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LEEFF and Climate Disclosure: What Companies Need to Know

Earlier this month, the Canadian federal government announced its latest round of COVID-19 stimulus for large corporations through the Large Employer Emergency Financing Facility (LEEFF). The LEEFF program is designed to provide short-term liquidity assistance to large Canadian employers. Eligible companies will receive interest-bearing loans that will act as bridge financing to help preserve employment, operations and investment activities until they are able to access traditional market financing. The conditions for eligibility include being a large Canadian employer who:

  • Has significant operations in Canada or supports a significant workforce in Canada

  • Has annual revenues of approximately $300 million or more

  • Seeks a loan of at least $60 million

Large for-profit businesses (in all sectors except the financial sector), as well as certain not-for-profit businesses that meet the conditions outlined above, will be able to apply for the financing. A noteworthy part of this announcement is the requirement for recipients to report in alignment with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), including how future operations will support environmental sustainability and Canada’s climate change goals under the Paris Agreement.


Climate Disclosure: TCFD as the “Gold Standard”

Considering the global pandemic, many are questioning whether climate change will continue to be a pressing issue for investors and companies. As outlined in our article, COVID-19: Sharpening the Focus on ESG, these issues are likely to grow in importance given the parallels between the impacts of climate change and COVID-19. Requiring climate disclosure as a condition of obtaining financing under LEEFF demonstrates that climate change will remain a key priority for the public sector throughout the recovery.


Further to this, a Task Force for a Resilient Recovery has been assembled to offer advice to Canadian governments on building a clean and resilient economic recovery. The Task Force is made up of 14 Canadian finance, policy and sustainability leaders. Their mandate is to develop actionable recommendations for Canadian governments to support recovery efforts, while also building a low-carbon and resilient economy.


It is important that companies and investors understand the material climate-related risks and opportunities that could impact their business performance, value and longer-term strategy. The TCFD recommendations were born out of a market need for enhanced climate-related financial disclosure when it became clear that markets were not adequately pricing in climate-related risks. The TCFD recommendations seek to improve the quality and consistency of disclosure of climate-related information provided by corporations to financial stakeholders, including investors, lenders and insurers.


Since their inception in 2017, the TCFD recommendations have been endorsed by a growing list of institutional investors representing over $138 trillion in assets under management. Investors are encouraging portfolio companies to report in alignment with the TCFD framework in order to assess their own exposure to climate-related risks and opportunities, and to disclose to their own clients. The TCFD recommendations have become the de facto gold standard for climate-related disclosure, with several leading sustainability reporting frameworks (including the Sustainability Accounting Standards Board (SASB), the CDP and the Global Reporting Initiative (GRI) Standards) aligning with the TCFD framework.

The push for enhanced climate-related financial disclosure is intensifying globally, and the Canadian market is no exception. The Bank of Canada’s incoming governor, Tiff Macklem, was the Chair of the federal government’s Expert Panel on Sustainable Finance (Expert Panel), which recommended that Canada define and pursue an approach to implementing the TCFD recommendations that is fit-for-purpose for our natural resource-based economy. It also recommended that Finance Canada endorse a "comply or explain" approach to TCFD adoption. In May 2020, the Bank of Canada issued a discussion paper with findings that model the economic and financial risks from climate change based on a number of different plausible climate scenarios. The paper indicated that in all climate change scenarios, Canada’s economy faces significant potential risks and opportunities.


As a result, the TCFD recommendations will be important for all companies in the long-term, even if a company isn’t seeking LEEFF financing.


What Does This Mean for Companies Seeking LEEFF Funds?

While the federal government has not yet provided details on the implementation timeline for TCFD disclosure by LEEFF recipients, a useful starting point is the recommendations of the Expert Panel, which outlined a two-phase implementation approach and a timeline that distinguishes between larger and smaller companies. These timelines are summarized in the table below:

Source: Final Report of the Expert Panel on Sustainable Finance


Overall, this means that companies need to get started on TCFD implementation, recognizing that full adoption is a multi-year journey. Investors recognize the challenges to implementing the more quantitative elements of the TCFD framework as they themselves seek to report in alignment with the recommendations. As a result, companies should focus on progress over perfection, particularly in their first year TCFD reports.


How Should Companies Get Started?

The TCFD’s 2019 Status Report reveals that many companies disclose climate-related information, however only 25% of companies globally disclosed information aligned with more than five of the TCFD’s 11 recommended disclosures. The percentage of companies that provide TCFD-aligned disclosures is not greater than 50% for any of the specific recommendations. These statistics indicate that there is progress to be made on climate-related financial disclosure.


We offer three pieces of advice to companies getting started on implementing the TCFD framework:

  1. Start with Governance and Risk Management categories – The TCFD recommendations suggest that all companies should report on their processes for identifying, assessing, managing and overseeing climate-related risks and opportunities. This includes disclosure on the role of the board and senior management. These qualitative disclosures are relatively straightforward to provide, and they are viewed as a valuable starting point by investors, given good governance is foundational to effective oversight and risk management.

  2. Work on building out the recommendations relating to Strategy and Metrics & Targets categories – The TCFD recommendations include aspects that will require more sophisticated data and enhanced analytical capacity to implement, such as climate metrics, targets and scenario analysis. For companies just getting started, focus on the qualitative elements of these disclosure categories, such as the climate-related risks and opportunities identified over the short, medium and long term. In addition, disclosure of Scope 1 & 2 greenhouse gas (GHG) emissions is a valuable starting point for climate-related metrics. A recent CPA Canada study found that over 80% of leading Canadian public companies already disclose GHG emissions in voluntary reports.

  3. TCFD reporting is an output of a strategic internal assessment – The LEEFF announcement indicated that recipients will need to explain how their future operations will support Canada’s climate change goals. However, it is important to remember that reporting is the output not the objective. Reporting in alignment with the TCFD recommendations should be a catalyst for important internal discussions on the company’s business model, brand and strategic positioning.

Climate-related financial disclosure aligned with the TCFD recommendations is not only a requirement of LEEFF financing, it is also a growing expectation from institutional investors and may very well become mandatory reporting in the future. Companies who get started on implementing the TCFD recommendations now will be well positioned to meet evolving investor needs and comply with future reporting requirements.


If your company is seeking support with its climate change strategy and TCFD reporting, contact us to learn more about our ESG and climate change advisory services.

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