RBC Global Asset Management, Alberta Investment Management Corporation, Manulife Investment Management, and University Pension Plan Ontario are amongst 27 founding members of a new Canadian shareholder engagement programme targeting the country’s heaviest emitters.
Coordinated by Canada’s Responsible Investment Association, the Shareholder Association for Research and Education, Ceres and the Principles for Responsible Investment, Climate Engagement Canada (CEC) will facilitate the $3trn group of investors in collaborative engagements with key companies “to promote a just transition to a net zero economy”.
The initiative has had “strategic leadership” from Barbara Zvan, CEO of Canada’s new University Pension Plan. Until last year, Zvan served as Chief Risk & Strategy Officer at the C$228bn Ontario Teachers' Pension Plan Board, during which time she was one of four members of the federal government’s Expert Panel on Sustainable Finance.
‘CEC will work to achieve real-world outcomes that are meaningful for the climate and support just transitions for affected workers and communities’ – Barbara Zvan, University Pension Plan
That panel made a series of recommendations in 2019 to decarbonise the nation’s financial system and foster green finance. Those recommendations included the creation of a national engagement program, akin to the influential global network Climate Action 100+, which mobilises hundreds of institutional investors to engage with ‘systemically important carbon emitters’.
“Climate Action 100+ set a clear precedent for collaborative shareholder engagement,” said Zvan in a statement announcing CEC’s launch today. “The question for the Expert Panel was how to adapt this successful model to the Canadian context, to amplify climate ambition and action at home. What CEC delivers is a unified vision from Canada’s financial community and support for our businesses in finding competitive advantage in the transitioning economy.”
Despite Canada’s resource-heavy economy, there are only six Canadian firms on the list of 167 companies targeted by CA100+. CEC is expected to focus on around 40 companies in Canada, although the final list is yet to be finalised, Zvan explained.
One of the priorities for the investors will be to promote the protection of workers and jobs as the economy decarbonises – known as a ‘Just Transition’.
“Many Canadians are employed in the natural resources sector,” Zvan told RI. “Canada’s transition cannot be considered sustainable if it leaves these segments of the population behind. CEC will work to achieve real-world outcomes that are meaningful for the climate and support just transitions for affected workers and communities.”
Last week, RI reported that CA100+ will also begin scrutinising how companies are addressing the Just Transition.
“As far as we’re aware, CEC is the first of its kind as a national engagement program focused on climate action. Hopefully we can be a model for other regions to learn from our experience if they wish to create a similar initiative,” Zvan said.
The CEC is the latest in a swathe of sustainable finance initiatives being launched in Canada. The country’s long-awaited ‘transition taxonomy’ is slated to be released before the end of the year – a market-driven project outlining which business activities are considered supportive of the transition to a low-carbon economy.
Zvan told RI that CEC will “leverage” the taxonomy in its engagement work, “making issuers aware of it in our dialogues with them”.
Earlier this week, Canada’s Office of the Superintendent of Financial Institutions (OSFI) said it will announce the “next steps on its climate-related policy work” early in 2022.
Over the summer, more than 70 financial institutions, pension funds and other stakeholders gave their feedback on the regulator’s discussion paper on climate risk, first published in January. A summary of that feedback was published on Tuesday, in which OSFI noted general agreement between the regulator and stakeholders that any future guidance should be principles-based and “aligned with global standards where they exist, while considering the Canadian context”.
OSFI said such guidance would be informed by the results of a project on climate-risk scenarios that it is currently undertaking in partnership with the Canadian central bank. An update will be communicated later this year, it added, and it will continue to consider broader ESG risks for its supervised entities.
OSFI is also working with the Canadian Association of Pension Supervisory Authorities on guidance on how to integrate ESG into pension investment decisions, and “will assess the need for additional guidance thereafter,” it said.
Other topics on which the regulator received suggestions during the consultation included climate disclosure, the taxonomy and measurement metrics.