Barbara Hendrickson BAX SECURITIES LAW June 1st, 2018 Environment & Financial Markets CBA Environmental, Energy & Resources Law Summit Barbara Hendrickson BAX SECURITIES LAW June 1st, 2018 03/12/2018

BAX Securities Regulation of Environmental Disclosure Public companies are subject to a myriad of legislation respecting disclosure in their public filings based largely on a materiality test They are required to disclose information material to investor decision-making, including material environmental issues including risks related to climate change.  This disclosure must be made in financial statements, annual information forms (AIF), management's discussion and analysis (MD&A), and information circulars, material change reports etc. Public companies also face shareholder resolutions requesting disclosure of the risks related to the effect of climate change on their operations. BAX Securities Regulation of Environmental Disclosure 03/12/2018

On March 21, 2017, the Canadian Securities Administrators (“CSA”) announced a project to: review the disclosure of risks and financial impacts to issuers associated with climate change, and the governance processes related to them (the “Project”). BAX CSA Notice 51-354 03/12/2018

BAX CSA Notice 51-354 The Project was focused on: climate change-related risks and opportunities that impact an issuer and its business, as opposed to the impact an issuer has or may have on climate change. BAX CSA Notice 51-354 03/12/2018

BAX CSA Notice 51-354 The objectives of the Project were: to assess whether current securities legislation and guidance are sufficient for issuers to determine what climate change-related disclosures they should provide; to better understand what climate change-related information investors need in order to make informed voting and investment decisions, and to see whether or not issuers are providing appropriate disclosures BAX CSA Notice 51-354 03/12/2018

CSA staff consulted with investors to understand their disclosure needs, whether those needs were being met by issuers and suggestions for improvement. Staff consulted with issuers with respect to the challenges involved in identifying climate change- related risks and opportunities, quantifying impacts, and preparing meaningful disclosure of material information. BAX CSA Notice 51-354 03/12/2018

On April 5, 2018, the Canadian Securities Administrators (CSA) published CSA Staff Notice 51-354 Report on Climate change-related Disclosure Project (“Staff Notice”). The Staff Notice follows on earlier guidance published in CSA Staff Notice 51-333 Environmental Reporting Guidance published on October 27, 2010 BAX CSA Staff Notice 51-354 03/12/2018

BAX CSA Staff Notice 51-354 The Staff Notice summarizes: The results of the CSA's review of the disclosure by reporting issuers of the risks, Financial impacts associated with climate change, and Plans for future work. BAX CSA Staff Notice 51-354 03/12/2018

BAX CSA Staff Notice 51-354 The CSA reported that: There was room “room for improvement” in the disclosure but no “corrective action” was taken and noted a “variation” in disclosure. Investors were generally dissatisfied with the state of climate change related disclosure, some suggested additional guidance and education others required that new disclosure standards should be imposed. BAX CSA Staff Notice 51-354 03/12/2018

BAX CSA Staff Notice 51-354 The CSA reported that: All Investors believed that issuers who were affected by climate change risk were not reporting appropriate risk related disclosure. Investors differed on whether issuers should disclose GHG gases and /or scenario analysis in their regulatory filings BAX CSA Staff Notice 51-354 03/12/2018

BAX CSA Staff Notice 51-354 The CSA reported that: Issuers expressed concerns about mandatory disclosure citing regulatory burden. They also pointed out that climate change risks may be over emphasized compared to other risks if mandatory disclosure was imposed. Preferred the application of the materiality test and voluntary disclosure of non material information. BAX CSA Staff Notice 51-354 03/12/2018

The CSA highlighted the following climate change risks and impacts: Physical –changing weather patterns; water availability & quality resulting in asset write offs, capital expenditures, increased costs and reduced revenues. Regulatory- current and changing regulations causing increased costs, capital expenditures, reduced revenues, asset valuations, early retirement or write offs. BAX CSA Staff Notice 51-354 03/12/2018

The CSA highlighted the following climate change risks and impacts: Reputational – employees and investors attitudes and regulatory violations – resulting in asset write offs, increased costs and reduced revenues. Business Model – changes in demands for products/ services, renewable energy and energy efficient products resulting in lower revenues, increased costs, higher cost of capital/ limited access to capital and asset write offs. BAX CSA Staff Notice 51-354 03/12/2018

BAX CSA Notice 51-354 CSA plans for future work include: Developing guidance and educational initiatives with respect to the business risks and opportunities and potential financial impacts of climate change. Considering new disclosure requirements regarding corporate governance in relation to climate change-related risks and risk oversight and management. BAX CSA Notice 51-354 03/12/2018

BAX CSA Notice 51-354 The CSA future plans also include: Monitoring the quality of issuers’ disclosure and the evolution of best disclosure practices. Determining whether investors require additional types of climate change-related disclosure to make investment and voting decisions. BAX CSA Notice 51-354 03/12/2018

BAX Securities Disclosure Rules  Requirements for disclosure on environmental matters are found in: NI 51-102 Continuous Disclosure Obligations NI 58-101 Disclosure of Corporate Governance Practices NI 52-110 Audit Committees NI 52-019 Certification of Disclosure in Issuers’ Annual and Interim Filings NP 58-201 Corporate Governance Guidelines BAX Securities Disclosure Rules 03/12/2018

BAX Environmental Disclosure Standards  Task Force on Climate Related Financial Disclosures (“TCFD”) Recommendations: Arose out of COP 21 in Paris, creation of a task force to develop a set of recommendations for voluntary and consistent climate related financial risk in public company filings. Purpose to provide better information to investors, insurers, lenders and other stakeholders. Released its recommendations in March of this year. BAX Environmental Disclosure Standards 03/12/2018

BAX Environmental Disclosure Standards  International Integrated Reporting Framework published by the International Integrated Reporting Council ("IR Framework”) (2013): Focused on adopting ‘integrated thinking’ as a way of improves the quality of information to investors enable a more efficient and productive allocation of capital. Released following extensive consultation  including 140 businesses and investors from 26 countries. BAX Environmental Disclosure Standards 03/12/2018

BAX Environmental Disclosure Standards Global Standards for Sustainability Reporting published by the Global Reporting Initiative (”GRI Framework”): GRI is an independent international organization that has pioneered sustainability reporting since 1997.  GRI helps businesses and governments worldwide understand and communicate their impact on critical sustainability issues such as climate change, human rights, governance and social well-being.  The first and most widely adopted global standards for sustainability reporting.  BAX Environmental Disclosure Standards 03/12/2018

BAX Environmental Disclosure Standards Climate Risk Technical Bulletin (”SASB Framework”) published by the Sustainability Accounting Standards Board (“SASB”) in 2017: SASB is an independent, private-sector standards setting organization based in California dedicated to enhancing the efficiency of the capital markets by fostering high-quality disclosure of material sustainability information that meets investor needs. The SASB adopted in 79 countries. BAX Environmental Disclosure Standards 03/12/2018

BAX Environmental Disclosure Standards CPA State of Play: Study of Climate Related Disclosures by Canadian Public Companies (2017): Reviewed climate-related disclosures of public companies in their securities filings. Found broad disclosure of climate-related information, but also found a gap between investor information needs and current corporate reporting practices. BAX Environmental Disclosure Standards 03/12/2018

BAX Environmental Disclosure Standards Carbon Disclosure Project (“CPD”) project based in the UK which supports environmental reporting and risk management since 2002: Works with over 6000 corporations, 550cities and 100 states to ensure that an effective carbon emission reductions are integral to operations. Supported by 800 institutional investors with US$100 trillion in assets. Self reporting of environmental data including carbon emissions. BAX Environmental Disclosure Standards 03/12/2018

BAX Environmental Disclosure Standards Climate Disclosure Standards Board (“CDSB”) is an international consortium of business and environmental NGOs: Offers companies a framework for reporting financial information to provide investors with decision-useful environmental information. Aims to contribute to more sustainable economic, social and environmental systems. BAX Environmental Disclosure Standards 03/12/2018

Barbara Hendrickson BAX Securities Law Suite 300 155 University Avenue Toronto Ontario M5H 3B7 Tel: 416.601.1004 Cell: 647.403.4606 bhendrickson@baxsecuritieslaw.com www.baxsecuritieslaw.com LinkedIn :  www.linkedin.com/in/ Twitter:  https://twitter.com/BAXhendrickson BAX Contact Information 03/12/2018