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Q: do companies have to disclose climate targets?

A: Companies are required to disclose climate-related targets or goals if they have set any. For example, under the SEC's proposed rules in the US (Regulation S-K, Item 1506), if a registrant has set climate-related targets or goals, they must disclose details such as the scope of activities and emissions included, the unit of measurement, the time horizon, baseline periods, interim targets, and how they intend to meet these targets. Similarly, in Canada, under Proposed National Instrument 51-107, companies must disclose the targets used to manage climate-related risks and opportunities and their performance against these targets if such information is material. In the UK, companies meeting certain criteria must include climate-related financial disclosures in their strategic report, which may encompass targets if they are part of the company's climate strategy.


UK Climate Disclosure Rules
Companies Act 2006
Part 15 Accounts and reports
Chapter 4A Strategic Report

EXPLANATORY NOTE

(This note is not part of the Regulations.)

These Regulations require certain companies to provide climate-related financial disclosures in their strategic report.

The requirement applies to a traded company, a banking company, an authorised insurance company and a company carrying on insurance business which in each case satisfy various conditions, including that of having more than 500 employees.

The companies are listed in section 414CA(1) of the Companies Act 2006 and the requirement for more than 500 employees is set out in section 414CA(4) as applied by section 414CA(1B).

In addition, these Regulations require two further types of company, with more than 500 employees, to make climate-related financial disclosures. These are a company which has securities admitted to trading on the Alternative Investment Market and a high turnover company which is a company which does not fall within another category but which has a turnover of more than £500 million (see regulation 3).


Proposed Companion Policy 51-107CP Disclosure of Climate-Related Matters
Part 2 TCFD Recommendations
Section 2

TCFD Recommendations

(1) The disclosure requirements of the Instrument are set out in Form 51-107A and Form 51-107B and, subject to certain modifications, are consistent with the recommendations (the “TCFD recommendations”) developed by the Task Force on Climate-related Financial Disclosures (the “TCFD”) and published in their report entitled Recommendations of the Task Force on Climate-related Financial Disclosures dated June 2017 (the “TCFD Final Report”)

[Lexata note: the TCFD’s 2021 document Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures supercedes the 2017 equivalent implementation document].

Notably, the Instrument does not require issuers to disclose a scenario analysis, which is the TCFD recommended disclosure that describes the resilience of an issuer’s strategy, taking into consideration different climate-related scenarios. In addition, issuers may elect to not provide the TCFD recommended disclosure respecting greenhouse gas (“GHG”) emissions and their related risks, provided they instead disclose their reasons for not including this disclosure. [FN 1]

FN 1 As an alternative, the CSA is also consulting on requiring issuers to disclose Scope 1 GHG emissions. Under this alternative, disclosure of Scope 2 and Scope 3 GHG emissions would not be mandatory. Issuers would have to disclose either their Scope 2 and 3 GHG emissions and the related risks or the issuer”s reasons for not disclosing this information.

(2) The TCFD recommendations are summarized in Figure 4 of Section C of the TCFD Final Report and are reproduced in Table 1 below. Table 1 also illustrates the modifications to the TCFD recommended disclosures required by the Instrument:

Table 1: TCFD Recommendations and disclosure required by the Instrument

TCFD Recommendations TCFD Recommended Disclosures Disclosure required by the Instrument
Governance

Disclose the organization’s governance around climate-related risks and opportunities.

a) Describe the board’s oversight of climate-related risks and opportunities.

b) Describe management’s role in assessing and managing climate-related risks and opportunities.

a) Same as TCFD Recommended Disclosures.

b) Same as TCFD Recommended Disclosures.

Strategy

Disclose the actual and potential impacts of climate-related risks and opportunities on the organization’s businesses, strategy, and financial planning where such information is material.

a) Describe the climate-related risks and opportunities the organization has identified over the short, medium, and long term.

b) Describe the impact of climate-related risks and opportunities on the organization’s businesses, strategy, and financial planning.

c) Describe the resilience of the organization’s strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario.

a) Same as TCFD Recommended Disclosures.

b) Same as TCFD Recommended Disclosures.

c) Not required.

Risk management

Disclose how the organization identifies, assesses, and manages climate-related risks.

a) Describe the organization’s processes for identifying and assessing climate-related risks.

b) Describe the organization’s processes for managing climate-related risks.

c) Describe how processes for identifying, assessing, and managing climate-related risks are integrated into the organization’s overall risk management.

a) Same as TCFD Recommended Disclosures.

b) Same as TCFD Recommended Disclosures.

c) Same as TCFD Recommended

Metrics and targets

Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material.

a) Disclose the metrics used by the
organization to assess climate-related risks and opportunities in line with its strategy and risk management process.

b) Disclose Scope 1, Scope 2, and,
if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the related risks.

c) Describe the targets used by the organization to manage climate-related risks and opportunities and performance against targets.

a) Same as TCFD Recommended Disclosures.

b) Not mandatory. An issuer must disclose its GHG emissions and the related risks or the issuer’s reasons for not disclosing this information.

c) Same as TCFD Recommended Disclosures.

(3) Consistent with the TCFD recommendations and with disclosure requirements respecting corporate governance matters under National Instrument 58-101 Disclosure of Corporate Governance Practices, the disclosure required by the Instrument relating to the TCFD recommendation “Governance” and “Risk management” in Table 1 above are not subject to a materiality assessment. Accordingly, issuers must provide this disclosure in the applicable continuous disclosure document as required by the Instrument.

Disclosure under the headings “Strategy” and “Metrics and targets” is only required where such information is material. Information is likely material if a reasonable investor’s decision whether to buy, sell or hold securities in an issuer would likely be influenced or changed if the information in question was omitted or misstated.

An issuer must disclose its GHG emissions and the related risks or the issuer’s reasons for not disclosing this information. As an alternative, the CSA is also consulting on requiring issuers to disclose Scope 1 GHG emissions either a) when that information is material, or b) in all cases. Under this alternative, disclosure of Scope 2 and Scope 3 GHG emissions would not be mandatory. Issuers would have to disclose either their Scope 2 and 3 GHG emissions and the related risks, or the issuer’s reasons for not disclosing this information. If necessary, the final form of Policy will be modified to reflect the alternative chosen.


Form 51-107B Climate-Related Strategy, Risk Management and Metrics and Targets Disclosure (Proposed)
Item 3

Metrics and Targets

(a) Disclose the metrics used by the issuer to assess climate-related risks and opportunities in line with its strategy and risk management process.*

(b) Describe the targets used by the issuer to manage climate-related risks and opportunities and the issuer’s performance against these targets.*

* Lexata note: these disclosure requirements are identical to the Recommendations of the Task-Force on Climate-Related Financial Disclosures (TCFD).


Proposed National Instrument 51-107 Disclosure of Climate-related Matters
Part 2 Disclosure Requirements
Section 4

Climate-related Strategy, Risk Management and Metrics and Targets Disclosure Requirements

(1) A reporting issuer must include the disclosure referred to in Form 51-107B in its AIF, or if it does not file an AIF, in its annual MD&A.

(2) A reporting issuer that includes the disclosure of GHG emissions referred to in Form 51-107B in its AIF or annual MD&A must use a GHG emissions reporting standard to calculate and report its GHG emissions.


UK Climate Disclosure Rules
Companies Act 2006
Part 15 Accounts and reports
Chapter 4A Strategic Report
Section 414CB(4A)

Contents of non-financial and sustainability information statement – Exception from Disclosure Requirement

Where the directors of a company reasonably believe that, having regard to the nature of the company’s business, and the manner in which it is carried on, the whole or a part of a climate-related financial disclosure required by subsection (2A)(e), (f), (g) or (h) is not necessary for an understanding of the company’s business, the directors may omit the whole or (as the case requires) the relevant part of that climate-related financial disclosure.


Form 51-107B Climate-Related Strategy, Risk Management and Metrics and Targets Disclosure (Proposed)
Item 1

Strategy

(a) Describe the climate-related risks and opportunities the issuer has identified over the short, medium, and long term.*

(b) Describe the impact of climate-related risks and opportunities on the issuer’s businesses, strategy, and financial planning.*

* Lexata note: these disclosure requirements are identical to the Recommendations of the Task-Force on Climate-Related Financial Disclosures (TCFD). However, the TCFD also recommends that companies disclose the resilience of their strategy under different scenarios, including global warming of 2°C or lower.


Part 15 Accounts and reports
Chapter 4A Strategic Report
UK Climate Disclosure Rules
Companies Act 2006
Section 414CB(4B)

Contents of non-financial and sustainability information statement – Explanation of Omission

Where the directors omit the whole or part of a climate-related financial disclosure in reliance on subsection (4A) the non-financial and sustainability information statement must provide a clear and reasoned explanation of the directors’ reasonable belief mentioned in that subsection.


Form 51-107B Climate-Related Strategy, Risk Management and Metrics and Targets Disclosure (Proposed)
Item 4

GHG Emissions

(a) Disclose:

(i) the issuer’s Scope 1 GHG emissions and the related risks, or the issuer’s reasons for not disclosing this information,

(ii) the issuer’s Scope 2 GHG emissions and the related risks, or the issuer’s reasons for not disclosing this information, and

(iii) the issuer’s Scope 3 GHG emissions and the related risks, or the issuer’s reasons for not disclosing this information.*

(b) disclose the reporting standard used by the issuer to calculate and disclose the GHG emissions referred to in (a).

(c) If the reporting standard referred to in (b) is not the GHG Protocol, disclose how the reporting standard used by the issuer is comparable with the GHG Protocol.

As an alternative, the CSA is also consulting on requiring issuers to disclose Scope 1 GHG emissions either a) when that information is material, or b) in all cases. Under this alternative, disclosure of Scope 2 and Scope 3 GHG emissions would not be mandatory. Issuers would have to disclose either their Scope 2 and 3 GHG emissions and the related risks, or the issuer’s reasons for not disclosing this information. Text reflecting this alternative disclosure requirement for Scope 1 GHG emissions in all cases is set out below.

GHG Emissions

(a) Disclose:

(i) the issuer’s Scope 1 GHG emissions and the related risks,

(ii) the issuer’s Scope 2 GHG emissions and the related risks, or the issuer’s reasons for not disclosing this information, and

(iii) the issuer’s Scope 3 GHG emissions and the related risks, or the issuer’s reasons for not disclosing this information.

(b) disclose the reporting standard used by the issuer to calculate and disclose the GHG emissions referred to in (a).

(c) If the reporting standard referred to in (b) is not the GHG Protocol, disclose how the reporting standard used by the issuer is comparable with the GHG Protocol.

* Lexata note: the disclosures required under (a)(i)-(iii) above are similar to the Recommendations of the Task-Force on Climate-Related Financial Disclosures (TCFD). The main difference is that, under the TCFD recommendations, companies do not have the option of explaining their reasons for not disclosing emissions as a substitute for actually disclosing emissions.


Proposed Companion Policy 51-107CP Disclosure of Climate-Related Matters
Part 2 TCFD Recommendations
Section 4

Consistency with Existing Disclosure Requirements

Certain disclosure requirements contained in the Instrument are consistent with pre-existing disclosure requirements under Canadian securities legislation. For example, item 1 (a) of Form 51-107B requires issuers to describe the climate-related risks and opportunities it has identified over the short, medium, and long term. This disclosure requirement is consistent with risk factor disclosure required under National Instrument 51-102 Continuous Disclosure Obligations. An issuer is required to disclose in its annual information form, if any, risk factors relating to it and its business that would be most likely to influence an investor’s decision to purchase the issuer’s securities, and an issuer is required to discuss in its annual management’s discussion and analysis its analysis of its operations for the most recently completed financial year, including commitments, events, risks or uncertainties that it reasonably believes will materially affect its future performance.


Proposed National Instrument 51-107 Disclosure of Climate-related Matters
Part 2 Disclosure Requirements
Section 3

Climate-related Governance Disclosure Requirements

(1) If management of a reporting issuer solicits a proxy from a security holder of the issuer for the purpose of electing directors to the reporting issuer’s board of directors, the issuer must include in its management information circular the disclosure referred to in Form 51-107A.

(2) A reporting issuer that does not send a management information circular to its security holders must include the disclosure referred to in Form 51-107A in its AIF, or if it does not file an AIF, in its annual MD&A.


Part 15 Accounts and reports
Chapter 4A Strategic Report
UK Climate Disclosure Rules
Companies Act 2006
Section 414CB(2A)

Contents of non-financial and sustainability information statement – Meaning of “climate-related financial disclosures”

In this section, “climate-related financial disclosures” mean

(a) a description of the company’s governance arrangements in relation to assessing and managing climate-related risks and opportunities;

(b) a description of how the company identifies, assesses, and manages climate-related risks and opportunities;

(c) a description of how processes for identifying, assessing, and managing climate-related risks are integrated into the company’s overall risk management process;

(d) a description of

(i) the principal climate-related risks and opportunities arising in connection with the company’s operations, and

(ii) the time periods by reference to which those risks and opportunities are assessed;

(e) a description of the actual and potential impacts of the principal climate-related risks and opportunities on the company’s business model and strategy;

(f) an analysis of the resilience of the company’s business model and strategy, taking into consideration different climate-related scenarios;

(g) a description of the targets used by the company to manage climate-related risks and to realise climate-related opportunities and of performance against those targets; and

(h) a description of the key performance indicators used to assess progress against targets used to manage climate-related risks and realise climate-related opportunities and of the calculations on which those key performance indicators are based.


Part 2 TCFD Recommendations
Proposed Companion Policy 51-107CP Disclosure of Climate-Related Matters
Section 3

TCFD and Other Guidance

The TCFD recommendations and their application are discussed more fully in the TCFD Final Report, as well as in other publications produced by the TCFD, such as:

(a) Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures (June 2017); and

Lexata note: the 2017 document has been has been superceded by this 2021 document: Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures ]

(b) Guidance on Risk Management Integration and Disclosure (October 2020).

In addition to this Policy, issuers should consider the TCFD Final Report and related publications from the TCFD in preparing the disclosure required by the Instrument. Issuers should also refer to guidance published by the CSA relating to assessing materiality and existing disclosure requirements that are consistent with the TCFD recommendations (as discussed below), including:

(a) National Policy 51-201 Disclosure Standards;

(b) CSA Staff Notice 51-333 Environmental Reporting Guidance (October 2010);

(c) CSA Staff Notice 51-354 Report on Climate Change-related Disclosures Project (April 2018); and

(d) CSA Staff Notice 51-358 Reporting of Climate Change-related Risks (August 2019).


Form 51-107B Climate-Related Strategy, Risk Management and Metrics and Targets Disclosure (Proposed)
Item 2

Risk Management

(a) Describe the issuer’s processes for identifying and assessing climate-related risks.*

(b) Describe the issuer’s processes for managing climate-related risks.*

(c) Describe how processes for identifying, assessing, and managing climate-related risks are integrated into the issuer’s overall risk management.*

* Lexata note: these disclosure requirements are identical to the Recommendations of the Task-Force on Climate-Related Financial Disclosures (TCFD).


Proposed Companion Policy 51-107CP Disclosure of Climate-Related Matters
Part 1 General
Section 1

Introduction and Purpose

National Instrument 51-107 Disclosure of Climate-Related Matters (the “Instrument”) establishes disclosure requirements regarding climate-related matters for reporting issuers (other than investment funds, issuers of asset-backed securities, designated foreign issuers, SEC foreign issuers, certain exchangeable security issuers and certain credit support issuers).

We have implemented the Instrument to require reporting issuers to disclose certain climate-related information in their continuous disclosure documents. We believe that climate-related information is becoming increasingly important to investors in Canada and internationally, and that the disclosure required by the Instrument is an important element to their investment and voting decisions.

This companion policy (the “Policy”) provides information regarding the interpretation and application of the Instrument.


Proposed Companion Policy 51-107CP Disclosure of Climate-Related Matters
Part 2 TCFD Recommendations
Section 5

Greenhouse Gas Emissions Disclosure

(1) Item 4(a) of Form 51-107B requires an issuer to disclose each of its Scope 1, Scope 2 and Scope 3 GHG emissions or explain why it has not done so. Accordingly, where an issuer has disclosed its Scope 1 and Scope 2 GHG emissions but has elected to not disclose its Scope 3 GHG emissions, the issuer would be required to disclose its reasons for not providing its Scope 3 GHG emissions. Where an issuer has elected to not disclose any GHG emissions, the issuer may provide its reasons for not doing so in respect of GHG emissions as a whole, as opposed to a separate explanation for each scope.

(2) Certain issuers are already required to disclose GHG emissions under existing reporting programs, including for example, on a per facility basis under the federal Greenhouse Gas Reporting Program. The securities regulatory authorities expect issuers that are subject to an existing GHG emissions reporting program to disclose Scope 1 GHG emissions under the Instrument. However, should they elect to not disclose Scope 1 GHG emissions under the Instrument, they should clearly explain their election in light of such pre-existing reporting obligations.

(3) Subsection 4(2) of the Instrument requires an issuer to use a GHG emissions reporting standard to calculate and report its GHG emissions. A GHG emissions reporting standard is the GHG Protocol, or a reporting standard for calculating and reporting GHG emissions if it is comparable with the GHG Protocol. Accordingly, pursuant to item 4(c) of Form 51-107B, issuers who disclose GHG emissions using a reporting standard that is not the GHG Protocol must disclose how such standard is comparable with the GHG Protocol.

(4) Form 51-107B permits an issuer to incorporate GHG disclosure by reference to another document. If doing so, the issuer must clearly identify the reference document or any excerpt of it that the issuer incorporates into the disclosure provided under Item 4 of Form 51-107B. Unless the issuer has already filed the reference document or excerpt under its SEDAR profile, the issuer must file it at the same time as it files the document containing the disclosure required under Form 51-107B.


Proposed Companion Policy 51-107CP Disclosure of Climate-Related Matters
Part 2 TCFD Recommendations
Section 6

Forward Looking Information

Disclosure provided by issuers pursuant to the Instrument may constitute forward-looking information (“FLI”). If an issuer discloses FLI, it must comply with the requirements set out in Part 4A, Part 4B and section 5.8 of National Instrument 51-102 Continuous Disclosure Obligations.

Guidance on those requirements can be found in Part 4A of Companion Policy 51-102CP Continuous Disclosure Obligations and CSA Staff Notice 51-330 Guidance Regarding the Application of Forward- Looking Information Requirements under NI 51-102 Continuous Disclosure Obligations.

The FLI requirements do not relieve issuers from disclosing material climate-related risks even if they are expected to occur or crystallize over a longer time frame.


Form 51-107A Climate-Related Governance Disclosure (Proposed)
Item 1

Governance

(a) Describe the board of directors’ oversight of climate-related risks and opportunities.*

(b) Describe management’s role in assessing and managing climate-related risks and opportunities.*

INSTRUCTION:

This Form applies to corporate and non-corporate entities. Reference to a particular corporate characteristic, such as a board of directors, includes any equivalent characteristic of a non-corporate entity. Income trust issuers must provide disclosure in a manner that recognizes that certain functions of a corporate issuer, its board of directors and its management may be performed by any or all of the trustees, the board of directors or management of a subsidiary of the trust, or the board of directors, management or employees of a management company. In the case of an income trust, references to “the issuer” refer to both the trust and any underlying entities, including the operating entity.


Form 51-107B Climate-Related Strategy, Risk Management and Metrics and Targets Disclosure (Proposed)

Instructions

(1) This Form applies to both corporate and non-corporate entities. Income trust issuers must provide disclosure in a manner that recognizes that certain functions of a corporate issuer, its board of directors and its management may be performed by any or all of the trustees, the board of directors or management of a subsidiary of the trust, or the board of directors, management or employees of a management company. In the case of an income trust, references to “the issuer” refer to both the trust and any underlying entities, including the operating entity.

(2) An issuer is not required to disclose information that is not material in respect of items 1 and 3. An issuer must exercise judgment when it determines whether information is material in respect of the issuer. Would a reasonable investor’s decision whether or not to buy, sell or hold securities in the issuer likely be influenced or changed if the information in question was omitted or misstated? If so, the information is likely material.

(3) An issuer may incorporate information required to be disclosed under Item 4 by reference to another document. The issuer must clearly identify the reference document or any excerpt of it that the issuer incorporates into the disclosure provided under Item 4. Unless the issuer has already filed the reference document or excerpt under its SEDAR profile, the issuer must file it at the same time as it files the document containing the disclosure required under this Form.


National Policy 51-201 Disclosure Standards
Part VI Best Disclosure Practices
Section 6.1

General

(1) There are some practical measures that companies can adopt to help ensure good disclosure practices. The consistent application of “best practices” in the disclosure of material information will enhance a company’s credibility with analysts and investors, contribute to the fairness and efficiency of the capital markets and investor confidence in those markets, and minimize the risk of non-compliance with securities legislation.

(2) The measures recommended in this policy statement are not intended to be prescriptive. We recognize that many large listed companies have specialist investor relations staff and devote considerable resources to disclosure, while in smaller companies this is often just one of the many roles of senior officers. We encourage companies to adopt the measures suggested in this policy statement, but they should be implemented flexibly and sensibly to fit the situation of each individual company.


Proposed National Instrument 51-107 Disclosure of Climate-related Matters
Part 1 Definitions and Interpretation
Section 2

Application

This Instrument applies to a reporting issuer other than a reporting issuer that is any of the following:

(a) an investment fund;

(b) an issuer of an asset-backed security;

(c) a designated foreign issuer or SEC foreign issuer;

(d) an exchangeable security issuer that is exempt under section 13.3 of National Instrument 51-102 Continuous Disclosure Obligations;

(e) a credit support issuer that is exempt under section 13.4 of National Instrument 51-102 Continuous Disclosure Obligations;

(f) an issuer that is a subsidiary entity, if

(i) the subsidiary entity does not have equity securities, other than non-convertible, non-participating preferred securities, trading on a marketplace, and

(ii) the parent of the subsidiary entity is

(A) subject to the requirements of this Instrument, or

(B) an issuer that has securities listed or quoted on a U.S. marketplace, and is in compliance with the corporate governance disclosure requirements of that U.S. marketplace.


Proposed National Instrument 51-107 Disclosure of Climate-related Matters
Part 3 Exemption and Effective Date
Section 6

Effective Date and Transition

(1) This Instrument comes into force on [●].

(2) This Instrument applies:

(a) in the case of a reporting issuer other than a venture issuer, in respect of each financial year beginning on or after [January 1 of the first year after [●];

(b) in the case of a venture issuer, in respect of each financial year beginning on or after [January 1 of the third year after [●].


Part 3 Transition
Proposed Companion Policy 51-107CP Disclosure of Climate-Related Matters
Section 7

Transitional Periods

The Instrument will apply to issuers on a phased-in transition, beginning with issuers other than venture issuers (“non-venture issuers”) followed by venture issuers. Non-venture issuers must include the disclosure required by the Instrument in the applicable continuous disclosure document in respect of each financial year that begins on or after January 1 of the first year after the Instrument is made effective. As an example, for a non-venture issuer that has a financial year that begins on January 1 and ends on December 31, if the Instrument becomes effective in 2022, a non-venture issuer would be required to include the disclosure required by Form 51-107B in its AIF for its financial year ended December 31, 2023, and for every financial year thereafter.

For venture issuers, the Instrument will apply in respect of each financial year that begins on or after January 1 of the third year after the Instrument is made effective. Using the same example as above (except where the issuer is a venture issuer), the issuer would be required to include the disclosure required by Form 51-107B for its financial year ended December 31, 2025, and for every financial year thereafter. If a venture issuer becomes a non-venture issuer during the period when the Instrument only applies to non-venture issuers, the disclosure required by the Instrument will not be required in the applicable continuous disclosure document for the financial years in which the issuer was a venture issuer.


National Policy 51-201 Disclosure Standards
Part IV Materiality
Section 4.4

External Political, Economic and Social Developments

Companies are not generally required to interpret the impact of external political, economic and social developments on their affairs. However, if an external development will have or has had a direct effect on the business and affairs of a company that is both material and uncharacteristic of the effect generally experienced by other companies engaged in the same business or industry, the company is urged to explain, where practical, the particular impact on them. For example, a change in government policy that affects most companies in a particular industry does not require an announcement, but if it affects only one or a few companies in a material way, such companies should make an announcement.


National Policy 51-201 Disclosure Standards
Part V Risks Associated With Certain Disclosures
Section 5.5

Selective Disclosure Violations Can Occur in a Variety of Settings

Selective disclosure most often occurs in one-on-one discussions (like analyst meetings) and in industry conferences and other types of private meetings and break-out sessions. But it can occur elsewhere. For example, a company should not disclose material nonpublic information at its annual shareholders meeting unless all interested members of the public may attend the meeting and the company has given adequate public notice of the meeting (including a description of what will be discussed at the meeting). Alternatively, a company can issue a news release at or before the time of the meeting.


National Policy 51-201 Disclosure Standards
Part III Overview of the Statutory Prohibitions Against Selective Disclosure
Section 3.5

Generally Disclosed

(1) The tipping prohibition does not require a company to release all material information to the marketplace. [FN 20] Instead, it prohibits a company from disclosing nonpublic material information to anyone (other than in the “necessary course of business”) before the company generally discloses the information to the marketplace.

(2) Securities legislation does not define the term “generally disclosed”. Insider trading court decisions state that information has been generally disclosed if:

(a) the information has been disseminated in a manner calculated to effectively reach the marketplace; and

(b) public investors have been given a reasonable amount of time to analyze the information. [FN 21]

(3) Except for “material changes,” which must be disclosed by news release, securities legislation does not generally require a particular method of disclosure to satisfy the “generally disclosed” requirement. In determining whether material information has been generally disclosed, we will consider all of the relevant facts and circumstances, including the company’s traditional practices for publicly disclosing information and how broadly investors and the investment community follow the company. We recognize that the effectiveness of disclosure methods varies between companies. Whatever disclosure method is used to release information, we encourage consistency in a company’s disclosure practices. [FN 22]

(4) Companies may satisfy the “generally disclosed” requirement by using one or a combination of the following disclosure methods:

(a) News releases distributed through a widely circulated news or wire service. [FN 23]

(b) Announcements made through press conferences or conference calls that interested members of the public may attend or listen to either in person, by telephone, or by other electronic transmission (including the Internet). A company needs to provide the public with appropriate notice of the conference or call by news release.[FN 24] The notice should include the date and time of the conference or call, a general description of what is to be discussed, and the means of accessing the conference or call. [FN 25] The notice should also indicate for how long the company will make a transcript or replay of the call available over its Web site.

(5) We recognize that many companies prefer news release disclosure as the safest means of satisfying the “generally disclosed” requirement. In section 6.6 of the Policy, we recommend as a “best practice” a disclosure model centred around news release disclosure of material information, followed by an open and accessible conference call to discuss the information contained in the news release. However, we believe that alternative methods may also be appropriate. We believe it is important to preserve for companies the flexibility to develop a disclosure model that suits their circumstances and disseminates material information in the manner best calculated to effectively reach the marketplace.

(6) Posting information to a company’s Web site will not, by itself, be likely to satisfy the “generally disclosed” requirement. Investors’ access to the Internet is not yet sufficiently widespread such that a Web site posting alone would be a means of dissemination “calculated to effectively reach the marketplace.” Further, effective dissemination involves the “pushing out” of information into the marketplace. Notwithstanding the ability of some issuers’ Web sites to alert interested parties to new postings, Web sites by and large do not push information out into the marketplace. Instead, investors would be required to seek out this information from a company’s Web site. Active and effective dissemination of information is central to satisfying the “generally disclosed” requirement.

(7) We support the use of technology in the disclosure process and believe that companies’ Web sites can be an important and useful tool in improving communications to the marketplace. As technology evolves and as more investors gain access to the Internet, it may be that postings to certain companies’ Web sites alone could satisfy the “generally disclosed” requirement. At such time, we will revisit this policy statement and reconsider the guidance provided on this issue. In the meantime, we strongly encourage companies to utilize their Web sites to improve investor access to corporate information. [FN 26]

FN 20 See, however, section 2.1 regarding an issuer’s timely disclosure obligations.

FN 21 Green v. Charterhouse Group Can. Ltd. (1976), 12 O.R. (2d) 280. In the Matter of Harold P. Connor et al. (1976) Volume II OSCB 149. Existing case law does not establish a firm rule as to what would be a reasonable amount of time for investors to be given to analyze information. The time period will depend on a number of factors including the circumstances in which the event arises, the nature and complexity of the information, the nature of the market for the company’s securities, and the manner used to release the information. We recognize that the case law is dated in this respect and that, if the courts were to revisit these decisions today, they may not find the time parameters set out in the decisions appropriate for modern technology.

FN 22 A sudden change from the usual method of generally disclosing material information may attract regulatory attention in certain circumstances; for example, a last minute webcast of poor quarterly results without advance notice when positive quarterly results are generally released in advance of a subsequently scheduled discussion of the results.

FN 23 We encourage companies to file their news releases on SEDAR. Filing a news release on SEDAR alone will not constitute “general disclosure”.

FN 24 This is based on guidance provided by the U.S. Securities and Exchange Commission (the “SEC”) in the adopting release to Regulation FD.

FN 25 This might include a Web site link to any software that is necessary to access the webcast.

FN 26 See also The Toronto Stock Exchange’s Electronic Communications Disclosure Guidelines.


Proposed National Instrument 51-107 Disclosure of Climate-related Matters
Part 3 Exemption and Effective Date
Section 5

Exemption

(1) The regulator or securities regulatory authority may grant an exemption from this Instrument, in whole or in part, subject to such conditions or restrictions as may be imposed in the exemption.

(2) Despite subsection (1), in Ontario, only the regulator may grant such an exemption.

(3) Except in Ontario, an exemption referred to in subsection (1) is granted under the statute referred to in Appendix B of National Instrument 14-101 Definitions, opposite the name of the local jurisdiction.


Companion Policy 51-102CP Continuous Disclosure Obligations
Part 1 Introduction and Definitions
Section 1.3

Corporate Law Requirements

Reporting issuers are reminded that they may be subject to requirements of corporate law that address matters similar to those addressed by the Instrument, and which may impose additional or more onerous requirements. For example, applicable corporate law may require the delivery of annual financial statements to shareholders or may require the board of directors to approve interim financial reports.


National Policy 51-201 Disclosure Standards
Part III Overview of the Statutory Prohibitions Against Selective Disclosure
Section 3.6

Unintentional Disclosure

Securities legislation does not provide a safe harbour which allows companies to correct an unintentional selective disclosure of material information. If a company makes an unintentional selective disclosure it should take immediate steps to ensure that a full public announcement is made. This includes contacting the relevant stock exchange and requesting that trading be halted pending the issuance of a news release. Pending the public release of the material information, the company should also tell those parties who have knowledge of the information that the information is material and that it has not been generally disclosed.


National Policy 51-201 Disclosure Standards
Part VI Best Disclosure Practices
Section 6.3

Overseeing and Coordinating Disclosure

Establish a committee of company personnel or assign a senior officer to be responsible for:

(a) developing and implementing your disclosure policy;

(b) monitoring the effectiveness of and compliance with your disclosure policy;

(c) educating your directors, officers and certain employees about disclosure issues and your disclosure policy;

(d) reviewing and authorizing disclosure (including electronic, written and oral disclosure) in advance of its public release; and

(e) monitoring your Web site.


National Policy 51-201 Disclosure Standards
Part VI Best Disclosure Practices
Section 6.2

Establishing a Corporate Disclosure Policy

(1) Establish a written corporate disclosure policy. A disclosure policy gives you a process for disclosure and promotes an understanding of legal requirements among your directors, officers and employees. The process of creating it is itself a benefit, because it forces a critical examination of your current disclosure practices.

(2) You should design a policy that is practical to implement. Your policy should be reviewed and approved by your board of directors and widely distributed to your officers and employees. Directors, officers and those employees who are, or may be, involved in making disclosure decisions should also be trained so that they understand and can apply the disclosure policy. Your policy should be periodically reviewed and updated, as necessary, and responsibility for these functions (i.e., review and update of the policy and education of appropriate employees and company officials) should be clearly assigned within your company.

(3) The focus of your disclosure policy should be on promoting consistent disclosure practices aimed at informative, timely and broadly disseminated disclosure of material information to the market. Every disclosure policy should generally include the following:

(a) how to decide what information is material;

(b) policy on reviewing analyst reports;

(c) how to release earnings announcements and conduct related analyst calls and meetings;

(d) how to conduct meetings with investors and the media;

(e) what to say or not to say at industry conferences;

(f) how to use electronic media and the corporate Web site;

(g) policy on the use of forecasts and other forward-looking information (including a policy regarding issuing updates);

(h) procedures for reviewing briefings and discussions with analysts, institutional investors and other market professionals;

(i) how to deal with unintentional selective disclosures;

(j) how to respond to market rumours;

(k) policy on trading restrictions; and

(l) policy on “quiet periods”.


National Policy 51-201 Disclosure Standards
Part VI Best Disclosure Practices
Section 6.6

Recommended Disclosure Model

(1) You should consider using the following disclosure model when making a planned disclosure of material corporate information, such as a scheduled earnings release:

(a) issue a news release containing the information (for example, your quarterly financial results) through a widely circulated news or wire service;

(b) provide advance public notice by news release of the date and time of a conference call to discuss the information, the subject matter of the call and the means for accessing it;

(c) hold the conference call in an open manner, permitting investors and others to listen either by telephone or through Internet webcasting; and

(d) provide dial-in and/or web replay or make transcripts of the call available for a reasonable period of time after the analyst conference call. [FN 42]

(2) The combination of news release disclosure of the material information and an open and accessible conference call to subsequently discuss the information should help to ensure that the information is disseminated in a manner calculated to effectively reach the marketplace and minimize the risk of an inadvertent selective disclosure during the follow-up call.

FN 42 This model disclosure policy was recommended by the SEC in the adopting release to Regulation FD.


Companion Policy 51-102CP Continuous Disclosure Obligations
Part 4A Forward-Looking Information
Section 4A.6

Disclosure of Material Factors or Assumptions

Paragraph 4A.3(c) of the Instrument requires a reporting issuer to disclose the material factors or assumptions used to develop material forward-looking information. The factors or assumptions should be relevant to the forward-looking information. Disclosure of material factors or assumptions does not require an exhaustive statement of every factor or assumption applied – a materiality standard applies.


National Policy 51-201 Disclosure Standards
Part I Introduction
Section 1.1

Purpose

(1) It is fundamental that everyone investing in securities have equal access to information that may affect their investment decisions. The Canadian Securities Administrators (“the CSA” or “We”) are concerned about the selective disclosure of material corporate information by companies to analysts, institutional investors, investment dealers and other market professionals. Selective disclosure occurs when a company discloses material nonpublic information to one or more individuals or companies and not broadly to the investing public. Selective disclosure can create opportunities for insider trading and also undermines retail investors’ confidence in the marketplace as a level playing field.

(2) This policy provides guidance on “best disclosure” practices in a difficult area involving competing business pressures and legislative requirements. Our recommendations are not intended to be prescriptive. We encourage companies to adopt the suggested measures, but they should be implemented flexibly and sensibly to fit the situation of individual companies.

(3) The timely disclosure requirements and prohibitions against selective disclosure are substantially similar everywhere in Canada, but there are differences among the provinces and territories, so companies should carefully review the legislation which is applicable to them for the details.


National Policy 51-201 Disclosure Standards
Part II Timely Disclosure
Section 2.1

Timely Disclosure

(1) Companies are required by law to immediately disclose a “material change [FN 1] in their business. For changes that a company initiates, the change occurs once the decision has been made to implement it. This may happen even before a company’s directors approve it, if the company thinks it is probable they will do so. A company discloses a material change by issuing and filing a press release describing the change. A company must also file a material change report as soon as practicable, and no later than 10 days after the change occurs. This policy statement does not alter in any way the timely disclosure obligations of companies.

(2) Announcements of material changes should be factual and balanced. Unfavourable news must be disclosed just as promptly and completely as favourable news. Companies that disclose positive news but withhold negative news could find their disclosure practices subject to scrutiny by securities regulators. A company’s press release should contain enough detail to enable the media and investors to understand the substance and importance of the change it is disclosing. Avoid including unnecessary details, exaggerated reports or promotional commentary.

FN 1 Securities legislation defines the term material change as “a change in the business, operations or capital of the issuer that would reasonably be expected to have a significant effect on the market price or value of any of the securities of the issuer and includes a decision to implement such a change made by the board of directors of the issuer by senior management of the issuer who believe that confirmation of the decision by the board of directors is probable”. The Québec Securities Act does not define the term “material change” and provides that “where a material change occurs that is likely to have a significant influence on the value or the market price of the securities of a reporting issuer and is not generally known, the reporting issuer shall immediately prepare and distribute a press release disclosing the substance of the change”. See also Pezim v. British Columbia (Superintendent of Brokers), [1994] 2 S.C.R. 557, where the Supreme Court held that a change in assay and drilling results was a material change in the company’s assets.