Canadian pension funds advocate for stronger DE&I disclosure rules

Canadian investors have expressed their backing for more robust diversity, equity, and inclusion (DE&I) disclosure rules put forth by the Canadian Securities Administrators (CSA) in response to a consultation that concluded on September 29.

The consultation, initiated in April, aimed to encourage "meaningful disclosure" from issuers by proposing amendments to corporate governance disclosure requirements, as well as policies related to director nominations, board renewal, and diversity.

The CSA extended the comment period from July to September following feedback from stakeholders who sought additional time to assess the proposals.

The CSA presented two distinct approaches in its proposal. The first, known as Form A, suggested that issuers disclose their approach to diversity concerning board members and executive officers, with a focus on women. This approach allowed flexibility for issuers in addressing diversity.

The second approach, Form B, mandated reporting on the representation of five designated groups: women, Indigenous peoples, individuals from ethnic minority backgrounds, persons with disabilities, and LGBTQ+ individuals in board and executive officer roles. Both approaches operated on a "comply or explain" basis.

Supporters of Form B included Alberta Investment Management Corporation (AIMco), the Caisse de dépôt et placement du Québec (CDPQ), OMERS, Ontario Teachers' Pension Plan (OTPP), the University Pension Plan (UPP), and British Columbia Investment Management Corp. (BCI), along with organizations like the International Corporate Governance Network (ICGN) and the Shareholder Association for Research and Education (SHARE).

AIMco stated that Form B aligned better with “with investors’ needs for clear, comprehensive, standardised and comparable information” regarding the representation of women and historically underrepresented groups in leadership positions.

Others echoed this sentiment, emphasizing that Form A allowed too much discretion for issuers and did not ensure comprehensive disclosures. CDPQ pointed out that the flexibility provided by the first option might “limit, or even eliminate, the possibility for investors to analyse, consolidate and compare the data disclosed.”

CPP Investments and Norges Bank Investment Management (NBIM), however, favored the less stringent disclosure requirements presented in Form A.

CPP Investments argued that Form A's flexibility aligned with the International Sustainability Standards Board's approach, offering a baseline while leaving materiality assessments to issuers. It further mentioned that the extent of diversity in Canada is “not fully captured” by the suggested list of designated groups in Form B, and this could lead to the collection and public disclosure of data that is “not widely or meaningfully” utilized by investors.  

NBIM, while recognizing the benefits of Form B for enhanced comparability, pointed out that Form A allowed flexibility for preparers in determining and disclosing their diversity approach. It noted that Form B's designated groups might not align with diversity disclosures in other markets.

The CSA's comment period concluded as the UK's Financial Conduct Authority initiated its consultation on more comprehensive DE&I disclosures, expanding beyond gender and ethnicity reporting.