Competition Act changes leave lingering risks for greenwashing , Quebec researchers say

New research from the Quebec Environmental Law Centre highlights the risks of greenwashing in Canada s climate-conscious finance and ESG sectors, despite recent changes to the federal Competition Act aimed at preventing false environmental claims. The legislation, which could impose financial penalties on companies whose green assertions fail to withstand scrutiny, leaves significant gaps in regulation, particularly in areas where compliance is mandatory. The act s shortcomings are exacerbated by the simultaneous development of voluntary guidelines for environmental disclosure by various self-governing and regulatory organizations. This lack of a central authority has led to confusion among investors, who may be misled by inaccurate assumptions about a company s overall environmental impact. Lead author Julien Beaulieu emphasizes the need for a unified set of mandatory standards to avoid confusion and ensure transparency. Efforts to adapt international guidelines for climate and sustainability reporting to the domestic economy are underway, and the federal government is studying a draft green and transitionary taxonomy to certify investments environmental standards. Mark Carney, former governor of the Bank of Canada and Bank of England, has criticized Canada s piecemeal approach to climate-related finance. The Business Council of Alberta has also expressed concerns about the legislation, warning that it could lead to years of legal judgments and restrict companies from discussing their environmental actions and aspirations. The report recommends regulating new products and services such as voluntary carbon offsets, green and sustainability-linked bonds, and ESG ratings services. It also calls for strengthening labelling standards for investments and improved professional qualifications for financial advisers to better educate retail investors on the topic. In conclusion, while the federal Competition Act aims to prevent greenwashing, there are still significant risks for investors due to the lack of detailed rules and regulation in Canada s climate-conscious finance and ESG sectors. A unified set of mandatory standards, improved disclosure guidelines, and enhanced professional qualifications for financial advisers are necessary to address these issues and ensure transparency in the market.

Source: theglobeandmail.com
Published on 2024-10-02