As disruption of global weather patterns worsens, it is becoming increasingly imperative that regulatory bodies ensure corporations behave responsibly and comply with the ESG guidelines designed to take the world to net-zero.
With respect to corporate governance, responsible citizenship demands firms respect emissions-reduction targets and avoid "greenwashing" which undermines both public and investor confidence.
One independent body attempting to foster compliance integrity is FAIR Canada, a public advocacy organization led by its CEO and executive director, Jean-Paul Bureaud.
"Our mission is to champion the rights of individual investors in Canada through advocacy, education and regulatory advancements. As a public policy advocate, we act as a catalyst to bring about positive changes to the regulatory framework that better protect investors," Bureaud said in an interview with SustainableBiz.
FAIR Canada's history and goals
Established in 2008, FAIR Canada sees itself as a champion of individual investor rights by serving as a catalyst to bring about positive changes to the regulatory framework that will better protect investors.
In keeping with the overall scope of its mission, the organization is pushing provincial securities commissions to ensure corporations provide accurate emissions reporting and otherwise adhere to greenhouse gas targets.
"FAIR Canada can help promote the development of new sustainability-related reporting standards and changes to the regulatory framework to require compliance with such standards . . . We urge governments and regulators to develop high standards when it comes to sustainability reporting," Bureaud added.
"We promote good governance practices and seek to foster a culture of compliance through our public advocacy and communications efforts . . . This includes making public submissions recommending that securities regulators work with the International Sustainability Standards Board (ISSB) to develop globally accepted standards for sustainability reporting that all firms should follow."
Bureaud's road to FAIR Canada
Bureaud is well-equipped to monitor the compliance landscape. A lawyer who began his career in securities law, he subsequently spent 20 years at the Ontario Securities Commission where he played a leading role in setting policy guidelines.
Prior to taking the helm at FAIR Canada, Bureaud served at the World Bank Group as an advisor to countries seeking to enhance their securities regulatory regimes.
His understanding of the inner workings of provincial securities commissions also gives him insight into their limitations and how their regulatory activities should be supplemented by ancillary oversight bodies to promote corporate emissions transparency and responsibility.
Bureaud believes Canada has to follow the lead of the ISSB as part of the effort to establish reporting standards that will result in a high-quality, comprehensive global baseline of sustainability disclosures.
"We have also supported the establishment of the Canadian Sustainability Standards Board (CSSB) to support the uptake of ISSB standards in Canada, highlight key issues for the Canadian context, and facilitate interoperability between ISSB standards and any forthcoming CSSB standards," he said.
Enforcing corporate environmental responsibility
The past decade has seen a growing wave of public pressure on pension funds and other institutional investors to adopt environmentally friendly strategies when it comes to their investment portfolios.
Many institutional shareholders and lenders are now insisting corporations adhere to the highest ESG standards which in turn has led companies to outline lofty emissions targets to satisfy such requirements.
"Companies that fail to meaningfully address ESG with actionable strategies and clear reporting will face increased challenges accessing funding," Doron Telem, national leader for ESG at KPMG in Canada, said in a Feb. 13 story published in The Globe and Mail.
"Part of what’s driving this shift is that Canada’s biggest lenders and investors are adopting well-defined ESG mandates and targets, and the compensation of their executives is increasingly tied to delivering on them."
Implications of BCSC's Compliance Report Card
Apart from FAIR Canada's determination to help enforce corporate integrity in sustainability reporting, the Ontario-based organization is also broadly focused on protecting individual investors.
In May, the British Columbia Securities Commission (BCSC) released its 2022 Compliance Report Card that "found significant failures of compliance that resulted . . . referral to our Enforcement branch."
In this instance, the "compliance" the report refers to questions the integrity of investor advice being provided by B.C.-based portfolio managers, investment fund managers and exempt market dealers.
Although the specific issue of ESG compliance was not addressed, the implications of the report suggest investors need to be wary of financial advisors with potential conflicts of interest when it comes to portfolio recommendations. In the case of ESG governance, financial advisors and fund managers require close inspection by regulatory bodies, especially if corporations are to be discouraged from greenwashing and other dubious practices.
"Our goal is to foster a culture of compliance among market participants," the BCSC report states. "Where we find serious, systemic or repeat compliance failures or dishonest conduct, we will take decisive action."
"The latest compliance report card issued by the British Columbia Securities Commission is raising the same investor protection concerns found in other reviews," Bureaud said. "Several B.C.-based (portfolio and fund managers) failed to live up to some of the minimum standards required of them.
"For example, failing to identify and disclose material conflicts of interests to clients . . . Conflict-of-interest provisions were designed to ensure (that) advisors put their clients' interest first and to protect investors. (Conflict-of-interest provisions) only work if firms comply with them."