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Progress made on corporate GHG targets and disclosures, but Canada still must ‘up its game’: New ISF report

May 26, 2022

  • A new report by the Institute for Sustainable Finance updates the findings of its popular 2021 review of TSX Index firms’ GHG emissions disclosures, targets and plans.
  • The number of firms disclosing greenhouse gas emissions has risen only slightly and is an area that needs attention.
  • The number of companies with emissions reduction targets has doubled, which is significant improvement. Even so, companies need to do much better at tying compensation to emissions targets.
  • 30% of the emissions associated with all TSX Index firms would be eliminated by 2030 if only the top 32 emitting firms with stated emissions reductions targets meet them.

In recent months, regulators such as the Canadian Securities Administrators (CSA) and the Securities and Exchange Commission (SEC) in the United States have proposed new rules to improve climate-related disclosures by companies. And many institutional investors have been setting transition targets for their portfolios in response to client and other stakeholder demands, as well as in recognition of the long-term implications of not preparing for the major economic transformation in progress. There is evidence that once firms start reporting greenhouse gas (GHG) emissions, they take actions to reduce them.

A new report by ISF Chair, Sean Cleary, and Research Associate, Shuyi Hui, provides “An Update on Canadian Corporate Performance on GHG Emissions Disclosures and Target Setting”, following up on ISF’s popular 2021 report on TSX Index emissions. The authors have once again examined the firms in the S&P/TSX Composite Index, which includes more than 200 of the largest publicly listed companies in Canada. This study focuses on performance during the calendar year 2020, which the authors compare to performance during 2019, analyzed in the 2021 report.

Overall, the results show that while there has been a significant improvement in the number of Index companies that have stated emissions reductions targets, and some improvement in announcing emissions reductions plans, there have only been slight improvements in GHG disclosures over the previous year and Canada still lags Europe and the U.K. on that measure.

Also notable, as more firms adopt GHG emissions reductions targets, a much smaller percentage are taking the step of tying executive compensation to reaching climate targets. This is not a positive sign, since tying compensation to achieving climate goals is necessary to properly incentivize action. 

“The largest Canadian firms are responding to signals from investors and regulators that GHG emissions targets and reduction plans are a necessity,” says Dr. Cleary. “But Corporate Canada still needs to up its game. As a whole, Canadian companies will need to increase GHG disclosures, establish more meaningful reduction targets, and increasingly tie compensation to targets to keep pace with investor expectations and with global best practices.”

Key findings:

Reporting: Only 163 companies (70.6% of TSX Index companies) provided GHG emissions disclosures, which represents only a slight improvement from the results of our 2021 study (150 companies or 67.6%), and this still trails the world’s leaders in Europe and the U.K.

Targets: 120 out of 231 TSX Index companies (or 52%) have stated emissions reduction targets, which is exactly twice the number of companies that had targets the year prior (i.e., 60). So, this represents an area of significant improvement. Unfortunately, Canadian firms still don’t appear to be keeping pace internationally.

Plans: Among the 120 firms with targets, the authors classify 29 (24%) of the 120 stated company plans as very detailed, versus nine (15%) of 60 last year. So, this represents a marked improvement, particularly given the increase in companies with targets.

Potential emissions reductions: Bigger companies with greater emissions tend to be more likely to have emissions targets. The study estimates that 30% of the emissions associated with all TSX Index firms would be eliminated by 2030 if only the top 32 emitting firms with stated emissions reductions targets meet them, with 121.5 million fewer tonnes of CO2 entering the atmosphere.

Compensation: Only 17 companies (14%) with stated targets have compensation tied directly to GHG reduction targets, just a slight rise in the absolute figure and a notable decline in the percentage of firms with tied compensation compared to last year’s report. There was a significant increase in both the number and percentage of companies that have no specified link to compensation to 68 (57%) versus 17 (28%).

About the Institute for Sustainable Finance

ISF was launched in 2019 as a Canadian-specific centre of expertise and collaboration for advancing sustainable finance. Housed at Smith School of Business at Queen’s University, ISF is independent and non-partisan. It focuses on developing research, education, and collaborations among academia, business and government that will improve Canada’s capacity for sustainable finance as the shift to a low-carbon economy occurs. ISF’s work is generously supported by The Ivey Foundation (inaugural supporter), the McConnell Foundation, the McCall MacBain Foundation, the Chisholm Thomson Family Foundation, Smith School of Business, Queen’s University and Founding Contributors BMO, CIBC, RBC, Scotiabank and TD Bank Group.

Media contact

David Watson
Associate Director, Communications, Institute for Sustainable Finance
C: 613.796.3605