Canadian and U.S. climate-change disclosure update: final CSSB standards and SEC rules

On December 18, 2024, the Canadian Sustainability Standards Board (CSSB) published the final versions of its General Requirements for Disclosure of Sustainability-related Financial Information (CSDS 1) and its Climate-related Disclosure Standards (CSDS 2). The finalized standards include limited changes to reflect comments received as part of the CSSB’s consultation process on the exposure drafts previously published on March 13, 2024. As detailed in our bulletin last year, the CSSB standards largely adopt the International Sustainability Standards Board (ISSB) standards with minor modifications made for the Canadian market. The finalized standards are in effect as of January 1, 2025; however, they remain voluntary for all Canadian companies unless adopted by the Canadian Securities Administrators (CSA) or if otherwise mandated by Canadian legislation or accounting or regulatory requirements¹.

On January 20, 2025, Donald Trump will be inaugurated as the 47^th President of the United States, and it is expected that the incoming administration will mark a stark shift in the United States’ stance on climate from that of the Biden administration. The U.S. Securities and Exchange Commission’s (SEC’s) final rules on climate disclosure (the Final Rules) were voluntarily stayed in April 2024 due to pending litigation. The ultimate outcome of the Final Rules is uncertain; however, they are unlikely to be brought into force under the Trump administration in their current form, if at all.

What you need to know

• The CSSB standards are effective as of January 1, 2025. The standards are effective for reporting periods that start on or after January 1, 2025; however, disclosure pursuant to CSDS 1 during the first two years of application can be limited to climate-related risks and opportunities in accordance with CSDS 2 instead of the broader sustainability disclosure contemplated by CSDS 1.
• Revisions to key relief periods. In light of the feedback received by the CSSB on its exposure drafts, the final standards extend the length and scope of certain transition periods under both CSDS 1 and CSDS 2.
• The standards are currently voluntary. The new CSSB standards remain voluntary until adopted by the CSA or until otherwise mandated by Canadian legislation, or accounting or regulatory requirements. However, upon the release of the finalized standards, the CSA provided a market update confirming that it is continuing to work towards a revised climate disclosure rule that will consider the CSSB standards with any modifications considered appropriate by regulators. The CSA also anticipates consulting on the potential liability associated with the rule².
• The SEC’s Final Rules may be indefinitely suspended. The SEC’s final rules on climate disclosure were adopted on March 6, 2024, but were voluntarily stayed on April 4, 2024 in order to address legal proceedings brought against the legislation. While Trump has not overtly commented on the future of the rules, the reversal of climate-focused policy and disclosure was discussed during his campaign and is expected to have an impact.

Final CSSB standards

The final CSSB standards are an important step towards harmonized climate disclosures in the Canadian market. The revisions made between the draft exposure standards and the final standards are relatively minor and focus on extending the length and scope of certain transition periods. As discussed in our prior bulletin, the CSSB standards are generally consistent with the ISSB standards. The main changes between the draft exposure standards and the final standards are as follows:

• Scope 3 emissions relief period extended. The final CSDS 2 extends the relief period for the disclosure of scope 3 emissions from two years to three years.
• Climate scenario analysis. The final CSDS 2 also implements new relief from the quantitative climate-related scenario analysis requirements for a period of three years. However, this relief does not apply to qualitative disclosure of climate-related scenario analysis.
• Publication of sustainability disclosure and financial statements. The final standards provide new relief from the publication timing requirements of CSDS 1. In the first year, companies are generally permitted to publish sustainability-related financial disclosures at the same time as its second quarter financial report. In the subsequent two years, sustainability disclosures must be published within six months of the end of the annual reporting period.

SEC Final Rules

One month after the final rules on climate disclosure were adopted by the SEC, they were voluntarily stayed in order to facilitate the orderly resolution of legal proceedings that were brought against the legislation. The claims brought against the legislation included that the rules exceeded the SEC’s statutory powers and that they do not accord with the law. With the additional overlay of the Trump administration entering the White House, there is a high likelihood that the existence of the climate-related legislation vanishes altogether from the American landscape.

Next steps

Although the short-term progression towards mandatory climate-related disclosures in both Canada and the U.S. remains uncertain, Canadian companies should review the CSSB standards and consider how climate-related risks and opportunities are being contemplated within their organization, and how, in the long-term, they will prepare to meet all the requirements outlined in the CSSB standards.