BMO’s strategy for staying ahead of emerging ESG reporting obligations

"Start mocking up the future disclosure, in order to socialize it internally"

BMO’s strategy for staying ahead of emerging ESG reporting obligations

The ESG disclosure landscape has become increasingly complex as new reporting frameworks emerge. Legal departments and sustainability teams are preparing for mandatory reporting obligations in Canada and examining potential risks for their organizations.

At BMO Financial Group, the team is keeping a close eye on a number of regulatory and reporting matters, including Bill S-211, An Act to enact the Fighting Against Forced Labour and Child Labour in Supply Chains Act and to amend the Customs Tariff, which will come into effect early in 2024.

The bank also continues to monitor the Canadian Securities Administrators’ proposed National Instrument 51-107, Disclosure of Climate Related Matters, and related policies; as well as the US Securities Exchange Commission’s proposed set of rules regarding climate related disclosure.

Earlier this year, the Office of the Superintendent of Financial Institutions published its final version of Guideline B-15, Climate Risk Management, so BMO is staying abreast of those requirements.

“We are implementing plans that will prepare us to meet OSFI’s expectations when the first set of OSFI-mandated climate-related financial disclosures is due,” says Anton Tabuns, senior counsel, sustainability at BMO Financial Group. Tabuns will be speaking at HRD’s ESG Summit on Oct. 12.

Due to BMO’s recent acquisition of Bank of the West, Tabuns and his team are also tracking California climate bills, focused on climate disclosure and climate-related financial risk.

BMO has a long history of sustainability strategy and reporting, having published its first sustainability report in 2008 and continuing to evolve and develop the report ever since. To assist the bank in ensuring the report maintains its relevance, BMO identifies priorities through a materiality assessment. This involves consultations with internal and external stakeholders to assess the importance of certain topics, as well as surveys, interviews, data and AI to monitor the landscape of regulations, social media and news.

Tabuns recommends starting early when it comes to incorporating ESG reporting into financial statements.

“While most companies may not be required to integrate ESG information into regulatory reports yet, it can help to start mocking up the future disclosure, in order to socialize it internally,” says Tabuns. “It can be helpful to begin collaborating with your finance and risk teams, and others who may need to be involved.”

As some regulatory documents may be audited, Tabuns also advises engaging a financial audit provider to assure sustainability-related and climate-related metrics, and he suggests conducting a gap analysis of current disclosures with proposed regulations to see what work is required.

“We have established an internal working group to serve as a forum for discussion and updates on evolving climate-related and sustainability-related disclosures expectations and to operationalize plans to fill any gaps,” says Tabuns. The working group includes personnel from legal, sustainability, finance and risk.

The team at BMO is now working on a new automation solution for data collection, tracking and calculations for sustainability and climate.

Knowledge sharing is key when it comes to integrating financial and ESG reporting, so BMO developed and implemented a Climate Essentials learning program for employees to deepen their understanding of climate change and of the bank’s climate commitments.

Obtaining assurance from a third party can be another important step to increase management and investor confidence in the data being disclosed, Tabuns says.

“Our assurance scope has increased over the years,” he says. “Establishing and documenting our sustainability-related and climate-related reporting processes, procedures and responsibilities has been an enormous help to BMO.”

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