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Global Sustainability Standards Bring Benefits for Canadian Pensions

By Alyson Slater, Head of Sustainable Investment Canada, Public Markets, Manulife Investment Management

Corporate attention to sustainable practices has come a long way in recent years, but reliable and comparable universal reporting standards have remained elusive. Thankfully, following decades of splintered and voluntary reporting regimes, there’s been a flurry of activity this year, bringing the promise of global alignment and consolidation closer than ever. 

We think these changes ultimately bode well for Canadian asset owners with a global investment footprint. As awareness of the benefits of investing in companies with sustainable practices has grown, so, too, has the need for globally consistent and comparable disclosure. It’s hoped that the new standards, overseen by a single governing body, will create a common language for investors assessing the impact of climate-related risks and opportunities on a company’s prospects. 

Standardization and consolidation

When the International Sustainability Standards Board (ISSB), part of the International Financial Reporting Standards (IFRS), issued its inaugural standards—known as IFRS S1 General Requirements for the Disclosure of Sustainability-related Financial Information and IFRS S2 Climate Related Disclosures (IFRS S1 and S2, respectively)—in June of this year, it ushered in a new era of sustainability-related disclosures by issuers in capital markets worldwide. 

The standards were swiftly endorsed by the International Organization of Securities Commissions (IOSCO), who issued a call for regulators globally to mandate them, thereby creating a global baseline for sustainability disclosures akin to financial reporting standards.  

More recently, the Financial Stability Board (FSB), which has long been concerned about the systemic nature of climate risk, requested that the ISSB take over stewardship of the reporting recommendations put forth in 2015 by its Task Force on Climate Related Financial Disclosures (TCFD). The TCFD reporting recommendations already have significant uptake by issuers globally, and largely underpin the IFRS S2 climate reporting standard. This should help speed the uptake of S1 and S2 as issuers transition to the new standards, building on their experience with the TCFD.

The other key ingredient in the S1 and S2 standards are the Sustainability Accounting Standards Board (SASB) Standards. The SASB framework was established in 2011 to build sector-specific reporting standards specifically focused on investor needs and were merged into the IFRS Foundation in 2022, as a key first step in the consolidation of voluntary standards. This sector approach was incorporated into the S1 and S2 because different industries face different climate-related risks and opportunities. 

What do the standards mean for Canadian asset owners?

The IFRS S1 and S2 standards are designed to be applied together, but have separate objectives. IFRS 1 provides the overall framework under which companies should report, with particular focus on governance, strategy, risk management, and metrics and targets. IFRS S2, on the other hand, has been developed to cover climate-specific disclosure, including physical and transition risks alongside available opportunities. When used together, the standards will create a universal baseline for corporate reporting, making it easier for investors, analysts, and other capital markets actors to use this information to assess the financial implications of climate change on companies. The resulting data will allow analysts to assess critical information, including:

  • Whether various elements of climate risk are reflected in corporate credit risk
  • The impact of physical climate risk on a company’s sustainable free cash flow
  • Whether capital expenditures on climate-related risk are aligned with the company’s low-carbon transition plan and general risk profile
  • Whether the board of directors has sufficient oversight of climate risk
  • Possible new revenue streams a company may be able to realize by offering a low-carbon solution.


The evolution of a global standard is beneficial for Canadian asset owners who have a global exposure to issuers in all sectors—and because of the globally systemic nature of climate risk. Virtually no company can escape some form of climate risk, whether it arises from policy and market changes related to the low-carbon transition, or from the increased physical risks of severe weather, sea level rise, and fire. 

Some asset owners are seeking to align their capital with climate or other sustainability-related goals or targets, and the introduction of standardized reporting is a prerequisite to accomplishing such alignment. Companies will have to report on their longer-term strategy, the way they are managing climate-related risks and opportunities, their greenhouse gas emissions, and the board’s oversight of climate-related risk. Reporting on these issues will shed light on whether a particular issuer is aligned with or contributing to an investor’s sustainability goals, and if they are adequately managing climate-related risks now and into the future.

Pathways to mandatory disclosure

The new standards represent an important step in the right direction, but if they are to become the new global baseline we’ll need to see action from regulators around the world to mandate IFRS S1 and S2 in their local jurisdictions, just as they’ve done for IFRS financial reporting standards. 

The outlook so far is encouraging. Singapore is expected to consider ISSB-aligned listing rules before the end of 2024, and major economies, including the United Kingdom, Japan, Australia, South Korea, and Brazil, have announced their intention to mandate ISSB standards in the near term. The United States Securities and Exchange Commission conducted a public consultation on a set of climate-related financial risk disclosures in 2022 and is expected to announce new rules before the end of 2023, and the State of California just passed the Climate Corporate Data Accountability Act, which requires companies with revenues greater than $1 billion to report extensively on their greenhouse gas emissions—a key element of the IFRS S2 standards. 

As for Canada? We believe that in order keep Canadian businesses competitive in the global economy and attract international capital, it would be hugely beneficial if various Canadian regulators also adopted these global standards. Disclosing against these global norms would demonstrate how issuers of all sizes in Canada’s relatively high emissions economy are positioning for success through the low-carbon transition, or against the increasing risk of floods and fires. Again, there are reasons for optimism. Already, the Office of the Supervisor of Financial Institutions (OSFI) has said that it will require federally regulated financial institutions to report in alignment with the ISSB standards. The Ministry of Finance announced in 2021 that all Crown Corporations would be required to report against the pre-curser to the ISSB standards, the TCFD. 

To bring a level of consistency across the country, Canada’s financial standard setting body, Financial Reporting and Assurance Standards Canada (FRAS), has formed the Canadian Sustainability Standards Board (CSSB). The CSSB was designed in similar fashion to long-existing Canadian financial standard setting boards, such as the Accounting Standards Board, which reviews IFRS financial reporting standards and then issues them in Canada. Canadian regulators and authorities then mandate the use of these standards by entities under their authority. Today, there are over 220 pieces of regulation that refer to these financial reporting standards in Canada. 

It’s intended that the CSSB would perform a similar role, acting as a link between the ISSB and Canadian regulators and other stakeholders, by setting and maintaining sustainability disclosure standards for Canadian entities to report against. The CSSB also plays a key role in contributing to and influencing global standardization of sustainability disclosure, bringing the Canadian experience into the global standard-setting agenda.


The process to determine mandatory application will take time, but overall, the process may look something like this:

Step 1. The CSSB will review the ISSB’s global baseline standards for use in Canada. As part of this process, the CSSB will consider whether changes or further requirements are needed to reflect Canadian interests and priorities. This approach is consistent with the ISSB’s “baseline” and “building blocks” terminology. This would include a public consultation and result in the issuance of CSSB Standards.

Step 2. Canada’s regulators and legislators will consider whether—and over what time frame—the CSSB’s standards should be mandated. Until this decision is made, the standards would apply to whomever chooses to use them on a voluntary basis. 


International outlook 

As an asset manager with nearly $775 billion in AUM globally (as of June 30, 2023), Manulife Investment Management is a dedicated user of sustainability data for the thousands of issuers we invest in. We welcome the ISSB’s S1 and S2 standards, which we believe have the potential to vastly improve investors’ ability to access high-quality, reliable, and comparable information for issuers. But there is so much more to be done. Standards are urgently needed for other issues beyond climate, including on nature and human capital, which we hope to see emerge in the near term.

Voluntary standards are only one half of the equation—we’d also like to see consistent uptake of these standards by companies around the world. This is why we’re participating in the CSSB in Canada, our home market, as well as supporting ISSB alignment in other key markets—particularly in Asia—and globally as a member of the ISSB’s Investor Advisory Group. We welcome the efforts ISSB has made on interoperability with other standard setters, notably in Europe with the European Financial Reporting Advisory Group (EFRAG), where the partnership is making it as easy as possible for filers to translate between the standards. 

Capital, like systemic sustainability risks and related opportunities, is global and flows across borders. So, too, must be high-quality and timely sustainability information, such as that proposed for global disclosure under the ISSB’s leadership.

This content represents the views of the author which are provided for informational purposes only and are subject to change without notice.

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Alyson Slater, Head of Sustainable Investment Canada, Public Markets, Manulife Investment Management

Alyson leads sustainable investment and environmental, social, and governance (ESG) activities in Canadian public markets at Manulife Investment Management, which serves institutional, retail and retirement clients across global markets. She supports ESG integration across asset classes, investment stewardship activities with issuers, new sustainability-themed product development, and engages with clients and key stakeholders in Canada and beyond. Alyson brings over 20 years of experience to her role, with expertise in climate risk, sustainable finance, ESG data, inclusive finance, and a wide range of other sustainability issues gained through her work as a senior executive at leading consultancies and international organizations in Europe and Asia. Alyson has specialist knowledge in sustainability reporting and disclosure through her decade as an executive at the Global Reporting Initiative, an international sustainability standard-setting body. She’s currently a member of the Canadian Sustainability Standards Board.  She received her M.A. in Resource Management and Environmental Science from the University of British Columbia; and B.A., Honours, Geography and Environmental Studies, McGill University.