Law Times

Law Times • November 24, 2008 FOCUS PAGE 11 No surprise OSC focusing on environmental disclosure BY JULIUS MELNITZER For Law Times t really shouldn't have surprised anyone when the Ontario Se- curities Commission signaled its intention to focus on environ- mental disclosure last February. After all, the environment has been the flavour of the day for many regulators for some time now. The message, contained in a I Congress' attention, so much so that the Senate Banking Subcom- mittee on Securities, Insurance, and Investment convened a hear- ing on the petition. Among the witnesses was Jeffrey Smith, an environmental law partner at Cra- vath, Swaine & Moore and former chairman of the American Bar As- sociation's Committee on Environ- mental Disclosure. He testified that voluntary-based reporting fall short in meeting the needs of investors. "This isn't the Sierra Club calling for mandatory disclosure," says Dupont. "It was Cravath." Less than two weeks earlier, Staff Notice on Environmental Disclosure, followed a review of 35 Ontario-based issuers that revealed several areas of defi- cient disclosure and identified environmental liabilities and risks as areas of concern. While the notice provides guidance for reporting issuers who are discussing environmental mat- ters in the disclosure documents, the OSC indicated that it would continue to monitor environmen- tal disclosure on an ongoing basis. In other words, to the extent the commission is being a responsible regulator, its behaviour is predict- able. But anyone who believes that the screws on environmental dis- closure aren't going to be further tightened — and tightened consid- erably — is grossly underestimat- ing the broad base of concern over potential liabilities relating to the environment and climate change. Consider, for example, the Sep- tember 2007 petition filed with the U.S. Securities and Exchange Commission by 22 leading U.S. and European institutional inves- tors representing more than $1.5 trillion in assets. Maintaining that they require uniform disclosure practices to evaluate risk and bal- ance their portfolios, the petition- ers — including giant pension funds like CalPERS, investment fund managers, and a broad coali- tion of state officials with regula- tory, law enforcement, and fiscal management responsibilities — asked the commission to issue an interpretive release clarifying that material climate-related informa- tion must be included in corpo- rate disclosures under existing law. They also asked the SEC to begin immediate "close" evaluation of existing disclosure practices. "The drivers of climate change risk disclosure to date have been the usual suspects, like environ- mental advocacy groups, Al Gore, and concerned celebrities," says Norman Dupont, chairman of California-based Richards Watson & Gershon's climate change group. "But now we've moved from 'Save Willie' to Wall Street, in the sense of a significant shift among those who are pushing climate change issues." The petition certainly caught Senators Joe Lieberman and Kurt Warner introduced America's Cli- mate Security Act of 2007. The legislation would, among other things, have required the SEC to issue regulations requiring material disclosure of climate change within two years of the law's enactment. But Republicans, concerned th- some of its provisions would dam- age the economy, killed the Bill. "Still, when you get two dead- where companies name facilities — like those near the ocean — that could be affected by climate change," he says. "We'll also see emissions disclosures." But full climate change dis- centre Senators running with this, it becomes very instruc- tive," says Rachel Kronowitz, a partner in Gilbert Randolph's Washington, D.C., office. Even the SEC, which to date has still not insisted on disclosure of climate-related matters, and had failed to respond to two earlier let- ters that preceded the formal peti- tion, finally appeared to be listen- ing. So much so that staff agreed to meet with the petitioners. Nothing has come of that yet either, but just two days before the petition's filing New York At- torney General Andrew Cuomo launched an investigation into whether the plans of five large en- ergy companies to build coal-fired power plants posed undisclosed fi- nancial risks about which investors should be aware. The investigation highlighted the potential utility of securities laws in governments' fight against global warming. Equally instructive is the dra- closure engages quantification of these physical risks as well as regu- latory and compliance risks. Such quantification is difficult, however, because there are a wide variety of accepted models of climate change, and many have different outcomes. "Some securities lawyers are advis- ing their clients to get out in front of the disclosure issue, and that's okay, but when mandatory dis- closure arrives, quantification will be the real challenge," says Steven Shimberg, counsel to DLA Piper's regulatory and government affairs department. "What is clear is there are a tremendous number of un- certainties in quantification and at this point no one should be required to be definite about the numbers," he says. LT Glenn Zacher and Patrick Duffy Original author: The Honourable Mr. Justice David M. Brown Shedding light on the complex legislative and regulatory framework governing the Ontario natural gas and electricity industries Taken over by energy law practitioners, Glenn Zacher and Patrick Duffy of Stikeman Elliott, with original material by The Honourable Mr. Justice David M. Brown, Energy Regulation in Ontario is your most authoritative source for gaining an appreciation of the laws, regulations and policy directives governing the Ontario energy market and industry. In fact, it's the only publication available that analyzes the legal regime affecting each segment of the market and industry – i.e., generation, transmission, distribution, wholesaling/trading and marketing/ retailing. Energy Regulation in Ontario contains everything you need to understand the intricacies of the open market for natural gas and electricity. Regularly updated to reflect the latest changes, this book explores: matic increase in shareholder reso- lutions relating to climate change and disclosure. The 57 resolutions brought forward this year to Aug. 31, represented a doubling of such resolutions in the last five years. Going back to the beginning of the decade, there were fewer than 10 such resolutions in both 2000 and 2001. Still, Dupont believes inves- tors in SEC-regulated companies can't at this stage hope for more than relatively bland generic state- ments identifying potential risks. "At the beginning, we'll see an identification of physical risks, Environmental Law: The Year in Review 2007 Stanley D. Berger and Dianne Saxe With contributions by: Paul Crowley, Charles Kazaz, Ramani Nadarajah, Kirk Lambrecht, Jessica Clogg, Meinhard Doelle, Dennis Mahony, Rangi Jeerakathil and Clayton Leonard • the frequent amendments made since 1998 to both the Electricity Act, 1998 and the Ontario Energy Board Act, 1998 • the substantial revisions, repeals and additions made to the regulations under both Acts • the significant changes to the Market Rules made by the Independent Electricity System Operator • summaries of the major decisions made each year by the Ontario Energy Board on both the natural gas and electricity fronts, keeping you up to date This is a must-have resource for anyone in the energy sector who wants to successfully navigate through this complex regulatory landscape. Looseleaf & binder • $277 • Supplements invoiced separately (1-2/yr) P/C 042603000 • ISBN 0-88804-333-3 For a 30-day, no-risk evaluation call: 1 800 263 2037 or 1 800 263 3269 www.canadalawbook.ca Canada Law Book is A Division of The Cartwright Group Ltd. • Free Shipping on pre-paid orders. Prices subject to change without notice, and to applicable taxes. Zacher_Energy Regulation in Ontario (LT 1-4x3).indd 1 LT1117 11/19/08 1:43:27 PM Discover from experts, how recent developments in environmental legislation, policy and case law will impact your practice today Over the past year, our courts, tribunals and legislatures offered much to think about in the fast- moving areas of climate change, energy, aboriginal rights and water. In procedural terms, class actions and civil penalties continue to grow in importance, as does the rule of international law. This collection of insightful and timely articles, written by leading environmental law practitioners from across Canada, will keep you informed on how these new developments in the law will affect your practice and your clients now and in the future. Articles include: • A Shift in the Legal Climate: The Emergence of Climate Change as a Dominant Legal Issue Across Canada by Meinhard Doelle and Dennis Mahony • Environmental Law Developments in Nuclear Energy by Stanley D. Berger • Inuit Defend Their Human Rights Against Climate Change by Paul Crowley • Environmental Deregulation and the Crown's Constitutional Obligations to First Nations by Jessica Clogg • Environmental Assessment and Aboriginal Consultation: One Sovereignty or Two Solitudes? by Kirk Lambrecht • Watered Down: Issues Surrounding Water Use, Legislation and Policy in Southern Alberta by Rangi Jeerakathil and Clayton Leonard • Environmental Penalties: New Enforcement Tool or the Demise of Environmental Prosecutions? by Ramani Nadarajah • Class Action Update by Dianne Saxe • The Precautionary Principle: Six Years after Spraytech, What Does It Mean? by Charles Kazaz Hardbound • 176 pp. • Published March each year Standing order $105 • P/C 0152140000 • Current edition only $115 P/C 0152010000 • ISSN 1913-0252 For a 30-day, no-risk evaluation call: 1 800 263 2037 or 1 800 263 3269 www.canadalawbook.ca Canada Law Book is A Division of The Cartwright Group Ltd. • Free Shipping on pre-paid orders. Prices subject to change without notice, and to applicable taxes. www.lawtimesnews.com BERGER_Environmental Law-The Year in Review (LT 1-3x4).indd 1 LT1117 11/19/08 1:39:13 PM

• Cover
• Lipton Makes a Move
• Queens Park
• Focus On Environmental Law