Statement on the release of Climate Engagement Canada’s Net-Zero Benchmark Company Assessments
SHIFT ACTION FOR PENSION WEALTH & PLANET HEALTH
For Immediate Release: December 12, 2023
Toronto, ON | Traditional territories of the Wendat, Anishnaabeg, Haudenosaunee, Chippewa and Mississaugas of the Credit First Nation
Climate Engagement Canada’s (CEC) first Net-Zero Benchmark company assessments reveal how off-course Canada’s top carbon emitters are in aligning with climate safety and respect for Indigenous rights. With this valuable data in hand, CEC investors must double down to engage companies forcefully and with escalation. At the same time, investors should not waste their time trying to engage the oil and gas sector, which has no profitable or credible pathway to net-zero other than phasing out production.
CEC has the potential to be an important investor initiative for aligning Canada’s economy with net-zero. These company assessments offer vital information for regulators, investors and any Canadian seeking to understand our exposure to climate-related financial risks. Further, we applaud CEC’s inclusion of indicators regarding just transition and Indigenous rights, although it is deeply problematic that just two of the focus companies have “made a public statement committing to the principles of free, prior and informed consent where Indigenous people are affected”.
CEC should be commended for commissioning this company assessment data and releasing it publicly. But the data reveals a pathetic showing on climate disclosure and action from corporate Canada.
The benchmark provides a sobering state of play, with just 7% of companies having a decarbonization strategy, no companies aligning their capital allocation with the necessary net-zero transition, and the vast majority only “partially” meeting indicators on climate governance, a basic and essential board skill in the 21st century. This should be a wake-up call for investors trying to manage climate risk. The inaction of Canadian companies on climate puts their capital– and our collective economic, ecological and financial systems– in peril. It also continues Canada’s long history of ignoring the rights of Indigenous peoples while extracting resources from their lands and waters.
These company assessments demonstrate to CEC investors how crucial and time-sensitive it is that they get engagement right, and that they don’t just “drive dialogue”. This benchmark cannot simply serve as a “guiding tool” for “input and discussion” between CEC investors and focus companies. We are in a climate emergency. It is imperative that companies understand what is expected of them, along with the financial consequences they will face if they fail to align with climate safety.
CEC can help by publishing engagement standards for its members, outlining a playbook for timebound, escalatory engagement. While individual investors will make their own decisions on how to engage, CEC focus companies must know that a failure to meet net-zero benchmark indicators within a specified timeframe will result in investors publicly challenging the company’s strategy, calling for ambitious government policies to align finance with climate goals, bringing forward shareholder proposals, voting against directors, and ultimately withdrawing their capital.
Some companies simply cannot be engaged to align with the net-zero benchmark, and CEC should judiciously spend its time and efforts elsewhere. Specifically, companies with business models that rely on the extraction and production of fossil fuels have no credible pathway to net-zero alignment other than phase-out. The work ahead is hard enough without risking capital in a sector that has repeatedly demonstrated it does not have the ability or willingness to transition.
For an example of what a credible framework for investor escalation should look like, see ShareAction’s newly released Responsible Investment Standards and Expectations on Escalation paper.
More information:
For a selection of Shift’s previous comments on effective engagement, see:
Statement On Climate Engagement Canada’s Focus List (June 8, 2022)
Robust Climate Engagement (p.21), The Limits of Engagement for Fossil Fuel Companies (p.22), and Indigenous Rights and Reconciliation (p.26) in Shift’s 2022 Canadian Pension Climate Report Card (January 2022)
The time for engaging with fossil fuel companies is over (Corporate Knights, July 2023)
Contact information:
Adam Scott, Director, Shift Action for Pension Wealth & Planet Health
416-347-3858
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.
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