With the tenth-largest GDP in the world, Canada’s decisions have global implications. In 2023, Canada took a bold step forward by establishing climate-related risk management and disclosure requirements for financial institutions.
Canada’s Climate Risk Management Guideline requires major banks and insurance companies in the country to report on a range of sustainability issues, from governance, strategy, and risk management to metrics and targets — including scope 1, 2, and 3 emissions. The guideline follows the global framework created by the Task Force on Climate-related Financial Risk Disclosure (TCFD), and its adoption sent a strong message: Climate risk is financial risk, and the impact of climate change on the Canadian financial system represents a systemic risk.
Below, we break down Canada’s Climate Risk Management Guideline for financial institutions — why it was adopted, what it requires, and how companies can prepare for reporting.
What is Canada's Climate Risk Management Guideline?
The guideline governs how the financial sector manages and discloses climate risks.
The Canadian Office of the Superintendent of Financial Institutions (OSFI) created Guideline B-15: Climate Risk Management to govern the means and methods by which the financial sector in Canada is required to manage and disclose climate-related risk.
The guideline was created to ensure that financial institutions in Canada are prepared for both the “physical risks” (e.g., an increased frequency of extreme weather events) and “transition risks” (e.g., financial risks due to changing government regulations) associated with climate change. See here for a full primer on the difference between physical and transition risks.
What entities does Canada’s guideline cover?
The guideline applies to banks and insurers in Canada.
The Climate Risk Management guideline applies to federally regulated financial institutions (FRFIs) in Canada. Two core types of institutions comprise FRFIs: banks and insurers. OSFI subdivides each of those two groups by size and importance, leading to four categories:
- Domestic Systemically Important Banks (D-SIBs): This category includes the largest banks, including Bank of Montreal, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, National Bank of Canada, Royal Bank of Canada, and Toronto-Dominion Bank
- Small and Medium-Sized Deposit-Taking Institutions (SMSBs): Smaller banks considered less critical to the health of the Canadian financial system
- Internationally Active Insurance Groups (IAIGs) headquartered in Canada: A narrow group of large insurers, including Sun Life Assurance Company of Canada, Manufacturers Life Insurance Company, Canada Life Assurance Company, and Intact Financial Corporation
- All Other Federally Regulated Insurers: All federally regulated insurers that do not fit into the “IAIGs headquartered in Canada” group. This includes Canadian branches of foreign insurers
What does this mean for Canadian financial institutions?
Banks and insurers must monitor and disclose climate-related financial risks.
The guidelines will directly impact hundreds of financial institutions in Canada, requiring them to (1) establish governance and risk management processes to identify, monitor, and respond to the physical and transition risks associated with climate change, (2) incorporate that information into their strategy, scenario analysis and stress testing processes, and capital and liquidity adequacy analyses, and (3) provide disclosures about their climate-related financial risks.
What do organizations have to report?
Financial institutions must disclose scope 1, 2, and 3 emissions.
As part of their disclosure of climate-related risks, FRFIs in Canada will have to report their scope 1, 2, and 3 GHG emissions. The guideline assumes the use of the GHG Protocol Corporate Standard, Corporate Value Chain (Scope 3) Accounting and Reporting Standard, and the Partnership for Carbon Accounting Financials (PCAF) standards. If an entity uses a different reporting standard, it must disclose how that standard compares.
Reporting entities will not only have to disclose their own emissions, but also the emissions of the companies they finance or insure. Just as climate change has global financial impacts, the Canadian guidelines will also have global impacts: financial institutions based in Canada will soon be asking for emissions data from counterparties around the world.
The expectations for scope 3 specifically include the disclosure of financed, facilitated, and insured emissions. Below is a summary of the implementation timeline for GHG emissions disclosure requirements.
What is the implementation timeline for Canada's B-15 Guideline?
Scope 3 and industry-based metrics are now due in 2028.
In 2025, OFSI updated the disclosure timeline for its B-15 guidance to further align with the Canadian Sustainability Standards Board framework and extended the deadline for disclosing industry-based metrics and scope 3 emissions to 2028 for all reporting entities. This includes D-SIBs (Domestic Systemically Important Banks), Canada-headquartered IAIGs (Internationally Active Insurance Groups), and SMSBs (Small and Medium-Size Banks). A list of deadlines for other areas of climate risk disclosure is available through OFSI.
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Why does this matter for non-financial institutions inside Canada?
Financial institutions may request emissions data from companies they lend to or insure.
Non-financial companies inside Canada should expect to receive requests about their emissions profiles from financial institutions subject to the new rules. To calculate their scope 3 financed emissions, banks and insurers will need to collect emissions data from companies they lend to or insure. Therefore, companies in Canada doing business with Canadian banks and insurers will face increasing pressure to have their own carbon emission management systems in place to collect and report this data.
Why does this matter for companies outside of Canada?
Non-Canadian companies could receive disclosure requests from banks and insurers.
Companies outside of Canada will be affected in two ways. First, and most importantly, companies outside of Canada that do business with Canadian banks and insurers will likely see requests for data on their emissions profiles. As part of the requirement to measure scope 3 financed emissions, Canadian financial institutions will need to collect data from businesses around the world. Just like companies in Canada, companies outside the country that do business with Canadian banks and insurers will likely also face increasing pressure to share data on their GHG emissions. The second impact on foreign entities is more direct: these new guidelines will apply to foreign insurers with Canadian branches.
Global repercussions
With the adoption of its Climate Risk Disclosure Guideline, Canada joined the growing global movement towards stronger regulation for the financial sector regarding climate-related risk. It also further underscored the importance of scope 3 emissions information, not only to investors, but also to the resilience of financial markets.
As companies inside and outside Canada gather, analyze, and share emissions information with Canadian banks and insurance companies, carbon accounting practices, data availability, and data reliability will all evolve and mature.
