Lost in the news cycle about the Alberta-Canada MOU in the past days was a legislative move by the Alberta government to reduce investor accountability for Alberta-based companies accused of greenwashing.
Most of the greenwashing debate in Canada lately has centred on federal competition law and the effort – now reversed under Prime Minister Carney – to strengthen that law.
Yet, as provincial securities regulators have repeatedly stated, provincial securities law already prohibits listed companies from stretching the truth about anything, including their environmental performance, when that information is material to investors. “Material” in this instance means something that could influence an investment decision, and climate-related disclosures figure prominently in such decisions for investors in companies whose profits are deeply entwined with emissions and the energy transition, like Alberta oil and gas companies.
The problem is that, unlike in other countries, those same provincial securities regulators have been slow to engage in enforcement actions to check greenwashing in Canadian corporate disclosures, essentially ceding the field to the federal Competition Bureau. This is why changes to the federal Competition Act generated so much attention and controversy, because companies perceive that to be the more meaningful regulatory regime for greenwashing, with provincial securities regulators seemingly stuck on the couch.
Our organization has been working to change this. Last year we filed a complaint with the Ontario and Quebec securities regulators asking for enforcement regarding the misleading “sustainable finance” disclosures of Canada’s major banks. The banks had been claiming that their ESG-related business lines were part of their net zero plans, without providing any evidence of impact. Worse, they were including specific deals that actually increased emissions.
More recently, we filed a complaint with the Alberta Securities Commission (ASC) that was likely the inspiration for the Alberta Government’s legislative change. We asked the ASC for enforcement action to remedy the climate disclosures of Cenovus and Enbridge, although these companies are emblematic of similar problems with many oil and gas company disclosures. Claims of alignment with net zero while significantly expanding fossil fuel production and transmission – thereby increasing exposure to transition risk as the global energy transition accelerates – amount to greenwashing and are highly material to investors.
Unfortunately, sending complaints to securities regulators in Canada feels like dealing with spy agencies, in that they are black boxes. Our experience is they usually, although not always, acknowledge receipt, and then will neither confirm nor deny they are looking into things. Action is entirely at their discretion, and there is no report back nor public record unless things end up in court. This stands in stark contrast to other jurisdictions like Australia where its securities regulator publishes a regular report on its anti-greenwashing activities.
For this reason we were surprised to see provisions in Alberta’s Bill 12 to enable the government to pass regulations reducing accountability for “climate-related” disclosures by Alberta-listed companies given the ASC’s already lax performance in this regard. And, this would be the first instance of a province moving to reduce investor accountability specifically with regards to climate claims.
This reflex to supposedly protect Alberta polluters against investor accountability was also on display during the emission cap debate when the Alberta government threatened to take over emissions reporting and make it proprietary, only releasing aggregate data instead of company-specific data. While this has not happened, it demonstrates the willingness to deny investors the climate-related information they need to make informed decisions.
Ultimately, this is harming rather than helping Alberta’s investment environment. The way that investors manage risk is first to seek transparency so they have accurate information to inform their decisions. If they feel like they are in the dark, or worse, being misled, they will pull back and go elsewhere. The solution is more, rather than less, information, and robust enforcement by the ASC of truth-telling in corporate disclosures so that investors trust what they hear.
Bill 12’s proposed securities law changes are wrong-headed. “Make greenwashing great again” may be a rallying cry in certain circles, but it will not fly on Bay St. If Alberta wants to continue to attract investment, it will reverse course.
