The urgency surrounding the climate change crisis is pushing institutional investors to focus on stricter measurements in the fight against confusing data that delays meaningful action.
But voluntary measurements won’t be enough, as investors have already raised red flags against unreliable climate impact measurements getting in the way of their emissions reduction goals. The start of the new year brings about a blank slate to set new targets and it’s about time all parties get on the same page to work on a unified approach to climate change investment.
Read: How Canada’s large pension funds are approaching green investment disclosures
After much anticipation, last year saw the official launch of the disclosure guidelines built by the Canadian Sustainability Standards Board. These standards were highlighted by a group of Canada’s 10 largest pension plans. The group encouraged Canadian companies to adopt the metrics — since these aren’t enforced by any financial regulator in the country — sooner rather than later and improve their material sustainability-related information reporting.
“For major institutional investors, complete, comparable sustainability-related information is a key part of making informed investment decisions,” a joint press release from the pension funds said. “The CSSB’s standards address both general sustainability-related disclosures and climate-specific requirements, thus providing a framework to access this critical information.”
It’s encouraging to see some of the most sophisticated investors in Canada boost the visibility of the metrics to those seeking investment pools of capital. It will be necessary for this initial step to be met with a serious commitment to improve climate reporting in the ongoing pursuit of transparency within transition plans that can help with direct action against the climate crisis.
Read: Scope 3 emissions investment disclosure crucial for institutional investors: report
Detailed information from these metrics helps asset owners determine risk models and find a path to effective transition within their portfolio, with some even arguing for stricter guidelines that include Scope 3 disclosures, a greenhouse gas emissions metric used to measure the impact caused indirectly by a firm through its value chain.
The group consists of the British Columbia Investment Management Corp., the Caisse de dépôt et placement du Québec, the Canada Pension Plan Investment Board, the Healthcare of Ontario Pension Plan, the Investment Management Corporation of Ontario, the Ontario Municipal Employees Retirement System, the Ontario Teachers’ Pension Plan, the OPSEU Pension Plan Trust Fund, the Public Sector Pension Investment Board and the University Pension Plan.
It’s clear there are cracks showing in the collaboration efforts to achieve net-zero emissions. Global asset manager BlackRock Inc. announced it would leave the Glasgow Financial Alliance for Net Zero, which launched in 2021. The investment firm cited confusion regarding its own practices and facing legal inquiries from various public officials, according to a report from Bloomberg.
Read: CSSB releases financial reporting, climate disclosure guidelines
The effort was originally led by Mark Carney, co-chair of the GFANZ and a UN special envoy for climate action and finance, who’s expected to launch a leadership bid for the Liberal Party of Canada and could play a role in future climate action policy for the country.
During his address to the annual general meeting of the Net-Zero Asset Owner Alliance last November, the UN Secretary-General António Guterres pointed out there are those looking to leave their climate goal efforts behind, noting there are parties desperately looking for ways to delay the energy transition needed to help preserve the planet.
There’s a long way to go for a unified strategy that truly prioritizes environmental results. As part of the launch for the High-Level Expert Group on the Net-Zero Emissions Commitments of Non-State Entities, the United Nations said the Paris Agreement in 2015 brought a new era for climate pledges accompanied by all sorts of new criteria and benchmarks to set net-zero commitments with what it describes as varying levels of robustness.
“This misleads consumers, investors and regulators with false narratives and it feeds a culture of climate misinformation and confusion,” it said.
Bertrand Millot, head of sustainability at the Caisse, put it simply to Benefits Canada last year as part of a feature on disclosure trends. “Companies need to disclose more and disclose uniformly. This is why adhering to uniform standards is a good idea. . . . If companies don’t disclose, we don’t have any information.”
Read: CIA calling on financial organizations to include effects of climate change in risk projections