Statement on Climate Engagement Canada's Focus List
Statement from Shift Action for Pension Wealth and Planet Health on Climate Engagement Canada’s Focus List
For Immediate Release: June 8, 2022
Toronto, ON - Shift welcomes the release of the Climate Engagement Canada (CEC) Focus List – 40 TSX-listed companies that Canadian finance institutions will engage strategically on their climate change actions. We welcome this important effort from some of Canada’s largest finance institutions to engage with many of Canada’s largest climate polluters to seek required organizational changes in the face of a worsening global climate crisis.
In spite of frequent messaging from Canada’s finance institutions on the importance of climate engagement, we have seen very little disclosure on meaningful engagement activities and their impacts on companies’ approach to climate change. We are pleased to see CEC’s plans to set expectations for companies, leveraging the collective power of multiple stakeholders to influence corporate behaviour.
Shift believes company engagement is an essential part of any credible finance institution’s zero-emissions transition strategy.
There are however, some important caveats:
Engagement is just one of many tools in the investor’s climate-alignment toolbox. In many cases, engagement has real limits in its ability to force the alignment of high-carbon companies with a path to climate safety. Not every industry has a credible, science-based, profitable transition pathway. Short of a wholesale transformation of their business model, we do not see Paris-aligned pathways for fossil fuel exploration and production companies in particular. In spite of similar engagement actions from Climate Action 100+ (CA100+), recent analysis reveals little progress in achieving corporate climate-alignment, particularly in the oil and gas sector.
Nor can engagement fully protect finance institutions and their fiduciaries from climate-related financial risks, in particular the growing exposure to stranded assets in Canada’s oil and gas industry.
In many cases, engagement has not been proven to be effective without the threat of escalatory action on a fixed timeline, including the threat of voting out corporate directors and divestment should companies fail to change.
Transparency will be essential for all stakeholders, shareholders and the public to evaluate the effectiveness of CEC’s engagement efforts. We hope to see all benchmarking data released, as is done by CA100+.
Voluntary measures from financial institutions are important to ensure climate alignment in the finance sector. However, we believe that new regulations are also required to mandate disclosure and alignment in line with the requirements of climate safety. Canada will not meet its climate obligations without rapid and unprecedented change in the financial sector.
Background
Canadian pension managers AIMCo, HOOPP, IMCO, UPP, OMERS and Canada Post Corporation Pension Plan are founding participants in Climate Engagement Canada.
An analysis released in May 2022 by ShareAction concludes that, after five years of focused engagement, there is little evidence that CA100+, the world’s largest investor engagement initiative on climate change (on which CEC is modeled), has influenced companies to effectively reduce greenhouse gas emissions in line with the goals of the Paris Agreement. The analysis found that:
Less than 12% of CA100+ focus companies have adequate short-term emissions reduction targets or decarbonization strategies.
Not a single company has fully aligned their capital expenditure with a 1.5℃ future or produced financial statements that reflect climate risks.
Every single oil and gas focus company is planning expenditures on expansion projects that are inconsistent with the goals of the Paris Agreement.
49 CA100+ investor signatories (82%) did not specify any objectives for climate change engagement, or any escalation steps for unsuccessful engagement.
Only 10 signatories (17%) report on the progress of engagements.
CA100+ itself acknowledged in March 2022 that the vast majority of its focus companies have not set medium-term emissions reduction targets aligned with 1.5°C or fully aligned their future capital expenditures with the goals of the Paris Agreement, despite the increase in corporate net-zero commitments.
Only 17% of focus companies have set medium-term targets which are aligned with the International Energy Agency’s 1.5°C scenario and cover all material emissions.
Just 42% of focus companies have comprehensive net-zero by 2050 or sooner commitments that cover all material GHG emissions, including material Scope 3 emissions.
Only 5% of focus companies explicitly commit to align their capital expenditure plans with their long-term GHG reduction targets.
Only 17% of focus companies have robust quantified decarbonisation strategies in place to reduce their GHG emissions.
No company has demonstrated that its financial statements are drawn up using assumptions consistent with net-zero by 2050, as per CA100+’s own benchmark.
CEC explicitly left out six Canadian companies (CNRL, Enbridge, Imperial Oil, Suncor, TC Energy and Teck) from their focus list because they are already being engaged under CA100+. Yet an April 2022 analysis by Investors for Paris Compliance shows that all of these Canadian companies are failing across the board on aligning their businesses with the goals of the Paris Agreement.
A May 2022 analysis by Oil Change International of the climate commitments of major American and European oil and gas companies concludes that they fail to meet even the bare minimum for alignment with the Paris Agreement. The climate commitments of all eight oil and gas companies’ analyzed in the report are “grossly insufficient”, with these companies involved in over 200 fossil fuel expansion projects on track for approval between 2022 and 2025.
Similarly, a November 2021 analysis by Oil Change International and Environmental Defence of Canadian oil and gas producers, including CEC focus companies Cenovus Energy, Tourmaline Oil and ARC Resources, found their climate plans to be “grossly insufficient” against metrics of Paris-aligned ambition, integrity and transition planning, with all companies planning to increase oil and gas production in Canada.
Contact information:
Adam Scott, Director, Shift Action for Pension Wealth & Planet Health
416-347-3858
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Patrick DeRochie, Senior Manager, Shift Action for Pension Wealth & Planet Health
416-576-2701
Shift Action for Pension Wealth and Planet Health is a charitable initiative that works to protect pensions and the climate by bringing together beneficiaries and their pension funds to engage on the climate crisis.