Ethical Performance
inside intelligence for responsible business


Canadian body calls for better disclosure

April 2007

Canadian financial regulators have been urged by a government-appointed body to produce guidelines that would require enhanced disclosure by companies on their social and environmental impacts.

The National Round Table on the Environment and the Economy has recommended that the Canadian Securities Administrators (CSA), an umbrella body for 13 securities regulators overseeing capital markets, set out ‘a requirement for clearer and better disclosure [in annual reports] which might, in turn, facilitate greater transparency regarding social and environmental issues’. This should be ‘through publication of guidance or an interpretation statement’, making it easier for institutional investors, in particular pension funds, to take such factors into account when making investment decisions, it says.

In addition, the round table suggests the CSA encourage Canadian companies to use the Global Reporting Initiative when making disclosures.

The conclusions have been drawn up by a task force which consulted extensively with the private, public and voluntary sectors. They are not binding for the government, but the round table has influence and political commentators expect ministers and regulators to heed its advice.

The task force, which was asked to explore the relationship between capital markets, financial performance and sustainability in Canada, also called on federal, provincial and territorial governments to adopt regulations, similar to those in Britain, requiring pension funds to disclose the extent to which they take social and environmental factors into account in investment decisions, as well as in proxy voting.

It said the federal government should ‘lead by example’ by considering social and environmental issues when allocating funds for capital markets projects and federal pension plans, and that such issues should be ‘integrated into the education requirements of academic and professional institutions and programmes’, especially MBAs.

The task force says the measures are needed to quicken the pace of change on business responsibility issues, to which it feels investors and regulators have been slow to respond. Most Canadian investors ‘continue to be advised by counsel that consideration of social and environmental factors is in general conflict with their fiduciary duty’ – despite an opinion to the contrary issued by the international law firm Freshfields Bruckhaus Deringer more than a year ago (EP7, issue 8). It said pension fund trustees needed, as a priority, to be made aware that considering such factors was desirable.

The 17-member task force included Patricia McCunn-Miller, executive vice-president of corporate responsibility at Synenco Energy, David Wheeler, dean of management at Dalhousie University, and Ernst Ligteringen, the Global Reporting Initiative chief executive. It also featured mainstream
figures such as Charles Coffey, executive vice-president at RBC Financial Group and a former deputy prime minister, Suzanne Hurtubise.

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