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Mar 05, 2020

Considering ESG in Canada this proxy season

In the first of a series of articles on issues facing Canadian companies during the 2020 proxy season, Lisa Culbert and Ramandeep Grewal look at board accountability including increasingly important ESG issues

The growing pressure for broader corporate accountability in ESG is partly due in Canada to the publication of regulatory guidance last August. Although the Canadian Securities Administrators’ Staff Notice 51-358 Reporting of Climate Change-related Risks does not create any new legal requirements, it does highlight the role of the board and management in assessing:

  • Whether climate change-related risks and opportunities are integrated into the issuer’s strategic plan
  • The effectiveness of the issuer’s risk-management system, its methodology and underlying frameworks
  • The allocation of responsibility among business units for identifying, disclosing and managing climate change-related risks.

Although environmental considerations and impacts may not have been at the forefront for certain industries in the past, recent developments demonstrate the growing need for companies in all industries to consider environmental stewardship at some level. The Sustainability Accounting Standards Board framework, among other frameworks and reporting guides, is available for issuers to gain insight into their specific industry classification that may be affected in some way by climate change-related risk.

While we stay attuned to national and global developments in this area, on an issuer level we expect the focus to shift to a review of existing practices for the collection and communication of climate change-related information as well as the applicable methodology, controls and procedures for the assessment of materiality and corresponding disclosure of related risks, primarily for issuers’ annual information forms and MD&A.


Beyond environmental issues, the S in ESG refers to social matters such as workforce, local and indigenous communities, supplier relations, human rights, health and safety and working conditions. The G refers to governance matters such as board composition and diversity, executive compensation, shareholder rights, ethics, systemic risk management, bribery and corruption.

In May 2018 the Canadian Coalition for Good Governance (CCGG) published its Directors’ E&S Guidebook, intended to help boards evaluate and demonstrate whether their frameworks, practices and capabilities are appropriate for assessing material environmental and social factors.

Following interviews with directors of Canadian companies considered to be leaders in managing E&S oversight, the CCGG developed 29 principles-based recommendations under eight governance topics, which are intended to apply to boards of companies operating both locally and globally.

Examples of these principles and their practical impact for three of the CCGG governance topics include:

Governance In practice

Board structure 

Nature of E&S issues to inform committee composition

Board to consider and monitor where E&S factors relevant to the company are allocated among board committees and make changes where appropriate

Risk management

Already core to board oversight. Part of ERM framework and materiality assessment

Board to participate in active risk management, including continuing education initiatives, on-site visits and other efforts to better enable the board to assess risk in a way that is both independent and informed

Disclosure to shareholders

Elevated, fresh approach to CSR

Board to consider E&S reporting as part of a review of its existing CSR report (if any), which, given this year’s developments in E&S and related disclosure, may warrant a fresh look

Where ESG factors may have been treated as somewhat ancillary to an issuer’s overall governance reporting, practical application of the principles identified by the CCGG can be used to assist boards both in their review of ESG issues and in their assessment of what disclosure updates may be appropriate.


Beyond awareness, we encourage you to consider what these developments mean for your organization – specifically, how they are incorporated into your governance and disclosure processes and frameworks, with a particular focus on oversight, accountability and transparency. For many issuers, this means conducting a strategic review of stakeholder-focused communications including continuous disclosure materials as well as board and committee charters, company policies and underlying frameworks to consider whether updates are needed in areas such as:

  • Identifying gaps in allocation of oversight and responsibility, as well as in current disclosures, policies and materials and determining options for your organization to address these
  • Reviewing the frameworks and processes that support disclosure, charters and policies, particularly as they relate to risk management
  • Simplifying disclosures to focus on the quality of disclosures specific to the organization, its business and its risks
  • Aligning policies and/or public filings with regulatory and best practice updates and changes made this year and in past years, while taking a fresh look to eliminate redundancies or inconsistencies.

Lisa Culbert is counsel for legal design & operations and Ramandeep Grewal is a partner with Stikeman Elliott in Toronto