Canadian companies that disclose their climate-related risks and impacts have a considerable advantage over those that don’t when it comes to attracting financing from European institutional investors, according a recent report for the Institute for Sustainable Finance at Queen’s University (opens pdf).
...
European investors increasingly need credible sustainability information to meet their own reporting obligations, and Canadian companies that lag on climate disclosure risk shutting themselves out of European capital markets altogether.
...
Under the EU’s sustainable finance rules, financial market participants are required to disclose sustainability indicators, such as greenhouse gas emissions, carbon footprint, biodiversity, water, waste and social factors. The data must be collected either directly from investee companies or through research that may include third-party data and experts.
When investing in jurisdictions that operate under a mostly voluntary reporting regime, like Canada, disclosure has unique value to European institutional investors because it helps them meet their own reporting obligations.
...
Several major capital hubs are already strengthening their sustainability disclosure regulations, including Japan, Singapore, Australia, Chile and Mexico. In the U.S., California and New York are among several states pressing ahead with their own emissions-reporting rules despite the federal pullback on climate policy.
Savvy Canadian companies have so far been able to retain the interest of European institutional capital through voluntary disclosure. But Canadian securities regulators have the opportunity to follow Europe’s example and mandate climate disclosures for larger Canadian public companies.
...
Climate change doesn’t care about whether sustainability is in fashion, and the risks are growing. Among other benefits, expanding disclosures could help keep Canadian firms competitive in international capital markets going forward.