Law Times

Law TiMes • March 28, 2011 FOCUS PAGE 11 CSA offers guidance on environmental disclosure T BY ROBERT TODD Law Times he Canadian Securities Administrators have attempted to tackle an area of concern among inves- tors by providing new guidance for issuers on continuous dis- closure requirements relating to environmental matters. Th e additional directions aim to help issuers determine the information they must pro- vide on material environmental matters. Examples include risk related to weather patterns or environmental legislation. "Greater transparency is needed regarding the nature and extent of environmental risk and other environmen- tal matters," said former CSA chairman Jean St-Gelais in an- nouncing the notice. "Th is guidance should great- ly assist issuers in complying with their disclosure obliga- tions, which would ultimately provide investors with much more complete information on environmental matters." Th e notice follows consulta- tion with investors, issuers, and experts. It off ers direction in four specifi c areas of disclosure: envi- ronmental risks and related mat- ters; environmental risk oversight and management; forward- looking information require- ments as they relate to environ- mental goals and targets; and the impact of the adoption of international fi nancial report- ing standards on disclosure of environmental liabilities. Th e notice outlines several ways in which operations related to the environment can aff ect an issuer's performance. Problems in this area can, for example, lead to operational interruptions and unplanned costs, cause licensing complications, altered reputa- tions, and consumer preferences, and aff ect insurance costs. Th e CSA also makes refer- ence to the potential infl uence of fast-moving regulations. "Th e environmental regulato- ry landscape is constantly chang- ing," the notice states. "Issuers need to regularly assess their dis- closure obligations in light of on- going environmental regulatory developments domestically and abroad to the extent they may af- fect an issuer's operations, assets, supply chain or markets." Th e notice points out that the Ontario Securities Com- mission, during a 2009 eff ort dealing with corporate sustain- ability, heard from investors who said there's often key infor- mation on environmental mat- ters in voluntary reports but not in securities regulatory fi lings. Moreover, the information pro- vided is incomplete at times and may be unreliable and diffi cult to compare between issuers. Gray Taylor, co-leader of Ben- nett Jones LLP's climate change and emission trading practice, says he would have liked to see the CSA include more direct commentary on climate change disclosure. He notes that while the notice includes a reference indicating the direction was in- formed by the U.S. Securities and Exchange Commission's guidance regarding disclosure related to climate change, "they don't do anything with it." "Th ey neither tell you whether they like it or don't like it, and the fact that there's a reference in there kind of leaves you scratching your head a little bit," says Taylor, who was a member of the advisory committee consulted during the preparation of the CSA notice. "Climate change doesn't play the role in this document that one might have expected," he adds. "You can pick it up here and there in the document, but it's not very explicit." Having said that, Taylor does embrace the fact that the notice comes from the CSA, which means all of Canada's securities regulators have accepted it. "It's not clear to me that the level of climate-change disclo- sure really matches what, in some cases anyway, I would have hoped to see," he says. "While there are lots of companies doing fi ne on that, there are lots that aren't. With this guidance being signed onto by Alberta and oth- ers in the Canadian Securities Administrators group, I think that's helpful in saying there's a level expected right across the country, not just in Ontario." At the same time, while the notice off ers a more useful and detailed set of principles for issu- ers to consult, Taylor says it pres- ents the same challenge as general guidance does: bridging the gap between the general principles in the document and the specifi c issues facing individual issuers. "Th e biggest problem that us- ers of disclosure have is the diffi - culty around the word 'material,'" he says. "Th is document stresses that only material matters need to be disclosed. Material, while they say it's objective, without some practical examples, without some situations where the commission and issuers fi ght it out in public so that the guidelines translate into [direction on] here's how you apply them, it's very diffi cult to know what is material." Robert Black, a corporate and business law partner at Davis THE ONTARIO MUNICIPAL SERVICE DIRECTORY 2011 A Comprehensive Guide for reAl estAte professionAls, 2011 All the municipal services information you need for real estate searches under one cover. With introduction and historical linkages by michael l. 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• Cover
• Evidence Tossed
• Duty To Consult
• Focus On Energy Law/Environmental Law