Corporate Governance in the Age of Climate Risk: The Rise of ESG Disclosure in Canada

Written by Cole McMullen
JD Candidate 2026 | UCalgary Law
 
In recent years, environmental, social, and governance (ESG) considerations have moved from the periphery of corporate strategy to its core. Nowhere is this more evident than in the evolving regulatory landscape in Canada, where climate-related financial disclosures are fast becoming a cornerstone of corporate governance. As investors, regulators, and the public demand greater accountability from businesses, ESG is no longer a voluntary initiative—it is an imperative.
This blog post explores the growing importance of ESG disclosure in Canada, with a particular focus on climate risk, and considers how startups and growing ventures can align with emerging expectations without being overwhelmed.
 
Climate Risk as Financial Risk
The concept of climate risk has undergone a fundamental transformation. What was once considered a matter of corporate social responsibility is now viewed as a financial issue with direct implications for asset valuation, insurance, and long-term viability. The Bank of Canada and the Office of the Superintendent of Financial Institutions (OSFI) have repeatedly emphasized that climate-related financial risks—both physical and transitional—can pose systemic threats to the stability of the Canadian economy [1].
These risks include the physical consequences of climate change (such as extreme weather events) as well as policy and market shifts associated with the transition to a low-carbon economy. For companies in carbon-intensive industries, failure to adapt may mean diminished access to capital and heightened exposure to legal liability.
 
The Role of Disclosure: From Voluntary to Mandatory
In 2022, the Canadian Securities Administrators (CSA) proposed new climate-related disclosure requirements that closely align with the framework developed by the Task Force on Climate-related Financial Disclosures (TCFD) [2]. These guidelines ask publicly listed companies to disclose information in four key areas: governance, strategy, risk management, and metrics and targets related to climate issues.
While these requirements were initially voluntary, the regulatory tide is turning. The federal government’s 2023 budget announced its intention to work toward standardized ESG disclosure requirements, particularly for federally regulated financial institutions [3]. Meanwhile, the Canadian Sustainability Standards Board (CSSB), launched in 2023, is actively working to adopt and adapt global ESG reporting standards to the Canadian context [4].
This move toward mandatory ESG disclosure reflects a broader recognition that transparency around climate risks is essential for market stability. It also reflects growing investor demand for consistent, comparable, and reliable ESG data.
 
Implications for Startups and SMEs
Though current disclosure mandates are primarily targeted at large public companies, startups and small to medium enterprises (SMEs) are not immune to these changes. As part of supply chains, as recipients of venture or institutional capital, or as future IPO candidates, smaller firms increasingly face pressure to demonstrate ESG awareness.
In particular, venture capital funds are beginning to incorporate ESG metrics into their investment theses. Firms that fail to account for environmental impacts or that lack internal governance policies may find themselves at a disadvantage when seeking funding. This trend has been reinforced by global movements such as the Principles for Responsible Investment (PRI), which count several major Canadian funds among their signatories [5].
For early-stage companies, the key is to adopt scalable ESG frameworks that evolve with growth. Founders should consider setting internal climate-related goals, documenting risk management processes, and communicating their ESG vision to stakeholders—even if formal disclosure is not yet required.
 
A Legal Lens on ESG Governance
The legal implications of ESG governance are expanding. Directors and officers now face fiduciary duties that extend to material climate-related risks, especially as case law and regulatory expectations evolve. In 2023, the Canadian Association of Pension Supervisory Authorities (CAPSA) released guidelines stating that pension fund administrators have a duty to consider climate risk as part of their fiduciary obligations [6].
Although these principles currently apply to pension administrators, the logic applies more broadly. As climate risk becomes increasingly material to long-term financial performance, boards and executives have a legal obligation to inform themselves and act accordingly. Failure to do so could give rise to claims of mismanagement or breach of duty.
 
The Path Ahead: Strategic ESG Integration
As ESG continues to shape the contours of Canadian corporate governance, proactive integration will be a marker of resilient businesses. While startups may not be bound by current disclosure rules, embedding ESG considerations early offers several advantages. It can enhance brand reputation, improve investor relations, and prepare companies for the inevitable tightening of regulatory frameworks.
Moreover, tools and guidance are becoming increasingly accessible. Organizations such as the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB) provide sector-specific disclosure templates, while Canadian think tanks and law societies are beginning to offer training and resources tailored to SMEs.
Ultimately, the integration of ESG is not about compliance alone—it is about building companies that are better equipped to thrive in a complex, climate-conscious world.
 
Conclusion
Canada’s corporate governance landscape is entering a new phase—one where climate risk and sustainability are integral to fiduciary responsibility and strategic direction. Startups and established enterprises alike must respond to this shift with agility and foresight. By treating ESG not as a burden but as a blueprint for innovation and resilience, Canadian businesses can position themselves to lead in the decade ahead.
 
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[1] Office of the Superintendent of Financial Institutions. OSFI's Climate Risk Management Guideline B-15, (2022), online: https://www.osfi-bsif.gc.ca/Eng/fi-if/rg-ro/gdn-ort/gl-ld/Pages/b15.aspx.
[2] Canadian Securities Administrators. Proposed National Instrument 51-107: Disclosure of Climate-related Matters, (2022), online: https://www.securities-administrators.ca/.
[3] Government of Canada. Budget 2023: A Made-in-Canada Plan, (2023), online: https://www.budget.canada.ca/2023/report-rapport.
[4] Canadian Sustainability Standards Board. Mandate and Activities, (2024), online: https://www.frascanada.ca/cssb.
[5] Principles for Responsible Investment. Signatory Directory, online: https://www.unpri.org/signatories/signatory-directory.
[6] Canadian Association of Pension Supervisory Authorities. ESG Considerations in Pension Plan Management, (2023), online: https://www.capsa-acor.org/.