Investor-led initiative Climate Engagement Canada (CEC) has created its own net-zero benchmark to evaluate corporate issuers’ progress toward aligning with the Paris Agreement.
The CEC’s benchmark is closely positioned with the one developed by Climate Action 100+, the current global standard for collaborative shareholder engagement.
The CEC Net Zero Benchmark follows this example while also layering in additional context specific to Canada’s unique economy. It was developed with the expertise of the CEC Technical Committee and the Shareholder Association for Research and Education (SHARE).
It was further refined by incorporating feedback from a public consultation period, which involved CEC participant investors.
“We've established a benchmark series of indicators, which helped us to gauge progress by each company individually, and were against a set of standards. But also, as an initiative, as a whole, we are moving the needle on climate action here in Canada,” Kevin Thomas, SHARE’s CEO and a member of CEC’s joint secretariat, said during a webinar.
“It's a very strict methodological approach to addressing things like reducing emissions, to looking at governance structures to looking at lobbying, to try to assess whether the company has got a realistic approach to get into net-zero in a reasonable timeframe.”
The CEC Net-Zero Benchmark
The CEC launched in the fall of 2021.
It is led by several investor networks including the Responsible Investment Association, SHARE and Ceres. The UN-supported Principles for Responsible Investment is also supporting the program. It has 37 participant organizations representing approximately $4.5 trillion in assets under management.
Some of CEC’s founding members include BMO Global Asset Management, CIBC Asset Management, the Healthcare of Ontario Pension Plan, Desjardins Global Asset Management, Addenda Capital, RBC Global Asset Management and TD Asset Management Inc.
The CEC technical committee spent the last 12 to 18 months reviewing the Climate Action 100+ and adapting it for Canada – and also included Indigenous representation in the transition. The public consultation period ran through January and February.
Thomas also mentioned a close dialogue with the federal government regarding its own net-zero challenges, as well as securities regulators.
The benchmark looks at, among other aspects, a company’s long, medium and short-term emissions targets, its alignment with the Paris Agreement, the responsibilities of its board and commitment to just transition principles – such as retraining workers.
“We are all working from a common guidebook essentially, in terms of what are the expectations we have for issuers. That can then serve us as part of the engagements in terms of being able to have those conversations of where we perhaps need to focus,” Maia Becker, RBC Global Asset Management’s senior director of corporate governance and responsible investment and member of the CEC’s technical committee, said during the webinar.
“I think the other piece of it is having that common benchmark when we're talking with issuers, across different sectors, across different parts of the economy, we can also start to identify where there might be gaps or opportunities more broadly than just on an issuer by issuer level.”
Next steps for the benchmark
The benchmark is being utilized by the 39 TSX-listed companies on its Focus List.
These include Cenovus Energy Inc., Barrick Gold Corp., Air Canada, TransAlta Corp., Loblaw Companies Ltd. and GFL Environmental Inc.
The first results of the benchmark with the CEC’s Focus List will be released in the fall.
“We’re also there to try to see whether collectively we can move the needle on this individual company's progress on climate and on the sector, and perhaps the market as a whole,” Thomas explained. “So we'll take that back to the companies to get their feedback.
"That will be happening in summer, we will be doing a final run at the benchmark in the fall and releasing the results publicly, that will then create the framework for the next year of engagement.”
Whether or not the Canadian Focus List will have different strengths and weaknesses compared to other benchmark results remains to be seen.
The aim is for this process to be updated annually. It was also mentioned the CEC is open to re-evaluating its Focus List in the future.