OSC notes increased interest in ESG issues amongst Canadian investors

The Ontario Securities Commission (OSC) recently released its annual list of priorities for its work over the 2017-18 fiscal year. Each year the securities regulator invites comments from market participants on the work it proposes to undertake and other areas of concern.

Earlier this year SHARE commented on the OSC draft Statement of Priorities, emphasizing our hope for improved climate-related disclosure, continuing efforts on board and executive gender diversity, new regulations requiring annual “Say on Pay” votes, and other matters.

A positive note in the OSC’s final Statement of Priorities was that investor responses to the regulator demonstrated “the growing financial relevance to investors of environmental, social and governance (ESG) factors and the need for ESG disclosure by companies.”

The OSC responded that “Companies already have an obligation to disclose material environmental and governance issues,” but acknowledged “the continued importance of disclosures in these areas” and committed to “monitoring developments to assess whether additional or new forms of disclosure are required.” The Canadian Securities Administrators’ current consultation on climate-related financial disclosures, being led by the OSC and the Alberta Securities Commission, is an important contribution to that.

There was also “strong support for continued focus on the Women on Boards and Executive positions initiative,” and the OSC has pledged that it “will consider the need for additional measures if required.” The regulator will review this year’s disclosures from issuers and plans to assess the effectiveness of the “comply or explain” approach adopted three years ago.

The signal to issuers should, by now, be clear: the regulators will consider more forceful approaches if companies don’t voluntarily improve board and executive level gender diversity.

While these signals from the OSC are welcome, the response regarding adoption of Say on Pay regulations was disappointing. The OSC pledged only “to monitor developments in respect of shareholder democracy issues” and to “address these issues through work that is underway as part of our business plans.”

There has been substantial institutional shareholder interest in expanding the use of this important shareholder democracy tool and we have been looking to regulators to assist investors where boards have been unresponsive to those concerns.

So, while “Say on Pay” has not made the cut for the OSC’s latest list of priorities, it will definitely remain on ours.

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