Q3 | OCTOBER 2021
CLIMATE
ENGAGEMENT
Our 2021 Q3 Climate Engagement report highlights some of the milestones from client engagements over the past three months. As we get closer to COP 26, investor action on climate change is becoming an active priority. Learn more about some of our recent engagements on oil and gas, net zero, as well as the launch of Climate Engagement Canada.
Table of Contents
CLIMATE ACTION POLICY
Climate-concerned investors urge governments to take action ahead of Glasgow Summit
Following a summer of catastrophic weather events, and a “code red for humanity” issued by the world’s climate scientists, 587 investors worldwide comprising $46 trillion AUM, are urging governments to rapidly implement five priority policy actions that will allow them to most effectively invest to address the climate crisis.
“Investors are a critical voice in shaping our country and our world’s response to climate change,” said SHARE’s Associate Director of Climate Advocacy Jennifer Story.
“If we are to avoid climate catastrophe, we need both investment and policy alignment with a pathway that keeps warming below 1.5 degrees. There is still time, but there is no time to waste.”
SHARE has signed this statement on behalf of its engagement clients, urging Canada and governments around the world to take specific steps in the leadup to the global climate summit in Glasgow:
1. Strengthen their NDCs for 2030 before COP26, to align with limiting warming to 1.5-degrees Celsius and ensuring a planned transition to net-zero emissions by 2050 or sooner.
2. Commit to a domestic mid-century, net-zero emissions targetand outline a pathway with ambitious interim targets including clear decarbonization roadmaps for each carbon-intensive sector.
3. Implement domestic policies to deliver these targets, including the removal of fossil fuel subsidies, the phase-out of thermal coal, the avoidance of new carbon-intensive infrastructure and the development of just transition plans.
4. Ensure COVID-19 economic recovery plans support the transitionto net-zero emissions and enhance resilience, including facilitating investment in zero-emissions energy and transport infrastructure.
5. Commit to implementing mandatory climate risk disclosure requirementsaligned with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations, ensuring comprehensive disclosures that are consistent, comparable, and decision-useful
SHARE will continue to work closely with our responsible investment partners to articulate the policy gaps and solutions needed for effective action in Canada, and beyond, and will reassess its approach to policy advocacy on climate following the Glasgow Summit.
NET ZERO REGULATIONS
Investors advocate for rigorous net zero standards in oil and gas sector
Investor engagement through the global climate investor initiative CA100+ has made a substantial impact on the trajectories of many companies and sectors. In the oil and gas sector it has helped facilitate net zero commitments and transition plans. But not all of these plans have been credible nor have they necessarily been rooted in science-based targets and credible pathways.
In order to evaluate and, where needed, push for higher quality transition plans in the oil and gas sector, the International Investors Group on Climate Change, the Transition Pathways Initiative and others have recently come together to publish a “Net Zero Standard for Oil and Gas.”
The standard in effect takes the objectives measured by the CA100+ net zero benchmark and provides supplementary detail on how to apply and measure progress within the specific context of oil and gas production. effectively elaborates on how to set ambition and measure progress on the CA100+ net zero benchmark. A few highlights:
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- Ambition: A net zero ambition should be comprehensive, and should include Scope 3 use of sold products and methane)
- Targets: companies can set targets based on absolute and/or intensity metrics but should indicate how an intensity target translates into absolute emissions and vice versa
- Decarbonization Strategy: companies intending to rely on offsets, CCUS or third-party actions to “net off” gross emissions should also state the individual contribution of these measures and provide additional disclosure on these actions
- Capital Expenditures: Companies should disclose a 3 year capex budget; investment in CCUS and other CDR measures should also be specified; companies opting to invest in green energy should specify “green” capex
- Governance: Links between executive remuneration and climate targets should be prominently disclosed, and any link between remuneration and fossil fuel production growth should be removed
SHARE will use this enhanced framework in its upcoming conversations with Canadian oil and gas companies, and through its ongoing work on CA100+ engagements.
CLIMATE ENGAGEMENT CANADA
Financial community launches Climate Engagement Canada to promote a just transition to a net-zero economy
October 14 marked the official launch Climate Engagement Canada (CEC) – a finance-led initiative that aims to drive dialogue between the financial community and Canadian corporations to promote a just transition to a net zero economy.
SHARE is pleased to announce it will be the engagement secretariat for this initiative, coordinating participants in collaborative engagements with the top emitting companies traded on the TSX. SHARE is joined in coordinating this initiative by the Responsible Investment Association (RIA), Ceres, and The UN Principles for Responsible Investment (PRI) is also supporting the program.
The initiative has also leveraged strategic leadership from Barbara Zvan, who served as a member of Canada’s Expert Panel on Sustainable Finance.
The program is launching with over 25 investors as Founding Participants, who collectively manage more than $3 trillion in assets. A complete list of Founding Participants and supporting organizations is available on the CEC website at climateengagement.ca.
The CEC’s development was inspired by Canada’s Expert Panel on Sustainable Finance, which in 2019 made a series of recommendations to align Canada’s financial system with a low carbon future. One of the Expert Panel’s recommendations was to establish a national engagement program, akin to the global Climate Action 100+ initiative, to drive a broader and more consistent dialogue with Canadian issuers around climate risks and opportunities. Climate Engagement Canada is that program.
“Climate change is a systemic challenge for investors and capital markets as a whole,” said Kevin Thomas, CEO at SHARE. “It can’t be avoided, it can’t be hedged against, and it can’t be solved at an individual portfolio level. It requires ambitious, persistent collective action at a larger scale and faster pace. We’re bringing together the whole of the corporate balance sheet – shareholders, lenders, insurers, and others – to set a course for the biggest transition of our lifetime.”
READ: Investors target Canada’s top 40 carbon emitters (Corporate Knights)
Are you interested in joining SHARE’s University Network for Investor Engagement (UNIE) program?
Shareholder engagement is a responsible investment strategy that enables investors to use their voices as shareholders to support better corporate sustainability policies and practices.
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