Climate Governance Initiative


3 August 2023

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The Canadian Net-Zero Emissions Accountability Act, in force June 2021, enshrines Canada’s commitment to achieve net-zero emissions by 2050.1 Building on Canada’s 2020 climate plan2 and the 2016 Pan-Canadian Framework,3 in 2022, Canada announced its 2030 Emissions Reduction Plan, which provides a roadmap to how Canada will meet its enhanced Paris Agreement target to reduce emissions by 40-45% from 2005 levels by 2030.4 Canada has also enacted carbon-pricing legislation, the Greenhouse Gas Pollution Pricing Act,5which the Supreme Court of Canada upheld as constitutionally valid in 2021.6 In November 2022, the Canadian government published its first National Adaptation Strategy for consultation, announcing a whole-of-society approach to climate adaptation and encouraging the private sector to adapt to impacts of climate change.7

Federal regulators have acknowledged the risks to the Canadian economy if Canada fails to address climate change. In March 2023, the Office of the Superintendent of Financial Institutions (OSFI) brought into force its B-15 Guideline on Climate Risk Management, introducing mandatory climate-related financial disclosures aligned with the Taskforce on Climate-related Financial Disclosures (TCFD) framework and requiring more than 400 financial institutions to develop transition plans.8 The guideline builds on outcomes from a pilot program by the Bank of Canada and OSFI, which examined scenario analysis and stress testing in respect of climate-related financial risks.9 The OSFI also published a study in 2021 recognizing that climate-related transition risks can lead to reduced profitability, stranded assets, inability to make loan repayments and/or attract investments, and loss of market capitalization.10

The Canadian Securities Administrators (CSA), a coalition of all provincial and territorial securities regulators, has issued draft National Instrument 51-107 Disclosure of Climate-related Matters,11 which is aligned with the TCFD framework. The CSA has concluded a consultation on the proposed national instrument, and is currently considering how international developments may impact its final instrument, including the US Securities and Exchange Commission’s draft rule on climate-related disclosures, and the International Sustainability Standards Board (ISSB)’s proposed accounting standard for the disclosure of sustainability-related financial information and proposed specific climate-related disclosure standard.12 Effective April 2023, a new Canadian Sustainability Standards Board (CSSB) is working with the ISSB to support the uptake of ISSB standards in Canada and facilitate interoperability between ISSB standards and any forthcoming CSSB standards.13

In March 2023, the Canadian government’s Sustainable Finance Action Council (SFAC) published a roadmap for green and sustainable finance, which will include a Taxonomy Council and advisory groups from financial, multi-level governmental, Indigenous, and civil society groups.14 The taxonomy’s objective is be science-based and to foster the issuance of green and transition financial instruments that are consistent with Canada’s goal of achieving net-zero emissions by 2050, and with the Paris-aligned commitment to keep global temperature rise to below 1.5°C (based on pre-industrial levels) across all Scope 1, 2 and 3 emissions. To be taxonomy-eligible, companies must set net-zero targets, and undertake transition planning and effective climate disclosure; must use the categorization framework to determine whether the project meets the “green” or “transition” eligibility criteria under the taxonomy or is, by default, ineligible; and must assess the project against “do no significant harm” criteria to ensure the project is not detrimental to other environmental, social, and governance (ESG) objectives.

In June 2022, the Canadian Association of Pension Supervisory Authorities (CAPSA) issued the draft “CAPSA Guideline, Environmental, Social and Governance Considerations in Pension Plan Management”, which states that as part of their fiduciary duties, pension plan administrators should consider ESG characteristics, including climate risk, that may have material relevance to the financial risk-return profile of the pension fund’s investments, and that pension plan administrators, as part of their standard of care, need to assess whether their plan governance, risk management and investment decision-making practices are sufficient to identify and respond to material climate and other ESG information in a manner proportionate to their plans and appropriate for their investment beliefs.15

The federal government’s 2023 budget included further measures to accelerate the transition to a net-zero economy, including: $8 billion large-scale investments in clean technologies; $4.2 billion for its Low Carbon Economy Fund to support the installation of emission-reducing technologies; $3.8 billion for Canada’s Critical Minerals Strategy; $5.4 billion to make zero-emission vehicles more affordable and encourage investment in production of clean fuels; $33.5 billion for infrastructure investments in public transit; and $35 billion for the Canada Infrastructure Bank to attract private capital to major infrastructure projects.16

In short, regulatory and government actions and policies on climate change risks and impacts indicate that these are material financial risks for companies.

Directors' Duties and Climate Change

The Canada Business Corporations Act and its sister corporation statutes in the provinces and territories codify and enhance directors’ common law duties of loyalty and care. The corporate statutory duty of loyalty requires the directors and officers of a corporation to “act honestly and in good faith with a view to the best interests of the corporation”.17 The Supreme Court of Canada has held that the duty of care requires the directors and officers to “exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances”.18 The court will defer to the reasonable business judgment of directors who have been duly diligent in their oversight of the company.19 

In June 2020, corporate board governance expert Carol Hansell issued a legal opinion on directors’ obligations to address climate change under Canadian law.20 The legal opinion identifies both directors’ fiduciary duty of loyalty21and their duty of care22as requiring engagement and consideration of climate-related risk. In order to discharge their duty to act in the best interests of the company, directors must consider the long-term interests of the company and, to this end, any environmental risks.23 Directors’ duty of care requires that they solicit reports and recommendations from management and external sources on climate-related risk as necessary and be satisfied that the company is addressing climate change risk appropriately.24 Hansell’s updated legal opinion in 2022 observes that the obligation of directors to consider the implications of climate change risk is grounded in the duties each director owes to the corporation, and in managing or overseeing the management of risk, directors must meet the objective standard of what a reasonably prudent person would do in comparable circumstances; they must require reports and recommendations from management and external sources as necessary and be satisfied that the corporation is addressing climate change risk appropriately.25

OSFI also issued a report that recognized that directors of federally-regulated financial institutions and trustees of federally-regulated pension funds have a fiduciary duty to identify and manage climate risks as part of their prudential duties, and failure to do so may give rise to liability risks.26

Directors' Disclosure Obligations and Climate Change

Canadian securities regulators have advised that climate change risk is now widely recognised as a mainstream business issue and that companies must disclose material climate risks and how they are addressing them.27 A CSA report states that despite the potential uncertainties and longer time horizon associated with climate change-related risks, boards and management should take appropriate steps to understand and assess the materiality of these risks to their business.28

The CSA has given notice that the board and management should assess their expertise with respect to sector-specific climate-related risks, and augment that expertise, as necessary.29 CSA Staff Notice 51-358 Reporting of Climate Change-related Risks states that the audit committee and the board should be provided with appropriate orientation and information to help members understand sector-specific climate-related issues.30 It suggests that the board ask itself whether directors have been provided sufficient information, including management’s materiality assessments in respect of the issuer’s climate-related risks, to appropriately oversee and consider management’s assessment of these risks.31 CSA Staff Notice 51-358 states:

An assessment of materiality in relation to climate change-related risks may require issuers to adapt their existing approaches to risk assessments in order to better understand the potential impacts of climate change-related risks and their materiality. In some cases, this may involve adjusting their approaches to consider the longer time horizon associated with and how to effectively quantify these types of risks.32

CSA proposed National Instrument 51-107 Climate Related Disclosures will apply to all reporting issuers.33 The disclosure requirements relate to the four core elements of the TCFD recommendations: governance; strategy; risk management; and metrics and targets. With respect to governance, NI 51-107 will require reporting issuers to describe the board’s oversight of climate-related risks and opportunities and management’s role in assessing and managing climate-related risks and opportunities, irrespective of materiality.34 With respect to strategy, reporting issuers will be required to describe, where such information is material: the climate-related risks and opportunities the issuer has identified over the short, medium, and long term, and the impact of climate-related risks and opportunities on the issuer’s businesses, strategy, and financial planning.35 With respect to risk management, reporting issuers will be required to describe their processes for identifying, assessing and managing climate-related risks, and how processes for identifying, assessing, and managing climate-related risks are integrated into the issuer’s overall risk management.36 Finally, with respect to metrics and targets, reporting issuers will be required to disclose the metrics used by the issuer to assess climate-related risks and opportunities in line with its strategy and risk management process where such information is material.

Pursuant to proposed NI 51-107, issuers are to disclose Scope 1, Scope 2, and Scope 3 greenhouse gas emissions on a comply or explain basis, although the CSA is considering whether to make Scope 1 emissions reporting mandatory.37 Issuers will also be required to disclose the targets used by the issuer to manage climate-related risks and opportunities and performance against targets where such information is material.38 Finalization of NI 51-107 was delayed until 2023 so that securities regulators could align requirements with new proposed ISSB and CSSB standards.

The Hansell opinion concluded that public companies’ disclosure obligations under securities law extend to the disclosure of climate-related risks (and opportunities) and that directors should be aware that their decisions regarding disclosure under securities law are not subject to protection of the business judgement rule.39

Additional provisions for federally-regulated financial institutions

As referenced above, the OSFI’s guideline B-15 Climate Risk Management became effective in March 2023. The OSFI guidelines apply to federally-regulated financial institutions (FRFIs) including banks and insurance companies. The guideline states that the OSFI expects FRFIs to: have in place appropriate governance and management structures in place to manage climate-related risks; incorporate the implications of climate-related risks into their business models and strategy; carry out scenario analysis to assess the impact of climate risks on their business models and strategy; and maintain sufficient capital and liquidity buffers for their climate-related risks. The OSFI guideline also requires FRFIs to make TCFD-aligned disclosures.40 The OSFI expects FRFIs to evaluate and measure their capital available to protect against material risks, including climate-related risks, and reflect their assessments in the banks’ Internal Capital Adequacy Assessment Process (ICAAP) or the insurers’ Own Risk and Solvency Assessment (ORSA), as well as the adequacy of their liquidity to protect against FRFI-specific and market-wide severe, yet plausible, climate-related stress events.41

Biodiversity risk

Canada hosts approximately 10% of the world’s forest cover and 25% of the world’s wetlands.42 The CCLI has published a report on how companies in Canada and other jurisdictions may depend on biodiversity for the functioning of their business models.43 In particular, biodiversity risks may constitute material financial risks that boards are required to consider within the purview of directors’ duties. 

Canada hosts the ISSB headquarters and is set to impose mandatory TCFD-aligned disclosure requirements.44 The Canadian Pension Plan Investment Board recognises biodiversity as one of the factors redefining environmental risks and opportunities.45 In 2020, ESG reports of 38% of Canadian issuers discussed biodiversity.46 

Evidenced by case law, Canadian courts have demonstrated positive progression in judicial thinking and scrutiny regarding directors’ risk management, disclosure breaches as a result of failure to manage risk,47 environmental risk disclosures,48 and accountability of corporations active in Canada in relation to activities in their subsidiaries in other jurisdictions.49 The Canadian legal system has also recognized Indigenous titles and the cultural relationship with land (although how this recognition is implemented in specific cases is still a live issue in Canadian courts),50 and has adopted federal legislation recognizing the United Nations Declaration on the Rights of Indigenous Peoples.51 A local Indigenous council and municipality have recognized the rights and legal personality of the Magpie River (Muteshekau-shipu) in northern Québec.52 Nine rights have been established for the Magpie River, including the right to live, exist, and flow; the right to be preserved and protected; and the right to take legal action, such as to safeguard the river from potential industrial projects.53 There have also been a number of developments regarding the legal personhood of the St. Lawrence River, including a resolution passed by the Assembly of First Nations Québec-Labrador and the introduction of a private members Bill seeking to introduce private legal rights for the river.54 

In 2022, Canada hosted the 15th Conference of the Parties (COP15) to the United Nations Convention on Biological Diversity (CBD) and agreed to the Kunming-Montréal Global Biodiversity Framework, to safeguard nature and halt and reverse biodiversity loss in partnership with Indigenous Peoples and other stakeholders, putting nature on a path to recovery by 2050 and committing to conserving 30 percent of lands and oceans by 2030.55

All of these factors indicate that biodiversity protection is of importance in Canada, and that biodiversity loss could potentially pose a risk that directors need to pay attention to.


Practical Implications for Directors

Given that Canada has adopted an approach to directors’ obligations, both by statute and by opinions of the Supreme Court of Canada to act in the best interests of the company, having regard for multiple stakeholder interests and the environment; given the CSA’s direction that material climate risks need to be disclosed under current securities law; and given new federal guidelines requiring transition plans and disclosure for financial institutions, well-counselled boards will:

  1. delegate climate risk identification and evaluation to a clearly-identified team in management that reports directly to the CEO and board, always keeping in mind that directors retain overall fiduciary responsibility for oversight of identification and management of climate-related risks and opportunities;56 
  2. put on the agenda for the board, as soon as possible, a process to initiate the development of a climate transition roadmap to 2050 with transparent carbon neutrality or reduction targets, with clear interim targets to 2040, 2030 and the current rolling multi-year strategic plan, and periodically thereafter report back to the board;
  3. delegate to the appropriate committee(s) of the board, such as risk, audit, legal and governance, scenarios/strategy, nominations/remuneration, or sustainability/ corporate responsibility, the task of translating the long-term strategy into a clear decision-making process for each aspect that is relevant to each committee; 
  4. consider aligning executive compensation to meeting the company’s targets and timetables in transitioning to net-zero emissions; and
  5. discuss with disclosure counsel, to develop an external engagement and communications plan and ensure rigorous securities disclosure.


  • Dr. Janis Sarra, Professor of Law, University of British Columbia
  • Canada Climate and Law Initiative
  • CCLI
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End notes:

1Canadian Net-Zero Emissions Accountability Act, SC 2021, c 22, See also Government of Canada, “Net-Zero Emissions by 2050” <>.
2:  Government of Canada, A Healthy Environment and a Health Economy, Canada’s strengthened climate plan to create jobs and support people, communities and the planet, (2020), <>.
3:  Government of Canada, Pan-Canadian Framework on Clean Growth and Climate Change (2016) <>.
4:  Government of Canada, “2030 Emissions Reduction Plan: Clean Air, Strong Economy” (2022) <>.
5Greenhouse Gas Pollution Pricing Act, SC 2018, c 12.
6:  Reference re Greenhouse Gas Pollution Pricing Act, 2021 SCC 11.
7:  Government of Canada, Canada’s National Adaptation Strategy: Building Resilient Communities and a Strong Economy (November 2022) <>.
8:  Office of the Superintendent of Financial Institutions (OSFI), Guideline B-15: Climate Risk Management, (March 2022) <>.
9:  Bank of Canada and OFSI, Using Scenario Analysis to Assess Climate Transition Risk (January 2022) <>. OFSI, Building Federally Regulated Financial Institution Awareness and Capability to Manage Climate-Related Financial Risks (14 January 2022) <
10:  OSFI, ‘Navigating Uncertainty in Climate Change, Promoting Preparedness and Resilience to Climate-related Risks, (January 2021),
11:  Canadian Securities Administrators (CSA), draft National Instrument 51-107 Disclosure of Climate-related Matters, 51-107 - Consultation Climate-related Disclosure Update and CSA Notice and Request for Comment Proposed National Instrument 51-107 Disclosure of Climate-related Matters ( (hereafter NI 51-107).
12:  CSA, Canadian securities regulators consider impact of international developments on proposed climate-related disclosure rule (12 October 2022) <>.
13:  Canadian Sustainability Standards Board <>.
14:  SFAC, Taxonomy Roadmap Report Mobilizing Finance for Sustainable Growth by Defining Green and Transition Investments,
15:  Canadian Association of Pension Supervisory Authorities, CAPSA Guideline Environmental, Social and Governance Considerations in Pension Plan Management, (9 June 2022), <
16:  Government of Canada, 2023 Federal Budget (28 March 2023) <>.
17Canada Business Corporations Act, note 24, s. 122(1) and its sister provincial and territorial corporations statutes.
18Peoples Department Stores Inc (Trustee of) v Wise, 2004 SCC 68, [2004] 3 SCR 461; BCE Inc v 1976 Debentureholders, 2008 SCC 69 at [39], [2008] 3 SCR 560; Janis Sarra, Canada Climate Law Initiative Fiduciary Obligations in Business and Investment: Implications of Climate Change (April 2018) <>.
20:  Carol Hansell, Hansell LLP, ‘Legal Opinion: Putting Climate Change Risk on the Boardroom Table’ (June 2020) <>.
21:  CBCA, s. 122(1)(a)
22Peoples Department Stores Inc (Trustee of) v Wise, 2004 SCC 68, [2004] 3 SCR 461.
23:  Hansell LLP, ‘Legal Opinion: Putting Climate Change Risk on the Boardroom Table’ (June 2020), 16-17 <>.
24:  Hansell, 2020 at 13-15 <>. See also Janis Sarra, Duty to Protect: Corporate Directors and Climate-Related Financial Risk (January 2021) <>.
25:  Carol Hansell Legal Opinion, Climate Change Risk on the Boardroom Table, (7 June 2022), <>.
26:  OSFI, ‘Navigating Uncertainty in Climate Change, Promoting Preparedness and Resilience to Climate-related Risks, (January 2021),
27:  CSA Staff Notice 51-358 Reporting of Climate Change-related Risks (2019), <>. See also CSA Staff Notice 51-333 Environmental Reporting Guidance (SN 51-333).
28:  CSA Staff Notice 51-358, ibid at 4.
32Ibid at 8.
33:  Other than investment funds, issuers of asset-backed securities, designated foreign issuers, SEC foreign issuers, certain exchangeable security issuers and certain credit support issuers; NI 51-107.
34:  Proposed NI 51-107, at 7.
35:  Proposed NI 51-107, at 7.
36:  Proposed NI 51-107, at 7.
37:  Proposed NI 51-107, at 7.
38:  Proposed NI 51-107, at 8.
39:  Hansell LLP, ‘Legal Opinion: Putting Climate Change Risk on the Boardroom Table’ (June 2020) at 20, <>.
40:  Office of the Superintendent of Financial Institutions (OSFI), Guideline B-15: Climate Risk Management, (March 2022) <>, Annex 2-2.
41:  OSFI, Climate Risk Hub, May 2023.
42:  The Canadian Encyclopaedia, Biodiversity (last accessed 10 November 2021).
43:  CCLI, Biodiversity Risk: Legal Implications for Companies and their Directors (December 2022) <>.
44:  Government of Canada, Budget 2022. Tax Measures: Supplementary Information (April 2022) <>; Prime Minister of Canada, Minister of Environment and Climate Change Mandate Letter (2021) <>; Canadian Securities Administrators, CSA Notice and Request for Comment Proposed National Instrument 51-107 Disclosure of Climate-related Matters ( October 2021), 6 <>.
45:  Canada Pension Plan Investments, 2021 Report on Sustainable Investing (2021) <>.
46:  Millani, Millani’s 5th Annual ESG Disclosure Study: A Canadian Perspective (September 2021) <>; International Comparative Legal Guide, Environmental, Social & Governance Law 2022 (2022) <>.
47Green v Canadian Imperial Bank of Commerce, 2012 ONSC 3637, Superior Court of Justice of Ontario, paragraph 463.
48Drywall Acoustic Lathing and Insulation, Local 675 Pension Fund v Barrick Gold Corporation
2021:  ONCA 104, Court of Appeal of Ontario.
49Nevsun Resources Ltd. v Araya
2020:  SCC 5, Supreme Court of Canada.
50Guerin v The Queen, [1984] 2 S.C.R. 335, Supreme Court of Canada established that the Crown had a fiduciary duty to protect Aboriginal title for Aboriginal peoples; Delgamuukw v British Columbia
1997:  3 S.C.R. 1010, Supreme Court of Canada set out how courts will deal with Aboriginal title; Indigenous Foundations, Aboriginal Title (2009) <>; Terri-Lynn Williams-Davidson and Janis Serra, CCLI Canada, Haida law of gina ‘waadluxan gud ad kwaagiida and Indigenous rights in conservation finance (2021) <>; Haida Nation v British Columbia (Ministry of Forests), 2004 SCC 73 [Haida Nation]; Conservation partnerships with Indigenous peoples have been made in the Gwaii Haanas Agreement, Gwaii Haanas Marine Agreement, Great Bear Rainforest (Forest Management) Act and Great Bear Rainforest Land User Order.
51United Nations Declaration on the Rights of Indigenous Peoples Act, SC 2021, c 14.
52:  Reuters, Canadian river wins legal rights in global push to protect nature (24 February 2021) <>; United Nations, Harmony With Nature Platform, Rights of Nature Law and Policy <> (last accessed 10 November 2022).
53:  International Rivers, Why Recognize a River’s Rights? Behind the scenes of the Magpie River case in Canada (15 March 2021), <>.
54:  CTV News Montreal, First Nations chiefs adopt resolution declaring St. Lawrence River a legal person (24 April 2023) <>; Bill C-271 An Act to give legal capacity to the St. Lawrence River and to provide for measures respecting its protection <>.
55:  Government of Canada, “Canada at COP15”, UN Biodiversity Conference: COP15 in Montréal -
56:  Janis Sarra, with contributing authors Roopa Davé, Meghan Harris-Ngae, and Ravipal Bains, Canada Climate Law Initiative, Audit Committees and Effective Climate Governance, A Guide for Boards of Directors, (December 2020) <>.