Canada is following Europe's lead on mandatory ESG reporting
Before landing at the Saskatoon office of MLT Aikins, Chad Eggerman spent seven years in Europe. He practised business law for a Helsinki-Finland-based firm, worked in Switzerland and studied the law of the European Union in Sweden, and says he has always predicted North America and Europe would eventually “draw closer together.”
Now, he says, the rise of Environmental Social and Governance (ESG) considerations, and more recently the Russian invasion of Ukraine, appear to be advancing that transatlantic integration.
The EU has been a leader in ESG for 20 years, says Eggerman, who advises clients on real estate, construction, environmental, finance and Indigenous matters. “For the first time in at least 20 years… I see a bit of a global consensus developing around ESG, and the EU certainly taking the lead in that.”
One example is mandatory ESG disclosures. Last March, the EU’s Sustainable Finance Disclosure Regulation came into force. The regulation allows consumers to track a firm’s sustainability factors and minimize greenwashing in the financial services industry.
“The federal government has already announced that federally regulated institutions – like pension funds and government agencies – issue climate-related financial disclosures,” says Conor Chell, an energy lawyer and counsel with MLT Aikins in Calgary. “I think it’s only a matter of time until that makes its way into the private sector.”
Canada is moving on mandatory reporting. Last December, in his mandate letters to the ministers, Prime Minister Justin Trudeau called on Deputy Prime Minister and Minister of Finance Chrystia Freeland and Minister of Environment and Climate Change Steven Guilbeault to work with the provinces to establish mandatory climate-related financial disclosures. The Task Force on Climate-Related Financial Disclosures provides the framework for this collaboration.
The Canada-European Union Comprehensive Economic and Trade Agreement will provide the “underlying framework” for Europe and North America’s regulatory harmonization in the ESG space, says Eggerman. The agreement began to enter into force, provisionally, in September 2017.
The invasion of Ukraine will also facilitate greater cooperation between North America and Europe, at Russia’s expense, he says. The suspension of the Nord Stream 2 project is one prominent example. The $13.8 billion, 1,200-km gas pipeline stretches from Ust-Luga Russia, through the Baltic sea, curving passed Estonia, Latvia, Lithuania and Poland, and into Northern Germany. As Russia’s invasion began, the Germans halted certification of the pipeline, which was completed last September.
“Big countries, like Germany, have looked to Russia in the past to build these projects,” says Eggerman. “I just can’t see that happening anytime soon.” He expects Europe and North America to increasingly look to each other for expertise.
As Germany announced it would discontinue Nord Stream 2, Canada responded to the invasion by banning all Russian crude-oil imports. Though Canada has not imported Russian oil since before the pandemic, Russia has traditionally been among Canada’s top three international suppliers, along with Saudi Arabia and the United States. Russia’s alienation creates a gap Canada can fill, says Eggerman.
“This is a horrible, horrendous situation. If we’re just looking for bright spots, here – silver linings – this might be one of them for Canada.” This situation may give Canada an opportunity to better position itself as a sustainable energy producer, he says.
“We have the regulatory framework in place to do that. You don’t have to purchase oil from tyrants and despots and authoritarian regimes, and this has been said, for a long time, by a whole bunch of different groups. But it’s become very real now.”
