Attention, ESG investors: Canada’s biggest carbon-emitting public companies

That has implications for all of us. As the Bank of Canada puts it, “whatever path is chosen, delaying action heightens the risks to the financial sector and to the entire economy.” But thanks to a new report, Canadian investors now have greater insight into which companies are lagging.

Climate Engagement Canada introduces Net Zero Benchmark assessments

To help both individual and institutional investors in Canada make informed investment decisions, multiple industry initiatives are working to create and improve reporting on how companies approach climate and other ESG (environmental, social and governance) issues. Historically, both in Canada and globally, ESG reporting has been limited at best. But now, as demand for rigorous, usable data grows, fresh resources are emerging. One of these is the new Net Zero Benchmark Company Assessments from Climate Engagement Canada (CEC).

The 41 participants in the CEC initiative include major organizations such as Canada Post, Hydro Québec and McGill University, as well as financial companies like BMO Global Asset Management, AGF Investments and Vancity. CEC’s focus is to engage with publicly traded Canadian corporations that have the highest direct and indirect GHG emissions—among them large grocery chains and transportation and energy companies—and its goal is to measure these organizations’ commitment to climate action and progress toward net-zero.

“This is an attempt to understand what actions companies have taken so that investors can be more effective in pinpointing what companies they should target and on what specific climate issues,” says Tim Nash, founder of Good Investing, a Toronto firm that offers research and coaching to support DIY sustainable investors. “The more specific investors can be in saying to companies, ‘this is what we want,’ the easier it’s going to be for corporations to be able to meet those investor expectations.”

Nash adds that it’s no surprise that “a lot of investors right now want to see strong climate change policies and leadership from Canadian corporations.” A 2023 survey by the Responsible Investment Association found that among a group of Canadian institutional asset managers and asset owners, 76% said that minimizing investment risk over time was among their top three reasons to choose responsible investing, and 93% said they consider a company’s greenhouse gas (GHG) emissions when making investment decisions.

What’s in the Net Zero assessments?

The Net Zero Assessments focus on the top reporting or estimated GHG emitters on the Toronto Stock Exchange (TSX). Nash describes the assessments as “robust and comprehensive”—there’s a lot of detail involved. The key documents released in December are an outline of what the benchmark’s 10 indicators mean and a colour-coded spreadsheet ranking each company on each indicator as either Yes (green), Partial (yellow) or No (red) for 2023. Spoiler alert: there’s not a lot of green. Most of the 41 companies on the list have at least partially set medium-term GHG reduction targets, while only 15 have set short-term targets—all of them partial. Other indicators include whether the company has a decarbonization strategy, a goal to reach net-zero by 2050 and a climate advocacy position in line with the goals of the Paris Agreement, among others.

Which Canadian public companies have net zero ambitions and targets?

Below is part of the Net Zero Assessments colour-coded spreadsheet, displaying the first four indicators (net-zero ambitions, long-term targets, medium-term targets and short-term targets), to give you a glimpse of how the 41 companies are faring. (View the full spreadsheet at Climate Engagement Canada.)

Slide the columns right or left using your fingers or mouse to see even more data, including returns and strategy. You can download the data to your device in Excel, CSV and PDF formats. To reorder the data, tap the header’s arrow you want to compare.

A movement toward investment stewardship

The CEC initiative is part of a global movement of stewardship: engagement by shareholders to nudge large, high-emitting companies “to move faster, innovate more, and/or disclose better” when it comes to ESG, as Sean Cleary, chair of the Institute for Sustainable Finance, puts it.

A similar initiative on an international scale is Climate Action 100+, which started releasing annual progress reports on the world’s biggest corporate emitters—including Canadian firms Suncor Energy and Teck Resources—in 2019. The goal is to put a bit of peer pressure, so to speak, on companies who have the potential to do better. “If we can move them along that path to have less carbon risk exposure, that’s a benefit to the investor,” says Nash.

The question interested investors will have to ask themselves, Nash says, is where to prioritize their efforts in encouraging these large companies to improve their standing in the chart. If you are investing with any of them either directly or indirectly, now’s your chance to “lean on them a little bit” and let them know their climate-related decisions matter to you. If your shares are part of a fund such as an ETF or pension, he adds, make sure your proxy voting guidelines are in line with this CEC initiative—in other words, that whoever manages the fund is voting at company AGMs the way you would want them to.

If all goes well, Canadians will work together to move the needle in the right direction. “If this list becomes more yellow and green over the next 10 years, then there is no doubt that Canada’s publicly traded corporations will be playing a leadership role in this [net-zero] transition,” Nash says. And this first assessment document, he points out, is a significant benchmark. “This is the chart we’ll be referring to for decades to measure how far we’ve come.”

• Read more about the CEC Net Zero Benchmark Company Assessments
• Download the benchmark
• Download the assessments

More about sustainable investing:

• Why sustainable investing is important
• An investor’s guide to ESG reporting in Canada
• Responsible investing is growing in Canada. Which ESG factors matter most?
• 5 ways to invest sustainably for Canadian investors
• Greener days ahead: There’s a new global standard for climate-related disclosures

About Kat Tancock

Kat Tancock is a writer, editor, translator and content strategist based in B.C. She writes for publications including The Globe and Mail, Chatelaine and Asparagus.

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