Below is a summary of the most significant changes in Canada over the last 12 months.

Supply chains legislation

The Fighting Against Forced Labour and Child Labour in Supply Chains Act (Canada) came into force on January 1, 2024. Subject entities are now required to file annual reports with the government and on their website disclosing the measures they have taken to prevent and reduce the risk of forced and child labour in their supply chains.

Private companies are subject to this legislation if they meet certain size-related thresholds and conduct covered activities, such as manufacturing goods (inside or outside of Canada) or importing goods into Canada, as well as controlling other reporting entities. Reporting obligations also apply to certain institutions of the federal government and companies listed on a stock exchange in Canada if they conduct certain covered activities and these obligations are not contingent upon meeting any size-related criteria. Failure to comply with the legislation or providing false or misleading statements can result in penalties of up to CAD 250,000 for an entity, its officers or directors.

The legislation also establishes an inspection regime and grants the federal Minister of Public Safety certain investigative powers.

Another important feature of this federal legislation is that it amends the Canadian Customs Tariff to strictly forbid the importation of goods that are mined, manufactured or produced, wholly or in part, by forced labour or child labour. The extent of the impact of this prohibition at the Canadian border remains to be seen.

The Canadian government signalled that they intend to introduce further requirements that would mandate supply chain human rights due diligence by businesses. That legislation, however, has not been introduced as of November 2024.

Competition Act

The Canadian federal Competition Act, which plays a crucial role in promoting fair and dynamic markets in Canada, has undergone significant amendments to address environmental and greenwashing claims.

These amendments, which became effective on June 20, 2024, introduced explicit prohibitions against greenwashing, mandating that any environmental benefits claimed by a product or service must be substantiated by proper and sufficient testing. Further, claims relating to a business’s environmental contributions or climate change mitigation efforts must be backed by substantiation in line with globally accepted standards. These representations are otherwise subject to the Competition Act’s generally applicable deceptive marketing provisions. Violations may lead to enforcement actions by the federal Competition Bureau, including prohibition orders and monetary penalties of up to 3% of a company’s global revenue. 

In June 2025, additional provisions will come into effect that will allow private parties to bring deceptive marketing and greenwashing claims directly to the Competition Tribunal.

Carbon pricing

At the provincial level, British Columbia implemented a new emissions pricing system in April 2024. The Output-Based Pricing System (OBPS) replaces the CleanBC Industrial Incentive Program enacted in 2019 and is compulsory for industry operations that emit over 10,000 tons of carbon dioxide equivalent per year. The primary change under the OBPS is that regulated companies will be able to purchase offsets generated pursuant to provincial offset protocols to meet their compliance obligations. Every jurisdiction in Canada now has a price on carbon pollution, with the pricing systems being administered either at the provincial or at the federal level. See Question 4 for information on the federal government’s Greenhouse Gas Pollution Pricing Act.

In Canada, ESG lacks a legally sanctioned, uniform definition and, while businesses within the same sector tend to adopt comparable interpretations, there is not an absolute uniformity in their definitions of ESG. Instead, organizations addressing ESG matters are usually referring to a set of considerations that fall under broad environmental, social and governance topics, but with significant variation in terms of what specific issues attract attention, largely based on that organization’s unique context (size, industry, region, etc.).

Environmental regulatory and social/labour laws in Canada exist at both the federal level (which apply across the country) and provincial level (which may differ between provinces). Courts across the nation have contributed to a body of case law interpreting this legislation, yet numerous elements of these laws continue to be open to further legal interpretation. Furthermore, these legal requirements form only the background of the broader ESG conversation in Canada as stakeholder and market pressure have driven corporate action on many ESG issues that are not yet legal requirements.

Canada’s unique social and economic context also brings forward distinctive topics in the ESG sphere. First, the Charter of Rights and Freedoms is part of Canada’s constitution and includes the right to equality. Second, Canada has a significant Indigenous population with constitutionally protected rights and, where proved, title to land, and the Government of Canada has committed to the implementation of the United Nations Declaration on the Rights of Indigenous Peoples into federal law. Third, Canada’s significant energy industry has resulted in a delicate balancing act between economic development, emissions reduction and the energy transition, therefore influencing public policies and legislative developments. Fourth, Canadian courts have extended the meaning of acting in the best interest of the corporation for boards of directors, encouraging them to consider the interests of a broader range of stakeholders, including “shareholders, employees, creditors, consumers, governments and the environment” (see Question 9). These distinctions, among others, impact how ESG is perceived and defined in Canada.

In Canada, major laws and regulations that are specifically related to ESG include the Competition Act and the Fighting Against Forced Labour and Child Labour in Supply Chains Act, both of which are described under Question 1. It also includes the Canada Business Corporations Act (CBCA)’s diversity disclosure requirements (which form part of the more general corporate law described in the statute), the Canadian Securities Administrators (CSA) proposed amendments to National Instrument 58-101 Disclosure of Corporate Governance Practices and to National Policy 58-201 Corporate Governance Guidelines. The federal government has also implemented certain measures aiming to improve the country’s environmental footprint, as described below.

Diversity disclosure for federally incorporated entities

Under the CBCA, federally incorporated entities that are listed on a stock exchange are required to disclose information regarding the diversity of their boards of directors and senior management teams to both their shareholders and Corporations Canada (a federal agency), which can be done by including the information in their proxy circular. Among other requirements, corporations must disclose data on four designated groups: women, Indigenous peoples, persons with disabilities, and members of visible minorities.

Proposed additional disclosure for public companies

In recent years Canada has gone through a process in which it was anticipated that certain regulatory frameworks pertaining to diversity and climate-related matters would be brought into effect, only to see regulators eventually pivot and pause the update process in 2025 until further notice:

• On April 13, 2023, the CSA proposed to adopt diversity-related disclosure requirements for TSX-listed companies, no matter their jurisdiction of incorporation. The proposed amendments to National Instrument 58-101 (NI 58-101) aimed at providing investors with additional information to assess how issuers address diversity beyond gender in their boards and executive positions and the proposed amendments to National Policy 58-201 provide guidelines with respect to such disclosure requirements. While the CSA generally aligns regulations between provincial and territorial jurisdictions, there has been disagreement in the case of National Instrument 58-101, notably on whether issuers should be mandated to report diversity data for specific designated groups, beyond just women.
• In October 2021, the CSA released their proposed National Instrument 51-107 Disclosure of Climate Related Matters, consistent with the recommendations of the Taskforce on Climate-related Financial Disclosure. The draft National Instrument 51-107 includes requirements for reporting issuers (other than investment funds) to disclose: (i) the board of directors’ oversight of climate-related risks and opportunities; (ii) management’s role in assessing and managing climate-related risks and opportunities; (iii) climate-related risks and opportunities that the issuer has identified over the short, medium and long term; (iv) the impact of climate-related risks and opportunities on the issuer’s businesses, strategies and financial planning; (v) the issuer’s processes for identifying, assessing and managing climate-related risks; (vi) the integration of item (v) in overall risk management; (vii) the metrics, targets and performance of the issuer relating to climate-related risks and opportunities; and (viii) greenhouse gas emissions of the issuer according to three levels of scope, or the issuer’s reasons for not disclosing such information. 
• As of April 2025, however, the CSA announced that it had “paused” its work on a climate disclosure rule and amendments to the diversity-related disclosure requirements while leaving open the possibility of revisiting mandatory disclosure standards in future years. The CSA noted that, for now, issuers will be guided by existing rules (such as the existing NI 58-101, noted above, with respect to diversity-related disclosure and existing rules governing the disclosure of material climate-related risks described in CSA Staff Notice 51-333) and voluntary disclosure frameworks, such as the CSSB standards (see Question 6, below, for more information on the CSSB standards).

Federal government procurement ESG criteria

Procurement by the federal government is subject to mandatory environmental criteria when a procurement totals CAD 25 million or more. The criteria are encouraged on a voluntary basis below this threshold. Since 2022, the Standard on the Disclosure of Greenhouse Gas Emissions and the Setting of Reduction Targets mandates suppliers to measure and disclose their greenhouse gas emissions and adopt a target to reduce such emissions. The reductions target must align with the Paris Agreement as part of Canada’s “Net-Zero Challenge” or an equivalent initiative or standard. The Net-Zero Challenge encourages businesses to develop and implement credible and effective plans to transition their facilities and operations to net-zero emissions by 2050.

In addition to environmental goals in procurement, the federal government made a commitment in 2021 to ensure that a minimum of 5% of the total value of contracts are held by Indigenous businesses. 

Federal Clean Fuel Regulation

The federal Clean Fuel Regulation (CFR) forms part of Canada’s plan to reduce emissions, increase clean technology and fuel, and support sustainable jobs. The CFR requires liquid and gaseous fuel suppliers to reduce the carbon intensity of the fuel they produce, import and sell for use in Canada. 

Entities subject to the CFR may purchase compliance credits generated by others under the CFR to meet their compliance obligations. Compliance credits may be generated in relation to projects within Canada that reduce the lifecycle carbon of energy products, or in relation to the production or import of fuels (including biofuels and hydrogen) that exceed the carbon reduction targets set under the CFR.

ESG-related themes are addressed in laws and regulations covering environmental protection, clean water, green energy, climate change, a tax on carbon, labour rights, child labour, forced labour, health and safety, human rights, aboriginal rights, pay equity, anti-corruption, anti-money laundering, transparency, anti-harassment and privacy. Our discussion will be concentrated on some of the most relevant of these regulations.

Human rights legislation 

In addition to the Canadian Charter of Rights and Freedoms, all provincial and territorial jurisdictions in Canada have human rights legislation prohibiting harassment and discrimination in the employment relationship based on grounds that usually include race, gender, age, religion, colour, disability (including drug and alcohol addiction), marital or family status, criminal record, ancestry or place of origin, sexual orientation, gender identity and gender expression.

United Nations Declaration on the Rights of Indigenous Peoples Act 

The United Nations Declaration on the Rights of Indigenous Peoples Act (UNDRIP Act) is Canada’s federal legislation aimed at aligning domestic laws with the United Nations Declaration on the Rights of Indigenous Peoples (the “Declaration”). The UNDRIP Act includes a requirement that the federal government take all measures necessary to ensure consistency between the laws of Canada and the Declaration. The UNDRIP Act requires the federal government to prepare and implement an action plan to achieve the objectives of the Declaration and that a Minister prepare a report on the progress made each year toward consistency of laws and the achievement of the Declaration’s objectives. The UNDRIP Act came into force on June 21, 2021.

In November 2019, the Province of British Columbia also committed to implementing the United Nations Declaration on the Rights of Indigenous Peoples with the coming into force of the Declaration on the Rights of Indigenous Peoples Act.

Greenhouse Gas Pollution Pricing Act

The Greenhouse Gas Pollution Pricing Act (“GHG Pricing Act”) is Canada’s federal legislation regarding carbon pricing. The GHG Pricing Act sets a national, minimum price for carbon emissions with the aim of imposing a minimum carbon price across Canada in order to reduce emissions nationwide.

In Canada, jurisdiction over the environment is split between the federal and provincial governments. Some provincial and territorial governments challenged the validity of the GHG Pricing Act, arguing that it was outside the jurisdiction of the federal government to impose a nationwide carbon tax. In 2021, the Supreme Court of Canada held that the GHG Pricing Act was constitutional as a matter of “national concern”. 

As of November, 2024, only Québec, British Columbia and the Northwest Territories are not subject to this legislation given that their respective local carbon systems meet the stringency requirements set by the federal government. A number of provinces (Alberta, Saskatchewan, Ontario, New Brunswick, Nova Scotia and Newfoundland) rely on the federal pricing system with respect to emissions from fuel but have implemented a carbon pricing regime for industry. 

To date in Canada, the primary mechanism for pursuing enforcement activity in relation to ESG has been under the federal Competition Act. As discussed above (see Question 1), Canada’s Competition Bureau has authority to enforce prohibitions against deceptive marketing practices. Also as discussed above, Canada has recently introduced new prohibitions against deceptive marketing practices in relation to environmental claims made with respect to products, services or business operations. While we have yet to see any enforcement actions under these new prohibitions, we have seen actions taken under the pre-existing general prohibition against deceptive marketing. 

As of November 2024, there are multiple complaints being investigated by the Competition Bureau, including the following:

• On March 4, 2023, Greenpeace Canada submitted a complaint to the Competition Bureau alleging that the Pathways Alliance “Let’s clear the air” advertising campaign made false or misleading representations to the public.
• A complaint against Lululemon Athletica Inc. was submitted to the Competition Bureau on February 12, 2024, and amended on March 27, 2024, alleging deceptive marketing practices arising from a 2020 sustainability campaign around working to reduce its greenhouse gas emissions.

A complaint has also been made to provincial securities regulators. On January 9, 2024, Investors for Paris Compliance submitted a complaint to the Ontario Securities Commission and the Autorité des Marchés Financiers of Québec. The complaint is specifically aimed at the marketing activities of certain Canadian financial institutions. The complaint seeks an investigation into the sustainable finance disclosures by those financial institutions and a disclosure requirement regarding emissions impact for their ESG-labelled bonds or the limitation of sustainable finance to activities that contribute to the banks’ net zero goals. The complaint’s assertions draw on the guidance given by the Canadian Securities Administrators in a series of Staff Notices pertaining to climate-related disclosure for investment funds or public companies (see Question 6). 

Legal action in the courts has primarily relied on Constitutional law claims related to Canadians’ right to life, liberty and security of the person. While those claims have had limited success to date, it is worth noting that none has been dismissed on the basis there is no merit to the claim. 

• In Mathur v. Ontario, six youths challenged the government of Ontario’s greenhouse gas reduction targets, claiming insufficient ambition and infringement on their Constitutional rights to life, liberty and security. The trial concluded with their claim being dismissed, as Charter violations were not substantiated. Appeals were argued at the Ontario Court of Appeal in January 2024 and although it allowed the appeal in October 2024, the Court of Appeal declined to determine the issue of constitutionality, and remitted the application for another hearing by the Superior Court.
• In La Rose v. Canada and Misdzi Yikh v. Canada, Canadian young people claimed the Canadian government’s inadequate climate change response violates their Constitutional rights. The Federal Court struck the claims, citing no prospect of success. Yet, the Federal Court of Appeal allowed appeals on December 13, 2023, permitting plaintiffs to revise their claims to rectify identified shortcomings.

Canadian courts have also heard private ESG-related litigation. In Nseir v. Barrick Gold Corporation, the Québec Court of Appeal has authorized a class action against the mining company and two of its former officers, under the Securities Act (Québec). The class action seeks compensation for the losses suffered by shareholders who purchased shares when alleged misrepresentations were made about the Pascua-Lama mine project’s environmental regulatory compliance in Chile.

Soft non-binding laws

In Canada, the Canadian Securities Administrators (CSA) play a crucial role in driving ESG trends for both public companies and investment funds. So far, the CSA has limited its intervention to Staff Notices, which are non-binding — but highly influential — interpretive guidance that the CSA proactively publishes.

ESG developments for public companies

CSA Staff Notice 51-333: Environmental Reporting Guidance, for instance, offers environmental reporting guidance for public companies, emphasizing the potential materiality of environmental matters, including climate change, in influencing investor decisions. Staff Notice 51-358: Reporting of Climate Change-related Risks further expands on Staff Notice 51-333 by providing guidance on disclosing material climate change-related risks in their continuous disclosure documents. Complementing these efforts, Staff Notice 51-354: Report on Climate Change-related Disclosure Project reports on the CSA’s work reviewing the disclosure of climate change-related risks and financial impacts by reporting issuers. In CSA Staff Notice 51-365: Continuous Disclosure Review Program Activities for the Fiscal Years Ended March 31, 2024 and March 31, 2023, the regulators highlight the importance of balanced disclosures, including adequate detail to avoid misleading investors in light of an increase in ESG and sustainability-related disclosure in recent years, and a corresponding amount of disclosure that is potentially misleading, unsubstantiated or otherwise incomplete.

Formed in 2023, the Canadian Sustainability Standards Board’s (CSSB) is working in collaboration with the International Sustainability Standards Board (ISSB) and various stakeholders to advance the adoption of voluntary sustainability disclosure standards across the country. The CSSB has published its final CSDS 1, which contains general requirements regarding sustainability-related financial information, and CSDS 2, which contains climate-related disclosure requirements. These standards are similar to the standards issued by the ISSB in June 2023, with certain additional relief to account for the Canadian context. 

ESG trends for private companies

In October 2024, Canada confirmed it intends to amend the Canada Business Corporations Act (CBCA) to require large, private companies incorporated pursuant to the CBCA to make climate-related financial disclosures. The substance of the disclosure requirements and the size of companies subject to the requirement will be prescribed by regulation. It is widely anticipated that the climate-related disclosures required under an amended CBCA will align with the upcoming CSSB standards.

ESG trends for investment funds, pension funds and financial institutions

Investor demand for sustainable practices is another important non-regulatory driver shaping ESG trends in Canada, particularly for investment funds and pension funds. Many institutional investors release voting guidelines to disclose how they fulfil their fiduciary duties and meet their obligations towards their beneficiaries and clients. For example, the Maple 8, which refers to Canada’s eight largest public pension plans, have each published voting guidelines which include ESG considerations. The Maple 8 are also members of the Canadian Coalition for Good Governance (CCGG), which also provides collective stewardship through their board engagement program.

In the context of investment funds offered by prospectus, CSA Staff Notice 81-334: ESG-Related Investment Fund Disclosure originally provided guidance on ESG disclosure practices, focusing on funds with explicit ESG objectives. A revised Staff Notice 81-334, dated March 7, 2024, expands upon this, summarizing key findings from the regulator’s ESG review, providing additional guidance on ESG fund characterization as well as disclosure in prospectus and sales communications for each fund characterization. The revised Staff Notice 81-334 categorizes ESG-related funds into the three fund categories dependent on the level of ESG inclusion in their investment process, with each category having its own set of rules to consider.

Regarding pension funds, another major driver of ESG development in Canada is the Canadian Association of Pension Supervisory Authorities (CAPSA), which considers ESG factors in pension plan management. CAPSA’s principles-based guideline on ESG supports plan administrators in fulfilling their fiduciary obligations and appropriately assessing ESG factors that can impact the financial performance of pension plan investments. This includes recognizing climate change as a significant ESG factor that poses both physical and transition risks to the financial system, companies, and industries.

Québec’s securities regulator, the Autorité des Marchés Financiers (AMF), published its Climate Risk Management Guideline on July 4, 2024 (the “AMF Guideline”). The announced objective of the AMF Guideline is to facilitate consistent sustainability disclosure which applies to licensed insurers, financial services cooperatives, licensed trust companies, and other licensed deposit-taking institutions under the AMF’s jurisdiction. The AMF Guideline incorporates the ISSB standards, namely IFRS S1 (general requirements) and IFRS S2 (climate-related requirements), and outlines the AMF’s expectations with respect to climate matters for financial institutions under the following six themes: (1) governance, (2) integrated risk management, (3) climate scenarios and stress testing, (4) capital and liquidity adequacy, (5) fair treatment of consumers, and (6) climate-related financial risk disclosures. On March 27, 2025, the AMF Guideline were adjusted to align with the CSSB’s final standards. The main change involves postponing the disclosure date of certain indicators and targets related to greenhouse gas emissions by at least three years. 

Similarly, the Climate Risk Management Guideline by the Office of the Superintendent of Financial Institutions Canada (OSFI) was most recently updated on March 20, 2024 (the “OSFI Guideline”). The OSFI Guideline provides detailed expectations for federally regulated financial institutions (the “Federal Institutions”) to manage climate-related risks. Federal Institutions include all of Canada’s national banks, as well as regional banks and credit unions, foreign banks and trust funds operating in Canada. The OSFI Guideline outlines principles for governance and risk management, including the integration of climate-related risks into business models, strategies and Enterprise Risk Management (ERM) frameworks. The OSFI Guideline mandates climate scenario analysis and stress testing to assess the impact on risk profiles, business strategies and financial resilience of Federal Institutions. It also stresses the importance of adequate capital and liquidity buffers to manage these risks. Additionally, Federal Institutions must disclose climate-related financial risks, governance roles, strategies and metrics, including Scope 1, 2, and 3 greenhouse gas emissions. Similar to the AMF Guideline, the OSFI Guideline integrates the requirements of the ISSB standards including IFRS S2 (climate-related requirements). 

National Contact Points (NCPs)

Canada is a participant in the OECD Declaration on Investment and Multinational Enterprises and to the Declaration’s Guidelines for Multinational Enterprises on Responsible Business Conduct and maintains a National Contact Point (NCP) for Responsible Business Conduct to promote awareness and uptake of the guidelines. The Canadian NCP also facilitates a dispute resolution process for multinational entities with Canadian operations to promote adherence with the guidelines. 

As ESG issues are not handled centrally in Canada with respect to policymaking concerning specific issues, the role of the Canadian NCP is likewise indirect. The Canadian NCP is involved with various efforts on corporate social responsibility, the role of businesses in responsible development and human rights, and policy development, but its powers are largely advisory and educational. 

While the major Canadian ESG-related current and proposed laws and regulations highlighted in Question 3 mainly concentrate on disclosure obligations, we note that Canada’s approach to ESG issues is becoming more stringent. For example, Canada’s Fighting Against Forced Labour and Child Labour in Supply Chains Act imposes penalties for non-compliance (see Question 1) and a few years prior to such legislation, the federal government created an ombuds office with a business and human rights mandate to receive complaints and investigate possible human rights abuses arising from the operations and supply chains of Canadian garment, mining, and oil and gas companies. Furthermore, the current Canadian government indicated its intention to introduce legislation mandating human rights due diligence for businesses, following the path of certain European countries as well as the European Union’s corporate sustainability due diligence directive (known as CSDDD). As of November 2024, the scope and extent of this anticipated bill remains to be seen.

Reporting

Voluntary ESG disclosure

Amid rising market and regulatory expectations for transparency in ESG matters, Fasken conducts an ESG study every year to examine how large Canadian companies manage and disclose increasingly critical ESG issues. According to the Fasken 2025 ESG Disclosure Study, Canadian companies are primarily reporting their ESG disclosures in two types of documents: sustainability reports and certain continuous disclosure documents that are mandatory under securities law (primarily management information circulars and annual information forms). For instance, 84% of the 60 largest companies listed on the Toronto Stock Exchange (TSX 60) publish a sustainability report.

On the social side, human rights and supply-chain management have also found their way into the continuous disclosure documents of a number of issuers. Although the Fighting Against Forced Labour and Child Labour in Supply Chains Act mandates companies to provide the required disclosure in a distinct report (see Question 1), many listed companies also provide information regarding this legislation and related issues in their continuous disclosure documents published pursuant to securities laws. For example, certain companies, mainly in the mining, energy, oil and gas and technology industries, have included risk factors such as the potential negative impact on their reputation and operations stemming from independent suppliers or manufacturers failing to prevent the use of forced labour or child labour in their operations or supply chain. In 2018, Québec’s Autorité des Marchés Financiers published a notice providing guidance on modern slavery disclosure requirements, indicating among other things that if the risks associated with modern slavery were considered material to the issuer, they had to be disclosed.

Use of ESG standards and frameworks

The Fasken 2025 ESG Disclosure Study found that most TSX 60 companies in Canada use the Task Force on Climate-Related Financial Disclosures (TCFD), the Global Reporting Initiative (GRI), or the Sustainability Accounting Standards Board (SASB) as a reference for their ESG disclosure. The majority of those large companies use more than one framework or standard, with 68% of them combining TCFD, GRI and SASB, and at least one other framework. 

Materiality threshold

According to the Fasken 2025 ESG Disclosure Study, over 80% of TSX 60 companies currently adhere to the GRI standards, which incorporates double materiality, therefore considering both financial impacts and a company’s broader societal and environmental footprint.

The Climate Engagement Canada (CEC) initiative, a financial sector-led corporate engagement program, identifies the top reporting or estimated emitters on the Toronto Stock Exchange (TSX) and/or with a significant opportunity to contribute to the transition to a low-carbon future.

The sectors with the largest representation on the CEC’s Focus List, representing an aggregate of 67%, are oil and gas, utilities, and mining. Companies operating in those industries most frequently link executive compensation to ESG metrics, with 100%, 100% and 83% respectively, according to the Fasken’s 2025 ESG Disclosure Study. 

Financial services companies are also significantly impacted by ESG in Canada. While experiencing relatively less connectivity between ESG and executive compensation at 80%, in the Fasken 2025 ESG Disclosure Study we found that companies in the financial services industry received 57% of all shareholder proposals related to ESG matters – by far the most of any industry.

As discussed in the Fasken 2025 ESG Disclosure Study, in recent years, there has been increased focus on boards of directors managing ESG-specific strategies, as evidenced by guidance published by various organizations including proxy advisory firms Glass Lewis and Institutional Shareholder Services, as well as the Canadian Coalition for Good Governance. 

Institutional investor attention is reflected in the proportion of TSX-listed companies that discuss ESG or “Sustainability” in their annual information form filed with Canadian securities regulators. While discussed by only 45% of TSX-listed companies with market capitalizations under CAD100 million, 92% of TSX-listed companies with market capitalizations over CAD 3 billion included at least some discussion of these matters.

According to Canada’s Responsible Investment Association’s Q2 2024 report, investments in Canadian sustainable funds surged by 20.8% from the previous quarter, hitting a record of CAD 60.9 billion in total assets. In the same period, investors withdrew more money from passive sustainable funds (CAD 1.6 billion) than from active ones (CAD 442 million), indicating a shift away from passive investments. 

Disclosure of ESG governance frameworks by major Canadian public companies in sustainability reports, impact reports or similar documents has become the market standard, despite no legal requirements. In recent years, those companies have increasingly disclosed the involvement of the full board of directors in ESG oversight, with the use of distinct sustainability committees being generally more prevalent in industries with high emissions. 

That said, the role of the board of directors in considering various ESG factors when making a decision is not new in Canada. Canada’s landmark Supreme Court case, BCE Inc. v. 1976 Debentureholders (2008 SCC 69) (BCE), held that boards of directors had to weigh “stakeholder” interests that went beyond the narrower consideration of shareholder interests. The court affirmed the principle that in deciding in the best interests of the corporation, directors may look to the interests of a variety of the corporation’s stakeholders, including “shareholders, employees, creditors, consumers, governments and the environment” and underscored that directors are “required to act in the best interests of the corporation viewed as a good corporate citizen”. The CBCA, Canada’s federal statute governing the organization of business corporations, was amended in 2019 to codify the principles of the Supreme Court’s holding in BCE into Canada’s key corporate governance statute.

On May 23, 2024, Bill S-285, the 21st Century Business Act (“Bill S-285”), was introduced as a private bill by a senator (i.e., the proposed legislation does not have the backing of the government) to propose further significant amendments to the CBCA. These changes include mandating that CBCA corporations must align with an expanded purpose that includes the best interests of the corporation as well as beneficial impacts on society and the environment. If approved by Canadian Parliament, Bill S-285 would embed these responsibilities into the fiduciary duties of directors and officers and require annual public reporting on the corporations’ social and environmental impacts, with reporting frameworks yet to be defined. This Bill’s legislative journey remains uncertain, as it does not currently have the official endorsement of any political party in Canada as of >November 2024, so it may never become law.

In line with international trends, companies and investors in Canada regularly use ESG ratings and benchmarks to gauge their own ESG performance or assess the performance of the entities in which they invest. Many companies publish their achievement in press releases, reports and continuous disclosure documents, such as their annual information form and proxy circular. Investment funds often rely on third-party research from a combination of ESG ratings agencies and benchmarks as part of their methodology to analyse potential portfolio companies. We also note that certain renowned Canadian financial institutions utilize third-party providers for the assessment of the credibility and impact of their green bond frameworks.

Public markets have visibly driven ESG developments in Canada, while private markets are experiencing ESG developments as well.

In a 2023 study, the Business Development Bank of Canada (BDC), a Crown corporation operated at arm’s length from the Government of Canada, surveyed more than 100 major buyers and 1,200 suppliers to understand the impact of ESG practices on procurement in the public and private sectors.

Finding that 76% of suppliers to organizations that have ESG criteria consider them beneficial to their business, BDC also noted that 92% of major buyers expected to require suppliers to disclose information about at least one ESG criterion by 2024 and 75% of major buyers plan to increase their sustainable procurement practices by 2028.

BDC assessed that Canadian small and medium-sized enterprises (SMEs) will increasingly be required to consider their environmental and social impact and to adopt sound governance principles. While 59% of surveyed SMEs were already required to report on their ESG practices, that proportion rose to 72% for Canadian SMEs selling into Europe.

Major private equity firms in Canada publicly report their investment policies, detailing how they integrate ESG into their investment processes and manage their portfolio companies, and some of these firms have issued net-zero commitments.

Climate-conscious consumers are also driving ESG developments. Professional services firm PwC surveyed over 1000 Canadian consumers as part of its 2024 Voice of the Consumer Survey. PwC found that, while Canadians are less climate conscious at 11% than the global average of 17%, Canadian consumers indicated that visible factors like waste reduction and eco-friendly packaging were more influential on their purchase decisions than certain reporting initiatives.

One of the most significant challenges in Canada in terms of compliance for companies under ESG obligations arises from the competing jurisdictions of the federal, provincial and territorial governments. Each of these levels of government has jurisdiction to legislate with respect to the environment, as seen in the challenge to the validity of the Greenhouse Gas Pollution Pricing Act (see Question 4), and each province has its own securities regulator which may disagree on certain regulatory orientation, the topic of diversity disclosure being one of them (see Question 3). These cases are just examples of the dissent within Canadian governmental bodies in terms of how ESG obligations and standards should be set. This dissent makes compliance challenging for entities operating across jurisdictions as there is often a lack of coordination between regulators with respect to the interaction of different ESG obligations and standards.

An additional challenge relates to companies that are headquartered in Canada with significant assets abroad and, consequently, exposure in other jurisdictions, due to the lack of coordination between nations’ regulators on a variety of topics.

Finally, the close relationship between the Canadian market and the U.S. economy requires increased vigilance concerning ESG initiatives and legislative development by both industry and lawmakers in Canada due to the contentious nature of ESG topics in the United States.

Information on ESG-related regulation is not consolidated in a centralized repository in Canada. The federal government and each of the provincial governments maintain websites with updates on new legislation and, in some cases, regulations. For instance, in-process legislation at the federal level is available on the “LEGISinfo” website at www.parl.ca/legisinfo/en/overview. Securities disclosure requirements are published on individual provincial regulator websites and a resource for access to court decisions is the Canadian Legal Information Institute (CanLII) at www.canlii.org/en.

The Canadian Coalition for Good Governance (CCGG) provides resources on ESG factors in Canada. Their offerings comprise instructional guidebooks, materials on executive pay and stewardship guidelines. Additionally, they release an annual overview of exemplary practices for proxy circulars on their website, highlighting ESG reporting methods that the CCGG endorses as effective.

Proxy advisory firms like ISS (Institutional Shareholder Services) and Glass Lewis also provide insights for ESG considerations in Canada. Their guidelines serve as a relevant source of information, reflecting current trends, best practices, and investor expectations.

Fasken provides consistent updates on new developments on Canadian ESG topics through its ESG and Sustainability page at www.fasken.com/en/solution/practice/esg-sustainability and an annual study of Canadian public disclosure of ESG topics, which is available at www.fasken.com/en/knowledge/esg-disclosure-study.

Although Canada has yet to develop a taxonomy related to ESG, the federal government released plans for voluntary made-in-Canada sustainable investment guidelines, also referred to as a sustainable finance taxonomy. The voluntary taxonomy is the federal government’s response to the recommendations proposed by the Sustainable Finance Action Council (SFAC) in its 2022 Taxonomy Roadmap Report. The taxonomy is intended to provide investment certainty through the credible identification of sustainable economic activities for Canada and it will include both “green” and “transition” categories. The “green” category will include low- or non-emitting activities, and the “transition” category will include scientifically credible methods to decarbonize Canada’s high-emissions sectors.

In the short term, many Canadian stakeholders expect that lawmakers will continue to adopt new legislation and regulations to increase ESG reporting requirements.

In the medium term, the recent amendments to the Competition Act may also change the landscape of environmental disclosure in Canada by allowing private parties to bring greenwashing claims before the Competition Tribunal, when it is in the public interest, starting in June 2025. This will lead to increased scrutiny over environmental representations and may encourage certain companies to reduce their environmental disclosure to avoid lawsuits, commonly referred to as greenhushing. Furthermore, if the current Canadian government’s intention to introduce legislation on human rights due diligence materializes, it is expected that Canadian businesses will have to take concrete actions to prevent human rights abuses in their operations and supply chains.

In the long term, Canada will continue to be influenced by the global ESG context. While the Canadian legislators continue to monitor and assess international developments in this area, including in the United States, political context and economic conditions may impact Canada’s approach to timing and content of any forthcoming mandatory rules pertaining to ESG matters.