Canada appears ill-prepared to deal with climate risk and the transition to a lower-carbon economy, according to new data from FTSE Russell.
The firm reported that Canada ranks 18th out of 22 developed countries when it comes to its preparedness and ability to deal with climate risk. It ranked 21st for cutting greenhouse gas emissions to meet the standards required under the Paris Accord.
“Canada’s resilience (i.e., institutional, social, economic and ecological) are below average, and not enough to counterbalance its transition challenges,” the report said, adding that those challenges are key to improving Canada’s overall climate risk, especially given the significance of the oil and gas sector to the country’s economy.
Canada ranked much better in terms of its physical risk — fifth out of 22 countries — as its susceptibility to the effects of climate change, such as rising sea levels and natural disasters, is much lower than that of other countries.
The rankings are based on FTSE Russell’s Climate Risk-Adjusted World Government Bond Index (Climate WGBI), which measures the performance of sovereign bonds, weighted by countries’ relative exposure to climate change.
“In collaboration with Beyond Ratings, FTSE Russell has developed a proprietary climate risk measurement methodology so that investors can better understand in detail the risks as well as the opportunities that climate change presents as well as the dynamic nature of these risks,” Marina Mets, managing director of product management at FTSE Russell Canada, said in a statement.
“We’ve initially developed our methodology around sovereign bonds and are working to extend this same lens to Canada’s corporate and provincial bond sectors,” she added.