When it comes to corporate disclosure of greenhouse gas (GHG) emissions, Canada’s performance is in line with the U.S. but far below Europe and the U.K., says a new report from the Institute for Sustainable Finance.
The report is the organization’s first-ever assessment of how well TSX companies are disclosing emissions and climate-related targets, and it found that roughly two-thirds of companies (or 150 out of 222) are providing such disclosure. That compares with 46% in Japan and 55% to 67% in the U.S., but falls below the thresholds of 79% and 99% of companies reporting in Europe and the U.K., respectively.
Looking at the 150 domestic companies that do provide data, the report found that the group’s emissions “comprise approximately 72% of total index firm emissions,” according to estimates. Yet, “only 65 (or 43%) of disclosing firms have their emissions estimates verified by a third-party provider,” leading to real issues with data availability and quality.
For portfolio managers and institutions, for example, this can mean that “determining measures of portfolio carbon intensity will require a significant amount of estimation,” the report said.
As for emissions reduction targets, only 27% of TSX 60 companies have stated goals. That’s below the 2020 figure of 53% for S&P 500 index companies, the report said, and “even further below the figure of 67% for FTSE 100 index firms.”
The further challenge is that the detail provided about those goals varies widely. While 15% of the firms with goals have offered detailed plans, 62% provide only some detail and 23% simply provide “boilerplate comments or no details at all,” the report said.
What’s more, only 25% of that group have tied executive compensation “directly to reductions targets,” versus loose climate-related incentives or no specific links. As such, “there is room for improvement in terms of the number of firms establishing targets for GHG emission reductions,” the report said.
There is some good news: “Those Canadian companies that are disclosing GHG emissions and setting climate targets are among our largest emitters,” said Sean Cleary, co-author of the report and chair of the Institute for Sustainable Finance at Smith School of Business, Queen’s University.
If those companies reach their targets, he said in a release, the effort could lower the TSX’s carbon profile by close to 20% by 2030. “Obviously, the actions of Canada’s largest emitters are critical to achieving progress,” he said.