Resilient LLP (formerly DeMarco Allan LLP)
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DT Vollmer

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CSSB Publishes Exposure Drafts for Sustainability and Climate Disclosure

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UPDATE: The Canadian Securities Administrators (CSA) announced on March 13, 2024 that it anticipates seeking comment on a revised rule setting out climate-related disclosure requirements once the CSSB consultation is complete and its standards are finalized. The CSSB standards must be incorporated into a CSA rule in order to become mandatory under Canadian securities legislation. — The Canadian Sustainability Standards Board (CSSB) today announced the release of exposure drafts for the proposed Canadian Sustainability Disclosure Standards (CSDS), which include: CSDS 1, General Requirements for Disclosure of Sustainability-related Financial Information (CSDS 1); and CSDS 2, Climate-related Disclosures (CSDS 2). The International Sustainability Standards Board (ISSB) published IFRS S1 and IFRS S2 in June 2023. Those disclose standards served as the baseline for the development of CSDS 1 and CSDS 2, respectively. The CSSB also published a consultation paper on criteria for modifying the IFRS Sustainability Disclosure Standards when formulating Canadian standards based on them. The CSSB has proposed to make the new standards effective as of annual reporting periods beginning on or after January 1, 2025. Comments on the proposed standards are due June 10, 2024. CSSB will host a webinar on the exposure drafts on April 10, 2024. This bulletin provides a brief summary of the objectives and key conceptual foundations / core content of CSDS 1 and CSDS 2, as well as the Canadian changes as compared to the ISSB standards. CSDS 1: General Requirements for Disclosure of Sustainability-related Financial Information Objective. The objective of CSDS 1 is to require an entity to disclose information about its sustainability-related risks and opportunities that is useful to primary users of general-purpose financial reports in making decisions relating to providing resources to the entity. An entity would be required to disclose information about all sustainability-related risks and opportunities that could reasonably be expected to affect the entity’s cash flows, its…

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SEC Adopts Climate-Related Disclosure Rules

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The U.S. Securities and Exchange Commission (SEC) today adopted final rules for the “Enhancement and Standardization of Climate-Related Disclosures for Investors” (the Rules). The Rules require registrants to disclose climate-related risks that have had, or are reasonably likely to have, a material impact on business strategy, results of operations, or financial condition, together with their associated actual or potential material impacts. The Rules do not require reporting on Scope 3 emissions or greenhouse gas (GHG) emissions originating in a registrant’s value chains or outside of its direct operations (as was proposed in earlier versions – see our earlier bulletin here). The Rules notably require more disclosure from registrants on capitalized costs, expenditures expensed, and losses related to material use of carbon credits. Disclosure requirements will be phased-in between 2025-2033, with compliance dates dependent on the type of registrant. The SEC also published a fact sheet alongside today’s release. This bulletin briefly summarizes key details of the Rules. Content of the disclosures. The Rules will require a registrant to disclose, among other things: Strategy. The Rules require disclosure of the following strategy-related climate risks and impacts: actual and potential material impacts of any identified climate-related risks on the registrant’s strategy, business model, and outlook; if, as part of its strategy, a registrant has undertaken activities to mitigate or adapt to a material climate-related risk or has adopted a transition plan to manage material risks, a quantitative and qualitative description of material expenditures incurred and material impacts on financial estimates and assumptions that directly result from such mitigation or adaptation activities; and specified disclosures regarding a registrant’s activities, if any, to mitigate or adapt to a material climate-related risk including the use, if any, of transition plans, scenario analysis, or internal carbon prices. Risk management. The Rules require disclosure of a registrant’s climate-related risk management, including: any oversight…

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Guyana Announces World’s First Credits Eligible for Use for CORSIA

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The Government of Guyana and Architecture for REDD+ Transactions (ART) have announced the world’s first carbon credits eligible for use under the International Civil Aviation Organization’s Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). ART issued 7.14 million vintage 2021 carbon credits to Guyana under The REDD+ Environmental Excellence Standard (TREES), marking the first issuance of Paris Agreement correspondingly adjusted units reported to the UNFCCC. ART indicated that the credits will be eligible for the first phase of CORSIA (2024-2026), enabling airlines to use them towards their emission reduction targets under the program. Article 6 of the Paris Agreement. ART indicated that the TREES credits were issued to Guyana for reducing emissions from forest loss and degradation and maintaining one of the world’s most intact tropical forests as part of a jurisdictional REDD+ program. In addition, the Government of Guyana authorized the credits to be used for a range of compliance and voluntary purposes pursuant Article 6 of the Paris Agreement. As such, Guyana’s authorization for the use of the credits and its reporting of a corresponding adjustment to the UNFCCC enabled ART to label the credits as “CORSIA Eligible” on its public registry. Guyana is now the first country in the world to report a corresponding adjustment to the UNFCCC as a result of its authorization for the international transfer of emission reduction credits or internationally transferred mitigation outcomes under Article 6.2 of the Paris Agreement.  CORSIA. CORSIA requires airlines from participating countries with annual emissions over 10,000 tonnes of CO2 to monitor and report their emissions. Airlines may use carbon credits to offset any remaining emissions that exceed a percentage of their 2019 baseline emissions. ART and the America Carbon Registry are currently the only crediting programs that have been approved by ICAO to supply credits for…

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Ontario Proposes Significant Amendments to Ontario Energy Board Act

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The Ontario Government recently introduced the Keeping Ontario Energy Costs Down Act, 2024 (the Act). If passed, the Act will provide the government with significant new authority to influence or direct fundamental questions in future leave to construct applications that come before the Ontario Energy Board (the OEB or Board). In addition, the Act would reverse aspects of a December 21, 2023, decision by the Ontario Energy Board  relating to Enbridge Gas Inc.’s (Enbridge) application for approval of its natural gas rates for the period starting January 1, 2024 (the Enbridge Decision). This bulletin provides key details of the Enbridge Decision and outlines the significant proposed amendments of the Act. The Enbridge Decision, which represents the focal point for much of the government’s statements concerning the Act, arises from a complex regulatory proceeding lasting more than one year, involving approximately one month of hearings and thousands of pages of evidence, and implicating the participation of large numbers of intervenors and expert witnesses. The aspect of the Enbridge Decision that has attracted the most public attention was the OEB’s decision to eliminate Enbridge’s ability to recover the cost of new customer connections to the existing gas network over a 40-year period (i.e., revenue or amortization horizon), meaning those costs would now be recovered upfront. These costs are estimated at approximately $4,412 (weighted average of new construction and existing homes in the “Enbridge Gas Distribution” rate zone). The majority decision’s rationale was based on the need to facilitate an informed choice concerning the full lifetime cost of available energy options and to completely mitigate the stranded asset cost risk. The existing 40-year recovery period attracted criticism from certain parties intervening in the proceedings on the basis that, among others, it does not adequately account for the risk that the ongoing energy transition may result in natural gas assets being replaced over a shorter period, which…

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Council of EU and European Parliament Agree Deal on Carbon Removals Certification Framework

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The Council of the EU (the Council) and the European Parliament reached a provisional political agreement (the Agreement) earlier this week on a regulation to establish the Carbon Removals Certification Framework (CRCF), the first EU-level certification framework for permanent carbon removals. The CRCF is a voluntary framework intended to facilitate deployment of high-quality carbon removal and soil emission reduction activities in the EU, in support of net-zero by 2050. The Agreement follows the European Commission’s (the Commission’s) regulatory proposal for the CRCF (released December 2, 2022) and the Council’s mandate for negotiations with the European Parliament (released November 17, 2023). The European Parliament and Council now need to formally approve the Agreement. Once this process is completed, the new legislation will be published in the Official Journal and enter into force. We anticipate that the CRCF will facilitate integration of carbon dioxide removals into the EU’s broader package of climate policies and eventually allow for market-based trading of CRCF-certified units. CRCF certification may also serve as an integrity benchmark for CDRs developed for the voluntary carbon market. This bulletin briefly summarizes the main elements of the Agreement. Scope of activities. The CRCF will use an “open definition” of carbon removals, in line with the IPCC and which only covers atmospheric or biogenic carbon removals. It will cover the following carbon removal and emission reduction activities and differentiate between four corresponding unit types: permanent carbon removal (storing atmospheric or biogenic carbon for several centuries); temporary carbon storage in long-lasting products (such as wood-based construction products) of a duration of at least 35 years and that can be monitored on-site during the entire monitoring period; temporary carbon storage from carbon farming (e.g., restoring forests and soil, wetland management, seagrass meadows) of a duration of at least 5 years; and soil emission reduction (from…

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