CSA Publishes Guidance on Greenwashing and ESG Disclosures

On November 3, 2022, the Canadian Securities Administrators (the “CSA”) published CSA Staff Notice 51-364 – Continuous Disclosure Review Program Activities for the fiscal years ended March 31, 2022 and March 31, 2021 (the “Notice”). In the Notice, the CSA set out the findings of its Continuous Disclosure Review Program (“CD Review Program”), which reviewed continuous disclosure documents published by certain reporting issuers in Canada (“issuers”) during the fiscal years ended March 31, 2021, and March 31, 2022 (“Fiscal 2021” and “Fiscal 2022”, respectively) for completeness, quality and timeliness.

In both Fiscal 2021 and Fiscal 2022, “climate change” was one of the topics examined in the CSA’s issue-oriented reviews, which broadly focused on the manner in which emerging and pertinent climate change issues were addressed by issuers. Through the CD Review Program, the CSA observed an increase in issuers disclosing their environmental, social and governance (“ESG”) performance and a simultaneous increase in the practice of “greenwashing,” whereby issuers made misleading, or potentially misleading, unsubstantiated, overly broad or untrue claims about the sustainability of their operations, products or services. Accordingly, the Notice sets out the CSA’s guidance for issuers when disclosing their ESG performance in their financial statements, management’s discussion and analysis, and other continuous disclosure documents, as well as other voluntary disclosures, including ESG reports and public surveys.

CSA Guidance on Greenwashing

The CSA’s guidance in the Notice regarding ESG disclosures is summarized as follows:

  1. All statements regarding an issuer’s current or anticipated ESG performance must be factual, balanced and substantiated. The type and amount of detail that is required will depend on the aspect of an issuer’s ESG performance that is disclosed. For example, if an issuer discloses its goal to be carbon neutral by 2030, such disclosures may be supplemented with information regarding the current status of the issuer’s emissions, as well as a detailed plan setting out the technologies and tactics the issuer expects to employ, and the specific milestones the issuer expects to realize on the road to achieving this goal. The CSA also noted that where issuers make claims about their relationships with other organizations and the resulting social impact of those relationships, details about the organization’s activities, the particular aspects of sustainability that are being addressed through the relationship, and the manner in which these aspects are measured and assessed, should be included. As effective corporate governance mechanisms and risk management frameworks generally play a significant role in formulating and executing appropriate and meaningful corporate strategies, the extent to which an issuer implements these mechanisms and frameworks will greatly influence that issuer’s ability to provide thorough and accurate ESG disclosures, set achievable targets and develop realistic plans to address any existing deficiencies in the issuer’s ESG performance. Issuers should also keep apprised of updates in the ESG reporting landscape, which is evolving at a rapid pace, to ensure their ESG performance is disclosed accurately and thoroughly.
  2. Certain statements regarding, for instance, an issuer’s ESG-related targets, forecasts or projections, may constitute forward-looking information (“FLI”). In accordance with National Instrument 51-102 Continuous Disclosure Obligations, FLI must be supplemented by disclosure regarding material factors or assumptions used to develop the FLI, material risk factors that may cause any anticipated results to differ substantially, and any policies implemented by the issuer to update such FLI. Issuers should ensure that their internal review controls and procedures are sufficiently structured to engage in this analysis.
  3. Issuers should exercise caution when using promotional language. Specifically, the CSA noted that issuers have previously made promotional statements about their ESG performance – for example, claiming that the issuer was a “global leader” in sustainability, or had set “aggressive emissions reduction targets.” The Notice requires promotional statements to be accompanied by supporting facts and details. This aligns with the guidance set out in CSA Staff Notice 51-356 Problematic promotional activities by issuers, which notes that false and misleading statements are prohibited in all communications, voluntary or otherwise. Certain investors and other stakeholders pay particular attention to ESG-related risks and opportunities identified and managed by the issuer. As any false or misleading statements about an issuer’s ESG performance may affect investor confidence, issuers ought to be aware of the broader impact that their statements about the company’s ESG performance may have. Generally, issuers ought to avoid unqualified, broad statements and buzzwords when describing their products, services and operations. Issuers might also consider implementing a disclosure policy setting out the manner in which an issuer discloses its ESG performance and the individuals authorized to make such disclosures, in order to ensure appropriate oversight over the publication of its ESG disclosures.
  4. Disclosures about any ESG ratings must be accompanied by additional detail. As different rating agencies employ different metrics and matrixes in their respective evaluations, the CSA has advised issuers to disclose additional information about the specific criteria an ESG rating is based on (e.g., the factors considered and the weight assigned to those respective factors). Specifically, if applicable, issuers should also disclose whether any third party certified the rating.

Greenwashing and Securities Regulation

Outside of the activities of its CD Review Program, the CSA has demonstrated a consistent interest in regulating ESG-related disclosures of issuers in Fiscal 2021 and Fiscal 2022. As we reported in our article, Canadian Securities Administrators Propose Climate-Related and ESG Disclosure Requirements, the CSA released on October 18, 2021, the proposed National Instrument 51-107 Disclosure of Climate-Related Matters (the “Proposed Instrument”) and its Companion Policy 51-107CP Disclosure of Climate-Related Matters, both of which remain subject to finalization, but would, as currently drafted, require disclosure for most issuers on certain climate-related matters. The CSA also published the CSA Staff Notice 81-334 ESG-Related Investment Fund Disclosure to provide guidance on the manner in which ESG factors should be disclosed by investment funds.

Additionally, in the consultation paper that accompanied the release of the Proposed Instrument, the CSA noted that certain existing national instruments may currently apply to an issuer’s disclosure of climate-related information. For instance, Form 51-102F1 Management’s Discussion and Analysis and Form 51-102F2 Annual Information Form note that “materiality” is the deciding factor when determining whether information is required to be disclosed, and the latter specifically requires issuers, when completing their annual information forms, to note material risk factors that may influence an investor’s decision to purchase the issuer’s securities. National Policy 58-201 Corporate Governance Guidelines, National Instrument 52-110 Audit Committees and National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings set out guidelines for adopting corporate governance mechanisms and internal controls and procedures to identify and manage principal risks and opportunities, including climate-related risks and opportunities. The details of an issuer’s corporate governance policies and practices are ultimately disclosed in an issuer’s continuous disclosure documents, if required.

As the CSA pays an increasing amount of attention to ESG disclosures in existing and proposed legislative instruments, issuers ought to be aware of the consequences under securities law in Canada for an issuer's failure to provide sufficient disclosures, as set out in the Notice. Specifically, in the event that the issuer publishes continuous disclosure documents with extensive deficiencies, the CSA may add the issuer to its default list, issue a cease-trade order and/or refer the issuer to enforcement. The CSA may also require an issuer to refile a document correcting any previously noted deficiencies (e.g., by issuing a clarifying news release), commit to make disclosure enhancements on a prospective basis or file a missing document. The CSA may inform issuers specifically of changes that it wishes to see in its next set of applicable continuous disclosure documents, or may require the issuer to deepen its awareness on a particular topic. In the Notice, the CSA did not specify what the particular consequences for an issuer’s failure to provide sufficient ESG disclosures would be, but it can be reasonably anticipated that depending on the nature and extent of the deficiencies in the issuer’s ESG disclosures, any one or a combination of the aforementioned actions may be required.


The Capital Markets Group at Aird & Berlis will continue to monitor developments in ESG-related disclosure. Please contact a member of our group if you have any questions related to securities legislation, including the aforementioned Notice.