On October 7, 2024, the Ontario Securities Commission (the “OSC”) published Insights on the OSC Staff’s Approach to Sustainable Finance (“Insights”). The Insights clarify the OSC’s approach to sustainable finance in alignment with its Strategic Plan for 2024-2030,[1] the 2023-2024 Statement of Priorities,[2] and general mandates.[3] Specifically, the Insights outline the OSC’s approach to sustainable finance over the coming years, focusing on: (a) building transparency and trust in the sustainable finance ecosystem, (b) supporting investors and the regulated community as they address and adapt to rapidly changing capital markets caused by both emerging opportunities and risks, and (c) ensuring Ontario keeps pace with international developments in the sustainable finance area.
“Sustainable finance” refers to the integration of environmental, social, and governance (“ESG”) factors into financial decisions, risk management, and capital flows. This focus is in response to investor and stakeholder interest in issues related to sustainable finance, particularly the need for clear sustainability disclosure frameworks and concerns about greenwashing. It also reflects growing international and domestic interest in ESG considerations and sustainable investment practices. For instance, on October 9, 2024, the federal Department of Finance announced a plan to mandate climate-related reporting for large federally incorporated private corporations and to deliver a “Made-in-Canada” green and transition taxonomy.[4] This is in line with the European Union, which started phasing in its new Corporate Sustainability Reporting Directive, requiring sustainability reporting based on the double materiality disclosure framework developed by the European Financial Reporting Advisory Group, called the European Sustainability Reporting Standards.[5]
As a result, the Insights emphasize a “climate-first” approach, structured around three key pillars: (1) investor protection and thriving capital markets, (2) thought leadership, and (3) anticipating what’s next. Each pillar represents a core objective of the OSC and includes several “pathways” for achieving these objectives.
Pillar 1: Investor protection and thriving capital markets
The first pillar focuses on improving the OSC’s regulatory schemes and enforcement mechanisms to maintain confidence in Canada’s capital markets and ensure that investors are fully informed. Addressing concerns about greenwashing, the Insights emphasize the OSC’s commitment to effective, timely regulation through a holistic approach. This includes using traditional tools such as staff guidance, policies, and rules, along with a newly established sustainable finance role and an internal discussion forum. These new initiatives aim to foster innovation, encourage discussions on best practices, and tailor regulatory frameworks to accommodate companies of various sizes and resources. The Insights further commit the OSC to systematically integrate ESG/sustainability considerations into its supervisory work by enhancing staff training on climate-related disclosures and considering material climate-related risks in their compliance review programs. It also proposes expanding the OSC’s education programs for investors through its investor resource hub on sustainable investing and providing guidance to public companies, asset managers, dealers, and marketplaces on ESG/sustainability developments.
Pillar 2: Thought leadership
The second pillar provides clarity on the OSC’s role as a trailblazer in navigating sustainable finance regulation both domestically and internationally. The Insights highlight the OSC’s leadership as the largest regulator within the Canadian Securities Administrators (the “CSA”). It further bolsters the OSC’s influence in promoting global consistency in sustainable finance securities regulation through its membership in the Steering Group of IOSCO’s Sustainable Finance Taskforce and its relationships with the International Sustainability Standards Board (the “ISSB”) and the Canadian Sustainability Standards Board (the “CSSB”). The OSC’s commitment to expanding research on sustainable finance include determining which ESG fund attributes are important to retail investors and exploring investors’ attitudes, beliefs, and behaviours regarding ESG/sustainability. Notably, the OSC announced it will conduct a study evaluating the trends and impacts of disclosure requirements related to the representation of women on boards and in executive officer positions. The OSC claims it will “walk the talk” by adhering to the ESG-related disclosures expected of public companies, which includes disclosing the OSC’s board and leadership diversity representation, conducting an inventory of its greenhouse gas emissions (scopes 1 and 2 and four categories of scope 3), and developing a climate-related disclosure report based on the four pillars of the TCFD.
Pillar 3: Anticipating what’s next
The final pillar focuses on strategies to anticipate economic, societal, and technological changes, enabling the OSC to adapt its regulatory frameworks and identify emerging risks. This will be achieved through traditional engagement channels such as panels, advisory committees, industry events, and bilateral meetings, along with newer channels like social media to expand the scope of stakeholder engagement, particularly with Indigenous peoples and communities. The Insights also describe a “horizon scanning” plan to detect early signs of change. This includes monitoring ISSB and CSSB plans, domestic and international regulatory developments, and topics of interest to shareholders, such as artificial intelligence systems. Lastly, the OSC intends to leverage its Office of Economic Growth and Innovation to ensure timely reviews of novel sustainability-related products and to continue modernizing regulations to foster sustainable growth at all stages.
Conclusion
In summary, the Insights reflect the OSC’s efforts to drive change in response to longstanding stakeholder concerns, particularly regarding consistent sustainability disclosure standards, while demonstrating its proactive approach to ensuring nimble regulatory changes. In doing so, the OSC is following in the footsteps of Québec’s Autorité des marchés financiers, which initiated this new regulatory focus on sustainable finance within the CSA.
Should you have any questions, please do not hesitate to reach out to a member of Miller Thomson’s ESG and Carbon Finance Group.
[1] OSC, OSC Strategic Plan 2024-2030.
[2] OSC, Statement of Priorities for Financial Year to end March 31, 2025 and Response to Stakeholder Comments.
[3] Securities Act (Ontario), RSO 1990, c S5.
[4] Department of Finance Canada, Government advances Made-in-Canada sustainable investment guidelines and mandatory climate disclosures to accelerate progress to net-zero emissions by 2050.
[5] European Union, Directive 2022/2464 Corporate Sustainability Reporting Directive.
