2022 was Investors for Paris Compliance’s first full calendar year, and a full one it was. In general, we’re helping to fill a large and growing gap in the investor ecosystem as more Canadian companies make net zero pledges, yet with few people holding those companies accountable for following through.
Here are some highlights and accomplishments for 2022:
2022 Pre-AGM Engagement
- Early in the year we built on our banking best practices report to conduct engagements with all of Canada’s largest banks. We conducted rapid response when they released their first interim targets and staged a webinar to summarize our initial assessments.
- We filed a few shareholder resolutions with the banks during the 2022 AGM season and took one regarding sustainable finance to a vote at the RBC AGM, garnering 8.3% support, with a further 7.3% abstaining. As a result, RBC released a new sustainable finance framework later in the year, although the framework does not fix the problems that the resolution spoke to.
- We also filed a shareholder proposal with Enbridge seeking to strengthen its net zero plans with better targets and CapEx alignment (as per its C100+ assessment). The proposal garnered 21.84% of the vote, with a further 3.67% abstaining. Unfortunately, Enbridge has not taken this strong vote into consideration and will therefore be subject to follow up.
Pre-2023 AGM Research & Engagement
- We released a deep dive into the net zero work of Canada’s two largest insurance companies and asset managers Sun Life and Manulife, including commissioning an estimation of their financed emissions – each equivalent to the combined emissions of Ontario and Quebec! We used this report as a basis for engagement with the companies.
- We released a net zero report card for Canada’s six largest banks, grading them on their measurement of financed emissions, their target setting, and their transition planning. This report card is serving as the basis for our ongoing engagements.
- We have researched and filed several shareholder proposals for the 2023 season at Canadian financial and energy companies. We will engage with each company with a view to better disclosure and accountability regarding their net-zero work. Some of these may go to a vote at the 2023 AGMs – stay tuned for more.
- Along with allies, we have contributed to advancing financial regulation on climate change, including submitting input to the OSFI draft climate risk guidance and tracking green/transition taxonomy conversations.
In the Media
- Throughout our work we have garnered extensive media coverage, both through media stories and through opinion pieces helping to educate the media, the investment community, and the wider public regarding the net zero progress — or lack thereof – of large Canadian companies. We also continue to build our social media channels — follow us on LinkedIn here.
As we look forward to 2023, we will be tracking these big questions:
- Will the investment community shake off greenwashing and greenhushing?
The term “greenwashing” is widely understood, and unfortunately still captures what some Canadian companies are up to – or many of them in the oil and gas sector.
A new term though is “greenhushing” and describes the practice of companies not talking about their environmental work for fear of getting called out, either for greenwashing, or lately for being too “woke” by climate denying politicians.
At the same time, many institutional investors have net zero commitments and are under increasing pressure to show results. Most eschew fossil fuel divestment, claiming that “engagement” works better, but are yet to show proof, particularly when our major polluters plan to expand fossil fuel production and show up poorly in investor assessments. In 2023 we’ll be watching whether these investors begin to replace vague “engagement” with “escalation” and start to use their votes and ability to file shareholder proposals to advance change.
- Will CCUS continue to distract from the energy transition?
The biggest bubble in the Canadian investor world isn’t financial – it’s rhetorical. Here’s how it goes: carbon capture is going to make Canada’s oil industry net zero and ensure that the last barrel of oil will be a Canadian one.
Unfortunately, it’s just not true. Carbon capture may have a role in steel or cement or other heavy industry, but for oil – even if it works — it wouldn’t capture the 75-80% of emissions that occur downstream, meaning that “net-zero oil” is an oxymoron. And there are serious doubts it will work at the scale being contemplated. Which is why the industry, rolling in money, is asking taxpayers to take the risk on their behalf via tens of billions in subsidies.
Here’s the reality: a true net-zero transition means that the world shifts away from burning fossil fuels, meaning a demand peak for oil over the next decade and an oil market that then forever favours the lowest cost producer, which isn’t Canada. (Worse, CCUS would make Canada an even higher cost producer).
The oil industry is working hard to keep the story going, and lobbying Ottawa for ever more subsidies. So far investors have gone along, maybe not wanting to face the fact that their existing investments are at risk. But at some point as the contrary evidence mounts, the rhetorical bubble will burst, and perhaps then we can prioritize a just transition while shifting investments into clean energy.
- Will Canadian regulators regulate?
Canada is behind the EU when it comes to regulating climate risk in the financial sector. This is worrying given that our carbon-heavy economy poses greater transition risk — a pilot by the Bank of Canada and OSFI said so.
In 2023 we expect this to change in some initial ways. OSFI will finalize B-15 on climate risk guidance, and while we don’t yet expect OSFI to embrace double materiality or to re-align incentives to reduce carbon exposure, at least it will bring better disclosure as a starting point.
And Ministers Freeland and Guilbeault may finally start a democratic process to design a green and transition taxonomy for Canada, something that has had a couple of false starts.
Finally, we’re hoping that Canada’s securities commissions will continue to expand on their greenwashing work and push into areas like sustainability-linked bonds. Stay tuned for more on that from us in the New Year.