SECURITIES REGULATION & IR

                                    
(left to right: David Frost, Partner; Thomas Fung, Associate, and Pedram Gholipour, Articling Student, McCarthy Tétrault, LLP)

Like other jurisdictions across the globe, Canada continues to evolve its corporate governance and disclosure standards. Issuers should be aware of the emerging developments and trends in Canada highlighted below.

Climate-Related Disclosure

Canadian securities regulators have not yet finalized or mandated climate disclosure requirements; however, it is widely expected that they will do so in 2025. On March 13, 2024, the Canadian Securities Administrators issued a public statement signaling support for incorporating the Canadian Sustainability Standards Board’s (CSSB) proposed climate-related disclosure standards into National Instrument 51-107 – Disclosure of Climate-related Matters. Following a stakeholder feedback period, the CSSB announced on October 21, 2024, that its proposed standards are expected to be finalized in December 2024. The Ontario Securities Commission (OSC) also published a document in October 2024 titled Insights on the OSC Staff’s Approach to Sustainable Finance, indicating the OSC’s intent to develop ‘right-sized’ climate-related disclosure requirements for Canadian public corporations as part of its short- to medium-term goals. These initiatives reflect Canada's commitment to aligning with international best practices and ensuring that businesses are prepared to navigate the risks and opportunities presented by climate change. As these regulations take effect, issuers will need to enhance their governance frameworks to comply with the new requirements and maintain investor confidence.

Modern Slavery Legislation

Canada has also taken significant steps to address forced and child labour in supply chains. The Fighting Against Forced Labour and Child Labour in Supply Chains Act (the Supply Chains Act), which came into force on January 1, 2024, mandates that companies report on their efforts to prevent and mitigate the risks of forced and child labour in their supply chains. This legislation requires detailed annual reports from companies outlining the measures they have implemented to combat these issues.

On November 15, 2024, Public Safety Canada (PSC) released a new version of its guidance (the Guidance) on the Supply Chains Act, which contains significant changes to its interpretation of the scope of the reporting obligation and new information on the content and delivery of reports. As businesses prepare for the next round of reporting, it will be critical to thoroughly review the updated Guidance. This analysis will help determine whether a report is needed, ensuring ample time for preparation before the May 31, 2025 filing deadline.

Artificial Intelligence and Technology

The adoption and integration of artificial intelligence (AI) technologies within organizations is a trend that will continue to shape corporate governance and disclosure practices in Canada. As AI becomes more embedded in business operations, there is a growing expectation that companies establish comprehensive risk management frameworks that align with the scale and impact of their AI activities. This involves assessing whether the organization is a developer, implementor or end-user of AI solutions, as each role presents unique risks and concerns. Key governance considerations include delegating responsibility for AI oversight to designated leaders, developing policies to ensure safety, fairness and transparency and implementing protocols for human oversight and performance assessment.

From a disclosure perspective, there is a growing emphasis on transparency about AI strategies and risk management practices. On November 7, 2024, the Canadian Securities Administrators released a staff notice cautioning issuers to avoid overly promotional disclosures for AI, otherwise known as ‘AI Washing’, and emphasized the need for completeness in disclosures. This includes detailing how AI is used and the measures in place to mitigate risk. Issuers can expect additional guidance and expectations for the substance of disclosures to come in the near future.

Finally, if adopted, the much-anticipated Artificial Intelligence and Data Act would provide a framework for a new Canadian regulatory system that could impact Canadian business practices.

Shareholder Activism and Shareholder Meetings

In 2024, the number of shareholder proposals in Canada reached a 10-year record high. Not only are these proposals more frequent, but their rate of shareholder support is the second highest it has been in the last 10 years. This trend reflects a broader push for accountability and responsible corporate behaviour, with environmental and social motivations underlying the majority of shareholder proposals in 2024. Investors have also expressed a clear preference for hybrid shareholder meetings and clear opposition to virtual-only meetings.

Conclusion

Looking ahead to 2025, issuers should become familiar with the new trends and developments noted above and allow themselves sufficient time to ensure that they are in compliance with the latest corporate governance and disclosure standards in Canada.

David Frost is a Partner at McCarthy Tétrault LLP. This article was written by Thomas Fung, Associate and Pedram Gholipour, Articling Student, McCarthy Tétrault, LLP.