Industry

Canadian Investors Target High-Emitting Firms on Climate Transition

CEC will engage on decarbonisation targets, TCFD-aligned reporting and improving climate-related transparency. 

A coalition of Canadian investors has published its focus list of 40 high-emitting corporates for engagement on climate-related risks and opportunities on the road to net zero greenhouse gas (GHG) emissions by 2050.  

Launched in 2021 by 27 institutional investors collectively managing more than C$3 trillion (US$2.42 trillion) in assets, Climate Engagement Canada (CEC) is prioritising dialogue on decarbonisation with firms including oil and gas company Vermilion Energy, utility Emera, and mining company First Quantum Minerals. 

Firms on CEC’s focus list will now be encouraged to produce reports using the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD), develop and implement comprehensive decarbonisations strategies, and align their advocacy activities with the goals of the Paris Agreements. Companies will be further asked to define their accountability and oversight of climate-related risks and opportunities, and set relevant measurable sector-specific targets. 

Members of the coalition include CIBC Asset Management, Healthcare of Ontario Pension Plan and RBC Global Asset Management. 

“Canada’s major investors want to support the corporate sector in the transitioning economy, and understand the power of a collaborative approach,” said Barbara Zvan, CEO of the University Pension Plan Ontario (UPP) and Chair of the CEC Steering Committee.  

“Partnering to constructively and consistently engage with top emitters is critical for the success of Canada’s transition to a low carbon economy and the long-term prosperity of Canadian communities as we move toward a net zero world.” 

CEC was established following recommendations by Canada’s Expert Panel on Sustainable Finance, published in 2019, on aligning the country’s financial system with a low carbon future.  

It is co-ordinated by Canada’s Responsible Investment Association (RIA), Shareholder Association for Research and Education (SHARE), the UN-backed Principles for Responsible Investment (PRI) and US investor network Ceres.  

Speaking at the RIA Virtual Annual Conference this week, Kevin Thomas, CEO of SHARE, said: “These companies are at very different stages of figuring out their current position in the transition and what they need to be doing. We want to be sensitive to those nuances when we engage. The goal is to help these companies move along this net zero path – we have to be thoughtful.” 

Also speaking at the conference, UPP’s Zvan added that CEC members should each be “held individually accountable for deciding how they then vote on [climate-related] proxies” during companies’ future annual general meetings (AGMs). 

Taking inspiration from CA100+ 

The CEC platform is building on an investor engagement model developed by the Climate Action 100+ initiative (CA100+), which has 700 investor signatories globally representing US$68 trillion in assets. Companies covered by CEC’s focus list are not currently engaged with through CA100+. 

As of March 2022, 69% of focus companies engaged with through CA100+ have committed to achieving net zero by 2050 or sooner, and 89% have aligned with the recommendations of TCFD, according to the initiative’s Net Zero Company Benchmark.  

Having previously published sector-specific net zero strategy guidance for food and beverage, steel, electric utilities, and aviation, CA100+ will also continue to publish guidance for other high-emitting sectors over the course of this year. 

Zvan previously said that CA100+ is the perfect model to work from. 

However, the initiative has recently been challenged by UK NGO ShareAction to increase transparency from asset owner and manager members on their climate-related engagement efforts. A ShareAction report highlighted that 37 of 60 assessed CA100+ members have not provided aggregate statistics on their climate change engagements, and only 29 said they monitor the progress of their engagements – climate-related or otherwise.  

The UN-convened Net Zero Asset Owner Alliance has also previously emphasised the importance of taking a multi-pronged approach to climate engagement, working with policymakers and asset managers as well as companies. 

“It is paramount that investors work together to align capital with sustainable and inclusive development in Canada,” said Patricia Fletcher, CEO of the RIA.  

“We are steadily gaining momentum as investors join issuers under the CEC initiative and move forward in having meaningful conversations with identified emitters in Canada. We are on our way to establishing a uniquely Canadian blueprint for investor-led climate action.” 

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