Consistent climate reporting and net-zero planning coming for Corporate Canada, but not here yet: ISF report

The disclosure and verification of Greenhouse Gas (GHG) emissions data is a central element of efforts to address climate change in the corporate sector. Canada’s largest public firms are increasingly reporting on their greenhouse gas emissions, and more and more are setting targets to reduce emissions, finds a new report from the Institute for Sustainable Finance (ISF). However, there is a good deal of room to improve, particularly in the area of verifying emissions, setting more ambitious targets with detailed plans and timelines to meet them, and linking sustainability goals to executive compensation.

This report, by ISF Senior Research Associate Simon Martin, Director of Research Ryan Riordan and Chair Sean Cleary, provides an update to a subset of the findings of previous ISF reports on Canadian firms’ performance with respect to GHG emissions disclosures and target setting for emissions reductions. Researchers at ISF have collected and summarized climate reports from the constituents of the S&P/TSX Composite Index. The results are based on information included in corporate reports released during 2022, augmented with data reported to CDP.

Key findings:

• 169 firms (72% of firms in the Index) report their GHG emissions, representing a small increase from the previous year.
• 134 firms (57% of firms in the Index) disclose GHG reduction targets, up from 113 the previous year.
• However, 36% of firms with targets provide little or no associated details on how reductions will be achieved. Only 13% of firms provide very detailed plans.
• Large firms are more likely to report emissions and have reduction targets. For example, the 72% of firms in the Index that disclose emissions cover 91% of the total Index’s market capitalization.
• Relative to the previous year, the number of firms with net-zero or carbon neutral targets has increased.

Pressure from key stakeholders is mounting on public companies to disclose and reduce their emissions. Investors and financial institutions require climate-related information from companies that is reliable, consistent and comparable in order to assess investment and lending opportunities and risks, and to work towards decarbonizing their portfolios. Plans to reduce emissions also address the long-term implications of holding stranded assets that become obsolete as the world decarbonizes.

Private sector demand for climate-finance data is also being fuelled by regulators and standard setters. For instance, the U.S. Securities and Exchange Commission and the Canadian Securities Administrators have proposed new rules designed to enhance and standardize climate-related disclosures for investors. The Office of the Superintendent of Financial Institutions (OSFI) proposed guidelines in March 2023 that establish expectations of federally regulated financial institutions’ management of climate-related risks. And this month the International Sustainability Standards Board released its highly anticipated standards for corporate emissions reporting.

“Thanks to the emergence of global standards for emissions reporting and regulatory requirements for climate-related disclosures we can expect to see significant improvement in the next few years,” said Dr. Riordan. “We may be seeing the last days of the Wild West in climate reporting in Canada.”

Other jurisdictions are moving even quicker than Canadian regulators, but regulation is likely to make more disclosure mandatory. With additional guidelines and regulatory certainty, more and better disclosure is in our future.

“If Canadian firms want to increase the amount of foreign capital they attract, improving disclosure on these dimensions is critical,” said Dr. Cleary. “Many companies will need to acquire the skills and capacity for effective climate reporting. Before long there will be no excuse for failing to prioritize climate-related disclosures.”

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
david.watson@queensu.ca
C: 613.796.3605