Canada Delays Requirement for Reporting on Financed Emissions

Canada's financial regulator, OSFI, has postponed the requirement for banks and insurance companies to report on financed emissions, shifting the deadline to 2028 instead of 2025. This adjustment aligns with the Canadian Sustainability Standards Board's new guidelines, offering firms extra time to enhance their climate risk management. The delay provides a valuable window for institutions to innovate and strengthen their climate strategies, ensuring they are well-prepared to meet evolving global standards and maintain a competitive edge in the growing sustainable finance market.

The Office of the Superintendent of Financial Institutions (OSFI) in Canada has announced changes to climate-related disclosure requirements for banks and insurance companies. One of the key updates is the postponement of mandatory reporting on emissions associated with credit portfolios and underwriting activities. Originally set to take effect in 2025, reporting on financed emissions (Scope 3) will now be required from the 2028 financial year.

Alignment with Standards and Extended Deadlines

These changes aim to align OSFI’s requirements with the updated standards issued by the Canadian Sustainability Standards Board (CSSB) in December 2024. The CSSB standards are largely in line with those of the International Sustainability Standards Board (ISSB), issued by the IFRS Foundation. However, CSSB has granted Canadian financial institutions a three-year delay, whereas ISSB allowed only a one-year deferral.

Additionally, the reporting timeline for emissions related to off-balance-sheet activities, such as capital market operations, has been adjusted. These requirements will now come into effect from the 2029 financial year.

Updated Requirements under Guideline B-15

OSFI’s disclosure framework is based on Guideline B-15, which outlines expectations for climate risk management, strategic planning, and performance assessment. Initially released in March 2023, the guidelines required large financial institutions to begin climate-related reporting in 2024, with smaller institutions following later.

The updated version of Guideline B-15 maintains a strong focus on reporting greenhouse gas emissions across all three categories but clarifies the approach to assets under management, including both balance sheet and off-balance-sheet components. The revised disclosure indicators will be reflected in the next version of the guideline, which OSFI plans to publish by the end of March 2025.

Strategic Perspectives and Competitive Advantages

The revised climate disclosure timeline allows banks and insurers to refine their climate risk assessment frameworks, improving data integration and methodologies for financed and insured emissions calculations. Institutions that proactively invest in these areas will gain a competitive edge as regulatory expectations evolve. A key advantage lies in optimising risk-weighted asset distribution by incorporating climate scenario analysis into credit and underwriting decisions.

Advancing Climate Stress Testing Models

The updated requirements create opportunities to develop more sophisticated climate stress testing models. Financial institutions that leverage machine learning and advanced analytics will be better positioned to anticipate regulatory shifts and adjust capital buffers accordingly. Those that embed transition risks into their financial models will differentiate themselves in investor and regulatory assessments.

Driving Green Financial Product Innovation

The delay in mandatory reporting provides time to refine green bond frameworks, develop sustainability-linked lending instruments, and integrate climate-adjusted risk pricing models. Firms that align their financing structures with globally recognised taxonomies, such as the EU Green Taxonomy or Canada’s forthcoming sustainable finance classification, will strengthen their position among international investors.

Strengthening ESG Data Infrastructure

Many institutions face challenges in measuring Scope 3 emissions due to fragmented data across value chains. The extended timeline offers an opportunity to establish partnerships with data providers, enhance AI-driven emissions tracking, and explore blockchain-based verification mechanisms. Financial institutions that invest in improving data accuracy and transparency will enhance their long-term reporting capabilities.

Leading in Climate Governance and Disclosure Innovation

As regulatory and investor scrutiny intensifies, financial institutions that take a leadership role in climate governance will strengthen market trust. Establishing independent climate advisory boards, setting science-based net-zero targets, and integrating climate risk into executive remuneration frameworks will reinforce long-term stakeholder confidence. In an environment where sustainable finance is shaping global capital flows, a proactive, data-driven approach to climate disclosure will not only ensure compliance but also drive long-term value creation and market leadership.