On November 3, 2022, the Canadian Securities Administrators (CSA) published CSA Staff Notice 51-364 Continuous Disclosure Review Program Activities for the fiscal years ended March 31, 2022, and March 31, 2021 as a biennial report on the CSA’s review of continuous disclosure provided by reporting issuers (Report). In the Report, the CSA identified overly promotional disclosure pertaining to environmental, social and governance (ESG) matters as a key area for improvement in issuers’ continuous disclosure, stemming from the CSA’s concerns about "greenwashing."

The following considerations concerning ESG or sustainability disclosure (ESG-related disclosure) may guide issuers in improving their continuous disclosure to align with CSA disclosure requirements in light of the examples of deficient disclosure identified by the CSA in the Report:

1. Issuers should ensure consistency between voluntary and required disclosure documents (e.g., AIF or MD&A) with respect to ESG-related disclosure. The CSA has emphasized that both voluntary and required disclosure documents must contain factual and balanced disclosure and avoid misleading and promotional language. The CSA noted that many issuers have a practice of filing voluntary documents, such as sustainability reports, that contain different ESG-related disclosure than mandatory documents, such as their MD&A. The CSA reminds issuers that a mandatory document may be non-compliant with disclosure requirements if it omits or misstates material ESG-related information contained in a sustainability report or other voluntarily filed disclosure document. See our earlier article for more discussion about this here.
2. The CSA has noted that it observes many issuers making potentially misleading, unsubstantiated or otherwise incomplete claims about ESG and sustainability-related aspects of their businesses that convey false impressions commonly referred to as “greenwashing.” Issuers should ensure that statements and assertions are corroborated by facts and corporate activities. Including background information in appropriate detail to explain the issuer’s basis for making such disclosure may be appropriate. The Report notes that many sustainability-related assertions can constitute forward-looking information and that an issuer needs to have a reasonable basis for such statements. In the Report, the CSA warns that it considers vague or unsubstantiated claims related to ESG potentially misleading and promotional. The CSA suggests that where issuers disclose ESG scores, ratings or metrics, they should disclose the actual rating (as opposed to “high” or “low”), the criteria the rating is based on and what, if any, third party certified the rating.

For more information on the Report, please contact Bill Gilliland, Ana Cherniak-Kennedy or any member of our Securities and Corporate Finance group.