great. Thank you for that overview. And our focus here is really about supporting our clients through the energy transition and a lot of the work that they do around sustainability. And maybe you could talk a little bit about with all the changes that are happening around disclosure standards, like what could be the implications to Canadian public and private corporations? I know you spoke a little bit about that earlier, but maybe we can just delve into that a little bit.

Charles-Antoine St-Jean: Yeah. So the implication, there are multiple. Let’s say first of all, there’s many positives to it. First is going to be clarifying the city reporting requirement. I think at the moment everybody’s dealing with the alphabet soup to see of the various framework that reduce the number of those say to a single set. The second is it’s also levelling the playing field for all Canadians and entities, and it’s also enabling the successful, efficient allocation of capital because at the end of the day, these standards is very much designed to help investors to distribute to allocate the capital to where best to see where you’ll have the best return to see overall. So it’s important to reiterate that until the standards are mandated by jurisdictional regulators, they’re voluntary. So Canadian business do have some lead time to get up to speed on the reporting requirement. Consider the challenges and costs implication and plan for their next move. Importantly, the ISSB decided to narrow the scope. And I think it’s very important for everybody to understand when the ISSB released to see their standard on the 26th, they decided to narrow the scope of virus as the IFRS S1 to climate related disclosure alone in companies first year reporting. Everybody understands that’s a lot of work to be done and it’s better to start smaller than with everything. So they limited the city, they narrow the scope of IFRS S1 to climate related disclosure alone, and then the city will expand the scope to address sustainability in year two and beyond. So that provides a degree in transition relief to preparers. And also another degree of relief is the concept of proportionality, which gives organizations of all sizes the time to see to use the standards. Finally, the ISSB recognized the capacity challenges faced by businesses around the world, not only in Canada but around the world. So last November 2022, the ISSB formed a partnership framework for capacity building, which, among other things, will seek to build expertise for standard implementation and assurance across the world. So these are some of the changes that are implied by the coming up of ISSB standard 1 and S2.

Bindu Dhaliwal: Thank you for that. And so in closing, anything else that you think our capital markets participants need to start considering now that the standards are here, the CSSB is formed, lots of, you know, discussion to be happening in the next year or so. So any closing thoughts?

Charles-Antoine St-Jean: Well, thank you very much. You know, the momentum is there. So the coming out of the S1 and S2 to say 18 months to say after the formation of the ISSB is rapid deployment. So the speed is there, momentum is there. So now it’s time to see for everyone to get educated in the ISSB and to understand what your internal systems and process for collecting, aggregating and validating sustainability related information. We haven’t talked about the issue of eventually that could be subjected to a share ability. So your internal system and process for collecting and aggregating and validating sustainability related information you should be looking at it now because it will come fast. Consider the sustainability related risks and opportunities that affect your organization performance and of course review the standards themselves. Of course, and also we would be very, very thankful if you could engage with the CSSB. As I say, we are working to see where the ISSB to see to help implement their standard, but also to help the ISSB to focus their efforts to see on what would be the future standard to see that could have a greater impact on Canada. So the ISSB agenda priorities is something we’re consulting on to see and also to see what is the proposed update to the SASB standards. So there are different ways that you can prepare it. But just in closing, I’ll say the momentum is here. Those standards are coming to Canada and now it’s time to get on with the business of bringing sustainability standards to Canada.

Bindu Dhaliwal: Thank you, Charles-Antoine, for taking the time today. As you mentioned, there’s a lot in play, a lot of momentum, a lot of excitement. And we really appreciate for sharing all the information on today’s show.

Charles-Antoine St-Jean: So thank you very much, Bindu, And thank you very much and looking forward to work with you. We’re going to be helping to craft those standards in Canada. So thank you very much again.

Bindu Dhaliwal: And thank you to the listeners for tuning in. Please join us next time as we tackle some of sustainability’s biggest questions, providing different perspectives to help you move forward. I’m your host, Bindu Dhaliwal and this is The Sustainability Agenda.

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