canada

Canadian collaborative engagement initiative Climate Engagement Canada (CEC) has published its net-zero benchmark, a key element of its strategy to help investors engage with companies. 

The aim of the benchmark, published last week, is to provide a set of common standards for investors to evaluate companies’ progress towards aligning with the Paris Agreement.

CEC, a $4.4 trillion collaborative engagement initiative targeting the country’s heaviest emitters, will benchmark its focus list companies’ commitments and performance against the criteria.

It is working to assess focus companies based on the benchmark, saying investors “can expect to see evaluations” of all companies in the autumn.

CEC is coordinated by Canada’s Responsible Investment Association, the Shareholder Association for Research and Education (SHARE) and Ceres.

Its 27 founding members include RBC Global Asset Management, Alberta Investment Management Corporation, Addenda Capital, Manulife Investment Management, BMO Global Asset Management, Scotiabank and University Pension Plan Ontario.

The 40 firms selected for engagement – which began in mid-2022 – operate across the Canadian economy in the following sectors: oil and gas, utilities, mining, agriculture and food, transportation, materials, industrials and consumer discretionary.

Earlier this year, CEC kicked off a consultation on the benchmark, which had a strong focus on the Just Transition and the need to safeguard indigenous rights. According to CEC, responses to the consultation came from participant investors, NGOs and Indigenous voices.

The disclosure assessments will be complemented by sector-specific studies of alignment of capital expenditures, lobbying and advocacy activities, and other elements that will help investors assess company progress on climate objectives.

Climate solutions

When comparing the draft benchmark and last week’s version, one difference is that the final benchmark calls for companies to specify the role of “climate solutions”, such as low-carbon technologies, infrastructure or other activities that help displace fossil fuels, in their decarbonisation strategies. The draft version had instead called for companies to specify the role of “green revenues from low-carbon products and services”.

In addition, the final iteration also says the benchmark will “leverage” the Canadian taxonomy when it is published and/or the EU’s criteria on turnover, revenues or green projects “as appropriate”.

In March, the Sustainable Finance Action Council (SFAC) – the body mandated by the Canadian government in 2021 to establish definitions around green and transition investments – published its taxonomy roadmap report.   

The update followed work on Canada’s long-overdue “transition taxonomy” being stalled in early 2022.

Another addition to Thursday’s version in comparison with the previous iteration surrounded bolstering companies’ commitment to the principles of free, prior and informed consent (FPIC) where Indigenous peoples are affected by its decarbonisation strategy.  

This week’s update expands the metric to have companies also outlining “a process to ensure the participation of Indigenous peoples in decisions affecting them consistent with the effective protection of their fundamental right”. 

Unsurprisingly, the benchmark is closely aligned with the one developed by Climate Action 100+ (CA100+).

When the consultation in January was launched, CEC said the benchmark had been designed based on the CA100+ benchmark (version March 2022) “to advance a global standard for climate action”. 

And at the time, a spokesperson for CA100+ told Responsible Investor: “We are in contact with Climate Engagement Canada, and the two initiatives will seek to align their benchmark methodologies where appropriate.”