Final CSSB standards and SEC rules update on Canadian and U.S. climate-change disclosure

On December 18, 2024, the Canadian Sustainability Standards Board (CSSB) released the final versions of its General Requirements for Disclosure of Sustainability-related Financial Information (CSDS 1) and its Climate-related Disclosure Standards (CSDS 2). These standards have undergone minimal changes to address feedback received during the consultation process initiated with the exposure drafts published on March 13, 2024. As outlined earlier, the CSSB standards closely align with the International Sustainability Standards Board (ISSB) standards, with slight adjustments tailored to the Canadian context. Effective as of January 1, 2025, these standards are presently voluntary for Canadian businesses unless mandated by the Canadian Securities Administrators (CSA) or Canadian legislation or regulatory requirements.

Come January 20, 2025, the United States will witness Donald Trump’s inauguration as the 47th President, signaling a probable shift in the nation’s climate stance compared to the preceding Biden administration. The U.S. Securities and Exchange Commission’s (SEC) Final Rules on climate disclosure, set in motion in March 2024, were temporarily put on hold due to ongoing legal battles. The outcome of these rules remains uncertain, especially in light of the impending administration change under Trump’s leadership.

Here are the essential points you should be aware of:

– CSSB Standards Effective Date: Starting January 1, 2025, the CSSB standards will impact reporting periods commencing on or after this date. Initially, companies can focus their disclosures under CSDS 1 on climate-related risks and opportunities, aligning with CSDS 2, for the first two years of implementation.
– Relief Period Adjustments: Based on feedback received, the final CSSB standards have expanded certain transition periods under both CSDS 1 and CSDS 2 to accommodate varying needs.
– Voluntary Nature: While these standards are presently voluntary, the CSA aims to incorporate them into a revised climate disclosure rule, subject to potential modifications to ensure comprehensive suitability. The CSA also anticipates discussions regarding the consequent liabilities.

In contrast, the future of the SEC’s Final Rules remains uncertain, with the rules currently stayed as of April 4, 2024. The legal disputes surrounding the rules’ legitimacy, coupled with the anticipated policy shifts under the new U.S. administration, cast doubt on their future applicability.

The finalized CSSB standards represent a crucial step towards uniform climate disclosures within Canada. Noteworthy amendments include an extension of the relief period for disclosing scope 3 emissions and climate scenario analysis in CSDS 2. Additionally, new provisions offer relief regarding the timing of publishing sustainability-related financial information in the initial year.

As for the SEC’s Final Rules, following their temporary stay in April 2024, uncertainties persist regarding their eventual implementation, especially given the policy adjustments expected under the new administration. Companies in both Canada and the U.S. must monitor these developments closely to ensure preparedness for potential mandatory climate-related disclosures in the future.