In Insights on the OSC Staff’s Approach to Sustainable Finance, released Oct. 7, the securities regulator describes its approach to the subject in the coming years.
The report defines sustainable finance as the process of incorporating environmental, social and governance (ESG) factors “into decisions related to financial processes, risk management and capital flows that may prompt sustainable economic growth, capital formation and long-term stability of the financial system.”
ESG factors can include topics such as climate change, air and water pollution, natural resource management, diversity and inclusion, data privacy and security, labour practices, supply chain management, human rights, business ethics, executive compensation and shareholder rights.
The OSC said its approach has been shaped by its 2024–2030 strategic plan and its annual priorities and mandate, while taking a “climate-first” approach. Publication of the report was said to further objectives of transparency and trust in the sustainable finance ecosystem, as it aims to support investors in adapting to emerging opportunities and risks in the area. A holistic approach was said to be taken to address the needs of stakeholders.
Key participants in the sustainable finance ecosystem were described as retail and institutional investors, asset managers and investment funds, public companies, dealers, marketplaces, assurance providers, practitioners and advisors, credit and ESG rating providers, ESG data providers and other regulators and standard setters.
“As ESG-related risks have become a mainstream business issue in Canada and internationally, our role as a securities regulator is about bringing consistent, comparable and useful information to support investors’ decision-making,” said OSC Head of Sustainable Finance Jo-Anne Matear in a statement.
The three pillars that the report set out were:
- “Protecting investors and contributing to thriving capital markets through effective and timely regulation, compliance oversight and education.
- Demonstrating thought leadership and seeking to be an influential and trusted voice in sustainable finance regulation.
- Anticipating what’s next in the rapidly evolving area of sustainable finance.”
The report also highlighted investor concerns about sustainability-related disclosures, which stemmed from a number of current issuer disclosure practices, including:
- “issuers’ ESG-related disclosures may not be complete, consistent or comparable,
- quantitative information is often limited and when presented, is not necessarily prepared in a consistent manner by similar issuers,
- issuers may “cherry pick” by reporting selectively against a particular voluntary standard and/or framework and doing so may contribute to greenwashing or greenhushing, and
- sustainability reporting can be siloed and is not necessarily integrated into issuers’ periodic reporting structures, nor subject to the same rigour for preparation and oversight”
OSC CEO Grant Vingoe said the commission is looking to be responsive to investor and issuer needs when considering its approach to sustainable finance.
“As a capital markets regulator, we remain mindful that we do not set environmental or social policy, and we envision moving forward in a manner that is appropriate for our market.”
The OSC's head of sustainable finance, Jo-Anne Matear, added, “As ESG-related risks have become a mainstream business issue in Canada and internationally, our role as a securities regulator is about bringing consistent, comparable and useful information to support investors’ decision-making."
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