Canada’s Climate Disclosure Rules - New Mandatory Reporting and Sustainable Investment Guidelines for a Net-Zero Future

As part of a sweeping climate strategy, the Canadian government is introducing comprehensive climate-related disclosure requirements for large, federally incorporated companies. These rules represent the latest step in Canada’s journey to enhance corporate accountability, promote transparency, and attract sustainable investment on the path to net-zero emissions by 2050.

Announced alongside the new climate-related reporting requirements, Canada has also introduced a Made-in-Canada sustainable investment taxonomy to support businesses and investors in identifying and categorizing green and transition economic activities.

Expanding Climate Disclosure Standards to Private Companies

Canada’s climate disclosure journey began in 2021 when Prime Minister Justin Trudeau called for a national framework aligned with the Task Force on Climate-related Financial Disclosures (TCFD). In 2022, the Office of the Superintendent of Financial Institutions (OSFI) mandated that federally regulated financial institutions begin climate-related reporting in 2024. Now, the Canadian government is further expanding its climate disclosure requirements to include large, federally incorporated private companies.

Under this new mandate, Canada will bring forward amendments to the Canada Business Corporations Act, compelling these companies to disclose climate-related financial risks. The regulatory process will determine the specific requirements, including which companies must comply and the scope of required disclosures.

These changes are designed to offer investors a clearer picture of how Canadian businesses are managing climate risks and opportunities. Although small- and medium-sized enterprises (SMEs) are not required to comply, the government is exploring ways to encourage voluntary climate reporting among them.

Chrystia Freeland, Canada’s Deputy Prime Minister and Minister of Finance emphasized the significance of these initiatives by stating,

“Today’s release of a path for Made-in-Canada sustainable investment guidelines and climate disclosures from large companies will accelerate the flow of private capital into Canada, in turn growing our economy, creating good jobs, and advancing our progress to net-zero emissions by 2050.”

Canada’s Made-in-Canada Sustainable Investment Taxonomy

In addition to mandatory climate disclosures, Canada is introducing its sustainable investment taxonomy. This taxonomy, developed by the Canadian Sustainability Standards Board (CSSB), will provide clarity on what qualifies as “green” or “transition” investments, allowing investors, lenders, and companies to categorize their climate-related activities with confidence.

The CSSB’s taxonomy aligns closely with the International Sustainability Standards Board’s (ISSB) guidelines, which are grounded in the TCFD framework and include pillars such as Governance, Strategy, Risk Management, and Metrics & Targets. 

However, the CSSB has tailored the standards to reflect Canada’s unique climate and economic context. This Canadian-specific framework aims to boost private capital inflow for sustainable projects and aligns with the government’s broader goal to reach net-zero emissions by 2050.

Freeland underscored the importance of the taxonomy by noting,

“In the 21st century, a competitive economy is a net-zero economy. We are seizing Canada’s economic advantages to attract investment and ensure Canadian workers benefit their fair share in the global race to net-zero.”

Key Details of Canada’s Climate Disclosure Standards

The draft CSSB standards—CSDS 1 and CSDS 2—closely mirror the ISSB’s IFRS S1 and S2 guidelines and are expected to apply to Canadian companies starting in January 2025. CSDS 1 covers sustainability-related risks and opportunities, while CSDS 2 is dedicated to climate-related financial disclosures.

Notably, the CSSB standards provide extended transition relief for companies adjusting to new disclosure practices. For instance, the reporting of Scope 3 emissions, which cover emissions from a company’s value chain, has been given an additional year for compliance.

As the Canadian government works to finalize these standards by the end of 2024, companies already aligned with the TCFD framework are better positioned to meet the new requirements.

However, those without such alignment may face a challenging transition. The government expects companies to enhance their climate strategies, data collection, and reporting systems to comply with the new standards.

Minister of Environment and Climate Change, Steven Guilbeault, highlighted the importance of these standards by saying,

“The development of a sustainable investment taxonomy, paired with heightened transparency on climate disclosures, amounts to an important stepping stone for Canada on the path towards that cleaner economy.”

Sector Preparedness for Canada’s Climate Disclosures

A recent assessment by ISS Corporate Climate Analytics found that approximately two-thirds of companies in Canada’s Materials, Energy, and Financials sectors are currently aligned with the TCFD framework, suggesting strong preparedness for the CSSB standards.

However, sectors such as Real Estate, Information Technology, and Health Care exhibit lower levels of alignment, indicating more work is needed to meet the upcoming standards.

The CSSB’s emphasis on transparency and accountability reflects a growing recognition that climate-related risks and opportunities must be integrated into corporate decision-making across sectors.

Jonathan Wilkinson, Minister of Energy and Natural Resources, remarked on the economic opportunities in climate action, stating,

“Investors will have more certainty that companies are taking real and serious action to address the climate crisis and drive down emissions while building a strong economy.”

What Canada’s New Climate Disclosure Means for Businesses

For Canadian companies, the expanded climate disclosure requirements underscore the importance of sustainable practices. These rules are opportunities for businesses to build resilience, attract investment, and compete globally. Companies that proactively align with the new standards can enhance their reputation, access more capital, and demonstrate a commitment to sustainable growth.

With the final CSSB standards expected by the end of the year, businesses have a limited window to prepare. Leveraging ESG software and data management systems can streamline compliance and facilitate robust climate-related reporting.

As Canadian companies integrate climate risks into their governance, strategy, and risk management, they help to foster a more transparent and resilient economy.

Canada’s Climate Disclosure Milestone

Canada’s new climate disclosure rules, along with the Made-in-Canada sustainable investment taxonomy, represent a significant milestone in the country’s sustainability journey.

By mandating climate disclosures and offering clear guidelines for sustainable investment, the Canadian government is providing businesses and investors with the tools needed to transition to a net-zero economy.

These measures set a benchmark for corporate transparency and accountability, helping Canada compete in the global race to attract sustainable investment. With these new standards, Canada is not just responding to the climate crisis—it’s embracing the economic opportunities that come with it. F

You can find the original press release here.

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As Canada drives forward with ambitious climate disclosure rules and sustainable investment guidelines, staying informed has never been more crucial.

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