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Canada adopts TCFD recommendations in first climate disclosure mandate

January 17, 2023

Canada has become the latest G20 nation to adopt the Task Force on Climate-related Financial Disclosures (TCFD) recommendations in the government’s Climate Plan. In a mandate letter, the Canadian government has reiterated a commitment to achieve net zero by 2050 and various legislated climate goals by 2030, including use of the TCFD framework for climate-related financial disclosures. This is part of a wider package of mandates that serve to accelerate Canada’s carbon transition and climate adaptation strategy.

What does this mean for companies?

The directive from the Prime Minister’s office will require federally-regulated institutions, pension funds, and government agencies to issue disclosures in line with the TCFD. In Canada, the federally regulated private sector (FRPS) consists of roughly 910,000 employees in the banking; transportation; telecommunications and broadcasting; postal and pipeline; and feed, flour, seed and grain industries. Canadian companies in these industries must align their reporting practices with the TCFD when the mandate takes effect in 2024.

What does the mandate cover?

No detailed requirements have been specified in the mandate. However, we can expect the requirements to be similar to those adopted by the UK and the EU in their recent climate reporting legislations. Namely, companies within scope will have to meet the four pillars of the TCFD recommendations: governance of climate-related matters; climate adaptation strategies; management of climate risks; and the metrics and targets used to manage those risks and opportunities.  

Under TCFD, disclosure of Scope 1 and 2 emissions are mandatory and likely to form part of Canada’s requirements, with Scope 3 disclosure potentially to be phased in due to the challenge of data collection. Given that the mandate is targeted at a cross section of the Canadian economy and public companies, it will have to be flexible enough to accommodate different sectors. Quite possibly, TCFD supplemental guidance will be used or referenced, providing sectoral guidance to Energy, Materials and Buildings, Transportation, and Agriculture, Food and Forest Products in addition to the financial sector.

Scenario analysis - projections of the future based on data and science - are a key recommendation under TCFD. Scenario analysis helps companies develop adaptation strategies in response to plausible future scenarios and to stress test the resilience of the business.

Climate-related risks and opportunities will need to be accounted for in companies’ enterprise risk management framework and the financial impacts from those risks should be included in the financial statements or annual filings.

Mandatory climate reporting provides the basis for understanding climate risks and opportunities, benchmarking mitigation plans and strategies, and progressing transition plans. A recognised international framework like the TCFD makes it easy to compare across entities and we can expect more G20 nations to follow suit.

New Zealand was the first G20 country to legislate mandatory TCFD reporting, followed by the UK and France. The US Securities and Exchange Commission is looking to adopt requirements this year as well. By volume, Japan ranks first for the number of TCFD-reporting companies.

How we help you

  • We explain the TCFD recommendations and help you understand what data you need to collect in order to comply with the mandate.
  • We guide you through the data needed for TCFD disclosures with compliant frameworks enhanced with guiding questions and an analytics dashboard.
  • We simplify the collection of ESG data in your organisation by offering one central platform and integrations into ERP, HRM, CRM, EMS etc., to automate data collection.
  • We facilitate data collection from your suppliers and ensure that relevant information such as Scope 3 emissions from your supply chain arrives in a complete and accurate manner. We will handle the burden of information exchange with your suppliers.
  • We help you complete the information requests from regulators and guarantee the protection of business-critical information, for example about your supplier network.

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