Dear Canadian Securities Administrators:
Please find attached a new York University study regarding the sensitivity of Canadian corporate bond coupon rates to greenhouse gas emissions. In general, it finds little correlation at the issuer level. Rather, there is only correlation when comparing emissions between sectors. The study concludes:
Taken together, the results suggest that environmental risks are not yet directly priced
through firm-level carbon emissions in the Canadian bond market.
In its Implications for Policymakers section, the study highlights the need for stronger and more standardized climate disclosure frameworks and measures to help investors “better differentiate between firms with high transition risks and those actively reducing their emissions.”
We note that it is the role of provincial securities regulators to advance such measures in Canada to foster fair and efficient capital markets and to reduce systemic risk to the system and maintain confidence. These mandates are compromised by current disclosure gaps and deficiencies.
The Canadian Securities Administrators (CSA) has recognized this role via several staff notices, dating back to 2010. But, we are yet to see either progress by provincial securities regulators on disclosure measures required to manage climate risk in Canadian securities, nor on policing widespread misleading issuer disclosure regarding emissions management. To elaborate:
- In April 2025, the CSA “paused” its development of a mandatory climate-related disclosure rule that would have furnished Canadian investors with more reliable issuer-level emissions data. This leaves a patchwork of voluntary disclosures of varying quality for investors to muddle through, thereby unable to reliably assess climate risk at the issuer level.
- Despite expressing concern regarding greenwashing via staff notices, Canada’s securities regulators have not actively policed misleading issuer disclosures related to emissions management and “net zero,” ceding the field, unhelpfully, to federal competition/consumer protection law anti-greenwashing initiatives. For example, the Alberta Securities Commission recently refused to investigate our complaint regarding oil and gas issuer “net zero” claims despite widespread market confusion regarding the status and credibility of such claims.
This inaction coincides with both rising physical and transition risk, evidenced by insurance market disruptions and falling global battery and renewables costs. Many Canadian issuers stand at the forefront of these risks, yet market participants are being deprived of adequate and accurate disclosure upon which to base their investment decisions.
Inadequate disclosure of climate-related risks can leave the bond market exposed to systemic vulnerabilities with investors unable to reliably price transition risk. This may result in an over-allocation of capital to higher-emitting firms and creates the potential for abrupt shocks across the corporate bond market when climate-related risks materialize. These risks are economy-wide, with banks, insurers, and pension funds all holding sizable bond portfolios.
International peers provide useful models. The UK Financial Conduct Authority mandates TCFD-aligned climate disclosures and is consulting on more rigorous standards aligned with the IFRS; it also provides guidance on best practices for corporate transition plans. The European Securities and Markets Authority requires disclosure of all material scopes of emissions, and adherence to standardized climate reporting frameworks.
We therefore call on the CSA and its members to uphold their mandates by proceeding with mandatory climate-related disclosure and policing greenwashing by Canadian issuers. We look forward to your reply.
Yours sincerely,
Matt Price
Executive Director
