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CSA Publishes Guidance On Greenwashing And ESG Disclosures – Securities


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On November 3, 2022, the Canadian Securities Administrators (the
“CSA”) published CSA Staff Notice 51-364 – Continuous Disclosure
Review Program Activities for the fiscal years ended March 31, 2022
and March 31, 2021
(the “Notice”). In the Notice, the
CSA set out the findings of its Continuous Disclosure Review
Program (“CD Review Program”), which reviewed continuous
disclosure documents published by certain reporting issuers in
Canada (“issuers”) during the fiscal years ended March
31, 2021, and March 31, 2022 (“Fiscal 2021” and
“Fiscal 2022”, respectively) for completeness, quality
and timeliness.

In both Fiscal 2021 and Fiscal 2022, “climate change”
was one of the topics examined in the CSA’s issue-oriented
reviews, which broadly focused on the manner in which emerging and
pertinent issues were addressed by issuers. Through the CD Review
Program, the CSA observed an increase in issuers disclosing their
environmental, social and governance (“ESG”) performance
and a simultaneous increase in the practice of
“greenwashing,” whereby issuers made misleading, or
potentially misleading, unsubstantiated, overly broad or untrue
claims about the sustainability of their operations, products or
services. Accordingly, the Notice sets out the CSA’s guidance
for issuers when disclosing their ESG performance in their
financial statements, management’s discussion and analysis, and
other continuous disclosure documents, as well as other voluntary
disclosures, including ESG reports and public surveys.

CSA Guidance on Greenwashing

The CSA’s guidance in the Notice regarding ESG disclosures
is summarized as follows:

  1. All statements regarding an issuer’s current or anticipated
    ESG performance must be factual, balanced and substantiated. The
    type and amount of detail that is required will depend on the
    aspect of an issuer’s ESG performance that is disclosed. For
    example, if an issuer discloses its goal to be carbon neutral by
    2030, such disclosures may be supplemented, for example, with
    information regarding the current status of the issuer’s
    emissions, as well as a detailed plan setting out the technologies
    and tactics the issuer expects to employ, and the specific
    milestones the issuer expects to realize on the road to achieving
    this goal. The CSA also noted that where issuers make claims about
    their relationships with other organizations and the resulting
    social impact of those relationships, details about the
    organization’s activities, the particular aspects of
    sustainability that are being addressed through the relationship,
    and the manner in which these aspects are measured and assessed,
    should be included. As effective corporate governance mechanisms
    and risk management frameworks generally play a significant role in
    formulating and executing appropriate and meaningful corporate
    strategies, the extent to which an issuer implements these
    mechanisms and frameworks will greatly influence that issuer’s
    ability to provide thorough and accurate ESG disclosures, set
    achievable targets and develop realistic plans to address any
    existing deficiencies in the issuer’s ESG performance. Issuers
    should also keep apprised of updates in the ESG reporting
    landscape, which is evolving at a rapid pace, to ensure their ESG
    performance is disclosed accurately and thoroughly. Our Capital
    Markets Group will continue to monitor the development of ESG
    disclosure regulations and voluntary ESG reporting frameworks.

  2. Certain statements regarding, for instance, an issuer’s
    ESG-related targets, forecasts or projections, may constitute
    forward-looking information (“FLI”). In accordance with
    National Instrument 51-102 Continuous Disclosure
    , FLI must be supplemented by disclosure regarding
    material factors or assumptions used to develop the FLI, material
    risk factors that may cause any anticipated results to differ
    substantially, and any policies implemented by the issuer to update
    such FLI. Issuers must ensure that their internal review controls
    and procedures are sufficiently structured to engage in this

  3. Issuers should exercise caution when using promotional
    language. Specifically, the CSA noted that issuers have previously
    made promotional statements about their ESG performance – for
    example, claiming that the issuer was a “global leader”
    in sustainability, or had set “aggressive emissions reduction
    targets.” The Notice requires promotional statements to be
    accompanied by supporting facts and details. This aligns with the
    guidance set out in CSA Staff Notice 51-356 Problematic promotional
    activities by issuers
    , which notes that false and misleading
    statements are prohibited in all communications, voluntary or
    otherwise. Investors and other stakeholders pay particular
    attention to ESG-related risks and opportunities identified and
    managed by the issuer, in order to evaluate the long-term financial
    health of the corporation or assess the impact on their respective
    needs, generally. As any false or misleading statements about an
    issuer’s ESG performance may affect the price or value of an
    issuer’s securities, issuers ought to be aware of the broader
    impact that their statements about the company’s ESG
    performance may have. Generally, issuers ought to avoid
    unqualified, broad statements and buzzwords when describing their
    products, services and operations (e.g., “green,”
    “sustainable,” “environmentally friendly,”
    etc.). Issuers might also consider implementing an ESG disclosure
    policy setting out the manner in which an issuer discloses its ESG
    performance and the individuals authorized to make such
    disclosures, in order to ensure the publication of its ESG
    disclosures is appropriately controlled and monitored.

  4. Disclosures about any ESG ratings must be accompanied by
    additional detail. As different rating agencies employ different
    metrics and matrixes in their respective evaluations, the CSA has
    advised issuers to disclose additional information about the
    specific criteria an ESG rating is based on (e.g., the factors
    considered and the weight assigned to those respective factors).
    Specifically, if applicable, issuers should also disclose whether
    any third party certified the rating.

Greenwashing and Securities Regulation

Outside of the activities of its CD Review Program, the CSA has
demonstrated a consistent interest in regulating ESG-related
disclosures of issuers in Fiscal 2021 and Fiscal 2022. As we
reported in our article, Canadian Securities Administrators Propose
Climate-Related and ESG Disclosure Requirements
, the CSA
released on October 18, 2021, the proposed National Instrument 51-107 Disclosure of
Climate-Related Matters
(the “Proposed Instrument”)
and its Companion Policy 51-107CP Disclosure of
Climate-Related Matters
, both of which remain subject to
finalization, but will eventually require disclosure for most
issuers on certain climate-related matters. The CSA also published
the CSA Staff Notice 81-334 ESG-Related Investment
Fund Disclosure
to provide guidance on the manner in which ESG
factors should be disclosed by investment funds.

Additionally, in the consultation paper that accompanied the
release of the Proposed Instrument, the CSA noted that certain
existing national instruments may currently apply to an
issuer’s disclosure of climate-related information. For
instance, Form 51-102F1 Management’s Discussion and
and Form 51-102F2 Annual Information Form note
that “materiality” is the deciding factor when
determining whether information is required to be disclosed, and
the latter specifically requires issuers, when completing their
annual information forms, to note material risk factors that may
influence an investor’s decision to purchase the issuer’s
securities. Given the growing awareness of the impact of ESG
factors on a business, we anticipate that climate-related
information and climate-related risks, as applicable, may be
considered material to a reasonable investor when deciding whether
or not to buy, sell or hold an issuer’s securities. National Policy 58-201 Corporate Governance
, National Instrument 52-110 Audit Committees
and National Instrument 52-109 Certification of
Disclosure in Issuers’ Annual and Interim Filings
set out
guidelines for adopting corporate governance mechanisms and
internal controls and procedures to identify and manage principal
risks and opportunities, including climate-related risks and
opportunities. The details of an issuer’s corporate governance
policies and practices are ultimately disclosed in an issuer’s
continuous disclosure documents.

As the CSA pays an increasing amount of attention to ESG
disclosures in existing and proposed legislative instruments,
issuers ought to be aware of the general penalties the CSA may
impose on an issuer for its failure to provide sufficient
disclosures, which were set out in the Notice. Specifically, in the
event that the issuer publishes continuous disclosure documents
with extensive deficiencies, the CSA may add the issuer to its
default list, issue a cease-trade order and/or refer the issuer to
enforcement. The CSA may also require an issuer to refile a
document correcting any previously noted deficiencies (e.g., by
issuing a clarifying news release), commit to make disclosure
enhancements on a prospective basis or file a missing document. The
CSA may inform issuers specifically of changes that it wishes to
see in its next set of applicable continuous disclosure documents,
or may require the issuer to deepen its awareness on a particular
topic. In the Notice, the CSA did not specify what the particular
consequences for an issuer’s failure to provide sufficient ESG
disclosures would be, but it can be reasonably anticipated that
depending on the nature and extent of the deficiencies in the
issuer’s ESG disclosures, any one or a combination of the
aforementioned orders may be enforced against the issuer.


The Capital Markets Group at Aird & Berlis
will continue to monitor developments in ESG-related disclosure.
Please contact a member of our group if you have any questions
related to securities legislation, including the aforementioned

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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