Canadian companies aren’t doing much about the climate crisis. Are they ignoring the science? The regulators? Or the risk of liability?

The science is beyond reasonable doubt. Canada is heating up twice as fast as the global average. The climate we grew up with is gone and cannot return. Nor have we reached a “new normal.” Instead, we are beginning to see the end of “normal.”

If we want a world that is less stable and safe than today, but with manageable transition risks and reasonable food security, we can’t let average temperature rise more than 1.5C. Unless we’re willing to bet our planet on magical, non-existent technology, that means slashing fossil use more than 5 per cent every year.

Instead, Canada is a world Top 10 climate polluter. Investment in clean energy is rising, but banks keep putting billions of dollars into fossil fuels and into the urban sprawl that burns them, ignoring the damage it will cause during the lives of today’s children.

Disclosure of climate risks by Canadian companies “needs improvement” and regulators are taking notice. In 2019:

The Bank of Canada recognized climate change as a key vulnerability in the Canadian financial system.

Canada’s Expert Panel on Climate Risks predicts an 85 per cent chance of damage to infrastructure in the next 20 years, causing billions of dollars in annual costs; averse effects on millions of people, or the death of hundreds; and degradation or loss of thousands of kilometres of land, and/or massive destruction of ecosystems.

The Superintendent of Financial Institutions warned pension funds and insurance companies to better manage their climate risks, including the transition to fewer carbon-linked assets.

The Expert Panel on Sustainable Finance reported there is “intensifying pressure on companies and investors to adopt” the disclosure principles established by the Task Force on Climate-related Financial Disclosures, which are “well on their way to becoming the global benchmark.”

Instead, inadequate disclosure of climate risks is harming financial markets: A reliable, consistent and comparable bottom-up view of climate risk exposure is essential to proper assessment and pricing “particularly [in] Canada, given the severe physical and financial risks associated with our country”s accelerated rate of warming.”

Canadian Securities Administrators issued guidance for Reporting of Climate Change-related Risks by publicly traded companies. Staff Notice 51-358 warns: Climate change-related risks are mainstream business issues even if they are more uncertain, and have a longer time horizon, than other business risks. Climate risk disclosure must now be clear, understandable, and entity-specific, and must consider longer time frames. Boards with little expertise in climate risks must acquire it.

Every Canadian board of directors is therefore now on notice: it must get serious about its climate risks. And many should worry about liability.

The Superintendent of Financial Institutions had good reason to recognize climate liability as “a top concern.” The 1,200 climate-related court cases around the world are having some success.

In 2019, courts blocked billions of dollars of coal projects, including power plants in Kenya, Turkey, and Poland. A German higher court allowed a Peruvian villager to sue a German utility for its 0.5 per cent share of emissions that are melting the glacier that protects his village. Rhode Island won permission to sue Chevron, Shell, BP and others for billions in climate damage.

In Canada, climate liability got a big boost when the Quebec Court of Appeal ordered tobacco companies to pay Quebec smokers $15 billion. The companies had intentionally sold cigarettes without informing consumers of the consequences, actively casting doubt on accurate information. Oil companies have done just the same.

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Tobacco investors have long shrugged off the risk of liability; the day of reckoning never seemed to arrive. The Quebec lawsuit was only one of 20 against Canada”s tobacco companies, yet this single decision made them insolvent. Within two weeks, they were in bankruptcy protection.

Other Canadian boards are fooling themselves if they think this cannot happen to them. Foreseeability is the fundamental moral glue of tort law. Today, foreseeable climate damage is in the tens of trillions of dollars, enormously larger than that of either asbestos or tobacco, and fossil fuel use is the cause. No one can claim ignorance any more.

Dr. Dianne Saxe was the Environmental Commissioner of Ontario and now heads Saxe Facts, providing advice and presentations on climate, energy and environment.

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