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Next week marks the three-month anniversary of a federal government program designed to help large Canadian companies withstand COVID-19’s economic shocks.

The Large Employer Emergency Financing Facility (LEEFF) program had some notable strings attached: to access $60 million or more in loans, companies would have to agree to restrictions on executive pay and contentious share buybacks. One of the most forward-looking conditions included a requirement that in exchange for financing, companies would have to deliver annual reports on the financial risks and opportunities they face related to the climate crisis, including how the company plans to align with the government’s net-zero greenhouse gas emissions target for 2050.

Why does this matter? Since LEEFF was launched, we’ve seen a number of major announcements related to climate, particularly in Canada’s energy sector. In late July, Deutsche Bank became the latest bank to announce it will not finance any more oil sands projects. France’s Total took a US$8 billion write-down largely on its carbon-heavy Canadian oil sands assets and announced it would stop investing in capacity expansion projects in the oil sands.

Pressure on Canada’s energy sector to decarbonize and chart a credible path into a low-carbon future is only going to grow. COVID-19 has not slowed this down; if anything, it has ratcheted it up.

The federal government’s push for climate disclosure is critical because global investors are increasingly calling for climate-related financial information. Transparency on climate risk is vital for making sound business decisions in light of the climate crisis. Doing so can set companies and sectors up for success in a climate-adjusted future. However, there are still too many companies that don’t recognize the opportunity it presents.

The LEEFF requirement for climate disclosure has faced pushback from some parts of the oil and gas sector, with organizations like the Canadian Association of Petroleum Producers calling the LEEFF climate requirement “exceptionally onerous” and claiming its members won’t use it “due to the nature of the restrictions.” Pundits like John Ivison at the National Post dismissed it as “airing grievances over the oil and gas sector.”

That’s unfortunate, because the idea that climate disclosure is an unnecessary or onerous exercise demonstrates a lack of understanding of what a credible climate risk disclosure is, what global investors and regulators are looking for, and how it can usefully inform business strategy in the coming carbon-constrained economy.

At a time when Canada’s energy sector is under growing investor scrutiny for its climate impact, Canadian companies should be embracing, not attacking, climate disclosure.

Last year, the Bank of Canada warned of the lack of climate risk disclosure in Canada and urged widespread adoption of a framework developed by the Task Force on Climate-related Financial Disclosures (TCFD), chaired by Michael Bloomberg. The TCFD framework sets out a path for companies to disclose the financial implications of climate change on their businesses, and to do so in a way that is comparable across companies. The framework has emerged as the global standard for corporate climate disclosure.

Since the launch of TCFD in 2017, more than 1,000 companies have signed on as supporters, including well-known Canadian companies like RBC, Manulife and Suncor. Momentum continues to grow. The world’s largest asset manager, BlackRock, says it now expects its portfolio companies to disclose in alignment with TCFD.

As governments around the world, including Canada, commit to net-zero greenhouse gas emission targets by 2050, it’s becoming increasingly imperative for businesses to articulate how they fit into a low-carbon future. Failure to do so puts shareholder value at risk as investors seek to mitigate climate risk and exit carbon-intensive businesses. TCFD-aligned reporting enables companies to make the case for why they are worthy of investment despite the risk of climate change. As former Bank of Canada/Bank of England Governor Mark Carney said earlier this year, “the transition to net-zero is creating the greatest commercial opportunity of our time.”

Companies are often already doing a number of actions that could be disclosed in TCFD-aligned reporting but that are not explicitly highlighted in existing reporting. Whether it’s a board committee that includes climate risk in its mandate, a management team that has responsibility for climate issues, or product development focused on “green” or low-carbon products – these are all actions that TCFD is designed to highlight.

Another opportunity presented by the LEEFF requirement is that by virtue of operating in Canada, businesses have climate advantages they may not even realize. A regulatory environment that includes carbon pricing, or access to low-carbon electricity in provinces like B.C., Ontario or Quebec, helps limit the transition risk the climate crisis presents for business in the shift to a low-carbon economy. These are made-in-Canada climate advantages that businesses should be highlighting more forcefully. TCFD reporting brings that to the forefront.

This isn’t just about the energy sector. We need far greater disclosure across all aspects of the Canadian economy. Disclosing on climate change should be seen not as a burden but as an opportunity to prepare for the future – one that companies and investors around the world are increasingly adopting.

As difficult as things may seem now, the impact and disruption that climate change will bring far outstrips anything COVID-19 can do. The climate crisis is an all-hands-on-deck challenge, and the federal government is right to use any and all opportunities to get Canadian businesses to enhance their climate disclosure. Canadian companies should get behind the push for greater climate disclosure and recognize the opportunity it presents for them.

Kevin Quinlan is a senior advisor with Mantle314, a Toronto-based consulting firm dedicated to climate change.

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