Energy companies in North America are increasingly caught between conflicting political, legal, and stakeholder pressures surrounding diversity, equity, and inclusion (DEI) and climate risk disclosures. For legal counsel in Canada, this means not only staying ahead of regulatory developments but guiding clients through an ever-shifting landscape where what’s mandatory in one jurisdiction may be politically fraught in another.
“In the United States, the federal government is pushing back against DEI initiatives,” says Bill Gilliland, a member of Dentons’ corporate, securities and corporate finance, and M&A practice groups and leader of their ESG practice. “Executive orders from US President Donald Trump have instructed federal agencies to dismantle their own DEI programs and scrutinize those in universities, nonprofits, and corporations.”
This shift has sent ripples throughout the energy sector, where companies that once championed DEI and ESG (environmental, social, and governance) sustainability investment criteria are now reassessing their approaches. “Even lawyers advising on DEI programs are coming under pressure,” says Gilliland, whose practice involves working with clients on ESG and sustainability matters.
Dentons has reviewed public disclosures from major Canadian energy companies with operations in the US. “Comparing spring 2024 to spring 2025, we’ve seen a pattern: continued compliance with Canadian DEI disclosure mandates but a noticeable pullback in the voluntary DEI disclosures.
“Firms understand that any voluntary information they provide could be scrutinized by US regulators or other actors who question current practices on DEI and ESG.”
Energy companies operating across borders, particularly Canadian firms with significant US operations, face these added challenges. Says Radha Curpen, a partner at McMillan LLP who specializes in environmental, regulatory and Aboriginal law, including ESG and the transportation of dangerous goods: “We reviewed large energy companies active in both Canada and the US and found many voluntarily scaling back their DEI disclosures in 2025 compared to 2024, largely out of concern over how US regulators might use that information.”
For counsel, this means advising clients to balance transparency and stakeholder engagement while protecting the company from potential political or regulatory backlash when doing business in the US or with US firms.
By contrast, Canada’s regulatory framework around DEI and ESG disclosure remains relatively stable, though not immune to external influences. Gilliland says Canadian regulators have recently paused efforts to strengthen mandatory disclosure rules, “not because they doubt the importance of DEI or ESG, but because they are wary of overburdening companies with new mandates at this stage.”
Canadian companies with cross-border footprints must also remain attuned to US regulatory shifts. Curpen notes that “Canadian energy companies face pressure not only from regulators and investors but also from the US political environment, which can influence their disclosure decisions.”
Curpen’s colleague at McMillan, Sharon Singh, says DEI and ESG disclosures must go beyond regulatory compliance and be considered strategic business narratives. “The fundamental work isn’t necessarily changing. What’s evolving is how companies talk about it – the disclosure needs to emphasize the business case.”
Whether it’s innovation, employee retention, market competitiveness within the context of DEI and ESG, companies should explicitly tie their initiatives to business outcomes. For legal teams, Singh says this underscores the importance of guiding clients in crafting clear, compelling disclosures that can withstand both investor scrutiny and social and political pushback.
While DEI faces political headwinds, climate risk disclosure is another regulatory arena in which Canada's and the US's approaches appear to have diverged.
In the US, the Securities and Exchange Commission’s (SEC) long-anticipated climate disclosure rule is currently on hold amid litigation and political reconsideration. Says Gilliland: “The SEC is questioning its authority to impose these rules, pointing to concerns about the cost and uncertainty they bring to capital markets. The current signals suggest they may revoke or significantly roll back mandatory climate disclosure.”
In Canada, securities regulators have also paused formal rulemaking but are taking a softer regulatory approach. They emphasize climate risk as a material business risk that companies must disclose when relevant, referencing guidance from the Canadian Sustainability Standards Board (CSSB).
Despite regulatory headwinds, DEI isn’t disappearing – it’s just being reframed. That’s where legal advisers are playing a critical role. “Clients are not walking away from DEI,” Curpen stresses. “But how they talk about it is changing.”
Singh adds: “Historically, DEI was assumed to be almost self-explanatory. Now, that assumption no longer holds. Companies must articulate why it matters for their business and their bottom line.”
Singh believes this shift can lead to more meaningful communication. “It’s a chance for boards and executives to show leadership. Not just compliance for its own sake, but thoughtful, business-driven integration of ESG and DEI principles.”
While formal rules may be on pause, Canadian companies face another kind of pressure: enforcement under anti-greenwashing laws.
“One of the most important developments we’ve seen is the amendment to the Competition Act,” Gilliland says. “Companies can now be held liable if their climate-related claims are seen as deceptive or unsubstantiated.”
This has become a key concern in risk management. “If you’re going to make public claims about emissions, ESG targets or sustainability, they need to be backed by verifiable data. We’ve seen companies pull back from voluntary climate disclosures – not because of US influence, but due to concern about greenwashing enforcement in Canada,” Gilliland says.
By virtue of their role as capital providers, financial institutions also face intensified expectations around DEI and ESG disclosures. Singh says, “Banks and pension funds are being held accountable by their own stakeholders – and they in turn are pressing energy companies for robust disclosure and performance.”
That pressure continues even as public discourse around ESG becomes more polarized. “There’s a perception that ESG is being rolled back,” Curpen says. “But institutional investors – particularly long-term ones like pensions – still view DEI and climate as essential. They’re just being more tactical about how they engage, often behind the scenes rather than through public campaigns.”
Although the current regulatory environment may be unpredictable, all three experts agree that DEI and climate will remain enduring governance issues for companies operating in North America.
“This isn’t about ideology – it’s about strategy,” said Singh. “Boards and executives need to understand that ESG, particularly DEI and climate risk, are now mainstream components of enterprise risk management.”
John Valley, chair of Osler, Hoskin & Harcourt LLP’s governance and sustainability practice, notes that over the past decade, there has been steady development in the consideration and integration of environmental and social/diversity matters in the corporate governance fabric of Canadian public companies. However, in 2024 and into 2025, there has been a notable evolution – “not necessarily a retreat, but a recalibration” – in how organizations communicate these values, particularly in light of developments in the United States.
Based on data gathered for Osler’s annual “Diversity Disclosure Practices Report,” large TSX-listed companies have historically shown leadership on diversity, especially regarding gender diversity on boards. Utilities and pipelines, in particular, have performed well over the 10 years covered by Osler’s reports, with other sectors, such as oil & gas or energy services, showing improvements but remaining below the overall market average. Smaller issuers in Canada, for example, in the junior mining and exploration sector, often lack the necessary bandwidth and resources and tend to underperform larger issuers regarding diversity-related matters. “This isn’t necessarily about a lack of commitment – quite often, it’s a reflection of operational focus and scale,” he says.
That said, disclosure requirements in Canada have driven steady progress, both in terms of the representation of women and, increasingly, with voluntary disclosure about how diversity supports a company’s strategic and cultural goals. “Over the past decade, we've observed a growing maturity in how organizations are approaching the issue,” Valley says. “For a growing number of issuers, it’s no longer framed as compliance, but as an integral part of long-term business resilience.”
However, significant changes have occurred over the past six months, particularly in policy and other developments related to diversity and climate in the United States. Some American proxy advisory firms have softened or paused their diversity voting guidelines. Valley noted that Canadian companies, particularly those with US exposure, are actively monitoring the environment, but that it appears that many of these remain committed to such strategies, “seeing them as ultimately value-adding, not risk-inducing.”
But he did note that the way companies communicate about diversity and climate initiatives has shifted in that time, and that the situation remains very dynamic: “One trend we noticed in this year’s proxy and sustainability disclosures is a refinement of language. There's more care in how companies articulate their objectives in this area – less performative, more strategic.” This may signal a deeper integration of these principles into the core of corporate governance, especially in industries where climate, regulatory, or reputational risks are at the forefront. He noted the trend is something Osler is watching for as it prepares to publish this year’s diversity disclosure report this fall.
While the US debate is influencing tone and some understandable caution, it appears that most Canadian companies and investors continue to view diversity and sustainability matters not as a liability but as essential to innovation, governance quality, and long-term performance, particularly in sectors like energy, where transformation and trust are paramount.
As legal advisers, the opportunity is to help companies lead, rather than react. “If we do our jobs well,” Curpen says, “we help clients navigate complex environments without abandoning their values – or their competitive edge.”