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Canada Ties LEEFF Corporate COVID-19 Bridge Loans to Climate Action, TCFD Disclosures

Canadian PM Justin Trudeau announced a new round of corporate relief on Monday, designed to help companies that are struggling during the coronavirus pandemic.

"The new program will provide bridge loans of up to $60 million and guarantees of up to $80 million for companies earning more than $300 million in annual revenue. Companies that receive the loans, however, have to abide by a set of rules that include restricting executive bonuses and investing in climate action" (Global Citizen). In addition to supporting the economy, the loans are also tying the financial support to environmental objectives.

How are Canada's COVID-19 loans tied to environmental action?

While the primary goal of the bridge loans is to keep the economy afloat, the Federal government has wisely used this opportunity to encourage climate action. "Morneau said applicant companies must disclose their climate action plans and sustainability goals in order to qualify" (CBC). What does the Finance Minister mean by this? The press release from the PMO includes the following additional details: "recipient companies would be required to commit to publish annual climate-related disclosure reports consistent with the Financial Stability Board’s Task Force on Climate-related Financial Disclosures [TCFD], including how their future operations will support environmental sustainability and national climate goals." (emphasis added)

This is all we know so far, but it is promising to say the least. The TCFD has been praised as one of the best systems for understanding and mitigating climate risks for businesses. Read: What is the TCFD?

What is the TCFD?

“Increasing transparency makes markets more efficient, and economies more stable and resilient.” —Michael R. Bloomberg, Chair

The Task Force on Climate-related Financial Disclosures is a global of experts, brought together by Mark Carney and Michael Bloomberg, to develop a set of recommendations for the analysis and disclosure of climate-related risks. They sought to define the most effective way for corporate leaders to communicate their material environmental (and financial) risks to investors, insurers, and banks. It has quickly risen to be one of the foremost systems for corporate environmental disclosure.

In their words: "The FSB Task Force on Climate-related Financial Disclosures (TCFD) will develop voluntary, consistent climate-related financial risk disclosures for use by companies in providing information to investors, lenders, insurers, and other stakeholders. The work and recommendations of the Task Force will help companies understand what financial markets want from disclosure in order to measure and respond to climate change risks, and encourage firms to align their disclosures with investors’ needs."

Looking for assistance with TCFD disclosures? Talk to an expert at Circle.

Who can access the coronavirus capital?

"The program is open to large commercial businesses in all sectors (except those in the financial sector) and certain not-for-profit businesses, like airports." (CBC) "To qualify, businesses must be looking for financing of $60 million or more and have significant operations or large numbers of employees in Canada, and must not be involved in any ongoing insolvency proceedings." Furthermore, in addition to the environmental requirements, companies are being asked to set caps on executive compensation.

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