Thank you, Mr. Chair and members of the committee.

I am Rosemary McGuire, vice-president of member experience at Chartered Professional Accountants of Canada, known as CPA Canada. I oversee the research team focused on emerging issues in the accounting profession and capital markets. A key area of focus for us is the growing need to account for environmental impacts and for increased transparency around climate-related risks and opportunities.

CPA Canada is one of the most influential accounting organizations in the world. CPA Canada also supports the independent structure of accounting, assurance and sustainability standard-setting in Canada. We have been actively involved in the challenges of climate change for more than three decades, and we are currently an active member of the IFRS Foundation's partnership for capacity building, helping to develop resources to implement international sustainability disclosure standards in Canada and globally.

In my brief remarks, I will address three main points: the evolving expectations around sustainability issues, the importance of standards and third party assurance, and the need for a harmonized approach and policy certainty.

Sustainability is becoming increasingly important for investors and providers of capital. A report by the Bank of Canada and the Office of the Superintendent of Financial Institutions noted that the transition to a low-carbon economy will create opportunities for innovation, investment and potential green growth, but this transition may also lead to economic dislocation and a reassessment of the value of various financial assets.

Confidence in the quality of information is crucial for the integrity of our financial system and efficient capital markets. This need extends beyond financial information to include ESG factors, yet this demand for more transparency is leading to a trust deficit. PwC's 2023 global investor survey found that three-quarters of investors and analysts consider how sustainability is managed to be important to their investment decisions, yet 94% believe that sustainability reporting includes unsupported claims.

That brings me to my second point: the importance of sustainability standards and third party assurance.

We are seeing a push toward a global system for sustainability-related reporting. This began with the creation of the International Sustainability Standards Board, or the ISSB, which aims to develop a global baseline of sustainability disclosure standards for capital markets. The ISSB released its inaugural standards last year, covering general sustainability disclosure requirements and climate-related disclosures. The Canadian Sustainability Standards Board was created shortly thereafter and is expected to finalize standards before the end of the year, tailoring them for the Canadian marketplace.

These new standards aim for better disclosure, not just more of it. The climate disclosure standard will require companies to report on their targets and net-zero commitments, along with information on the anticipated financial impacts.

Materiality is a critical concept in these standards. It recognizes that different sustainability issues affect various industries in unique ways.

Another important concept is proportionality, which allows for adjustments based on the capabilities and circumstances of different companies, and this is vital for the Canadian market, given the large proportion of small and medium-sized entities.

Assurance plays a vital role in enhancing the reliability of ESG and climate-related information. The processes involved are similar to the audits that professional accountants have been conducting for decades.

Sustainability regulation in Canada is evolving rapidly, but concerns have been raised about multiple similar proposals being introduced at the same time. These include securities regulation, the Competition Bureau's new anti-greenwashing legislation, OSFI's guideline on climate risk management, the proposed sustainable finance taxonomy and new federal initiatives.

This may lead to a potentially unnecessary regulatory burden for Canadian companies facing oversight by multiple regulators. There is a need for a harmonized approach.

Education and capacity building are also essential. Standards and regulations that aren't well understood or properly applied won't be very effective.

I have only just skimmed the surface of this very complex and evolving subject, but I would be pleased to elaborate and I look forward to your questions.

Thank you.

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