Launched in 2021, Climate Engagement Canada (CEC) is a Canadian financial sector-led corporate engagement program to accelerate Canada’s transition to a low-carbon future. The program initiates engagements with publicly-traded company boards and senior management to address the concerns and expectations of the finance community to build climate resiliency across the value chain, consistent with Canada’s commitment to the Paris Agreement on Climate Change.

In April 2018, the Government of Canada appointed the Expert Panel on Sustainable Finance to explore opportunities and challenges in sustainable finance. The panel’s Final Report, published in December 2019, included Recommendation 10.2, which urged Canada’s leading asset managers to establish a national investor-led engagement Program, akin to Climate Action 100+, to drive consistent dialogue with Canadian issuers, inspired by the broader recommendations to align Canada’s financial system with a low-carbon future.

Through engagements, corporate issuers are encouraged to achieve the following:

1. Define accountability and oversight of climate change risks and opportunities;
2. Develop a clear roadmap anchored in comprehensive strategies to reduce their GHG emissions across their value chains;
3. Set measurable targets of relevance to their sector;
4. Disclose their climate data in alignment with the best-in-class standard of the Task Force on Climate-Related Financial Disclosures (TCFD); and
5. Ensure that advocacy efforts, including those conducted via industry associations, are aligned with the goals of the Paris Agreement.

CEC targets high-emitting sectors with a goal to incentivize companies within these industries to integrate climate resilience throughout their entire supply chain, consistent with Canada’s commitment to the Paris Agreement. While it is understandable that companies have complex business structures, the ultimate goal of their decarbonization strategies needs to ensure that, as a whole, it will be able to meet the conditions for a 1.5-degree scenario. Therefore, investors will anticipate climate action plans that outline a comprehensive strategy and specify the contributions of all company activities toward eliminating GHG emissions by 2050.

Achieving net-zero emissions by 2050 is aligned with the level of action recommended by the Intergovernmental Panel on Climate Change (IPCC) to mitigate the damaging impacts of climate change. Specifically, the IPCC’s Special Report on the Impacts of Global Warming of 1.5°C outlines that a trajectory limiting global warming to 1.5°C necessitates a 45 percent reduction in greenhouse gas emissions by 2030 (relative to a 2010 baseline) and achieving net-zero emissions by 2050. The International Energy Agency’s Net-Zero by 2050: A Roadmap for the Global Energy Sector report, published in May 2021, further indicates that certain sectors, such as electric utilities, may need to reach net-zero emissions even earlier than 2050 to meet this goal.

The 2020s is a “decisive decade” where global emissions must decrease substantially if the world is to have a chance at avoiding some of the worst impacts of climate change. While it is encouraging that many companies are committing to net-zero emissions, it is essential for there to be near-term accountability in order for these commitments to be credible. Mid and short-term targets allow investors to manage for risks of company staff making bold long-term future commitments with the responsibility to achieve them being put off down the road and potentially falling to their successors. 

Therefore, investors should expect companies to outline near-term accountability measures that provide them with confidence that their commitments will be met. This could include disclosures such as the indicators within the CEC Net Zero Company Benchmark.

No, CEC does not focus on banks and the financial sector. The Initiative focuses on those companies with the largest direct and indirect greenhouse gas emissions, including their value chains, rather than financed emissions. Investors are encouraged to engage with financial institutions through alternate channels and complementary programs.

Methodological frameworks such as those produced by the Science Based Targets initiative (SBTi) can help investors assess the robustness of a company’s emissions reduction target and determine the extent to which it is aligned with the goals of the Paris Agreement. Targets are considered “science-based” if they are in line with what the latest climate science says is necessary to meet the goals of the Paris Agreement. That is, to limit global warming to well below 2°C above pre-industrial levels, with the optimal aim being to limit warming to 1.5°C. Companies can submit their emissions reductions targets to SBTi for review and validation, providing investors with an independent assessment of their robustness and level of ambition. Science-based targets are generally anchored over time frames of 2030 and 2050.

CEC is committed to ensuring that companies examine the climate-related risks and impacts connected to their most material sources of greenhouse gas emissions. This means CEC Participants consider how companies can effectively address and disclose how they manage climate risks, as well as direct and indirect Scope 1, 2 and 3 emissions across their value chains.

For example, the most material or greatest source of greenhouse gas emissions of an auto manufacturer are those generated during the use of the vehicles it sells (Scope 3). Value chain emissions, like those of vehicles, are substantial sources of greenhouse gas emissions. Such value chain emissions are highly material to reducing emissions. Transportation emissions account for a quarter of annual global emissions. If only Scope 1 and 2 emissions had been used to assess the footprint of auto companies, transportation emissions would have not been sufficiently taken into consideration.

Climate Engagement Canada (CEC) seeks to protect the privacy of Participants. Participants can disclose the companies they are engaging with as part of the Initiative, as well as the collaborative engagement groups they are participating in, at their own discretion. However, they must first obtain explicit permission from each relevant Participant before disclosing the following:

• Participants assigned as Lead Investor for any collaborative engagement group;
• Names and identities of other Participants in a collaborative engagement group;  
• The Focus List Companies engaged by other Participants; and  
• Any other involvement that other Participants may have in CEC.

The CEC secretariat phased the launch of engagement teams according to four groups:

• Group A, with sixteen companies launched in June of 2022.  
• Group B, with nine companies launched in August 2022.
• Group C, with seven companies launched in September 2022. 
• Group D, with the remaining companies, has launched and will continue to initiate engagements on an ongoing basis as additional participants are enlisted into each team.

* Of note, four out of the five companies currently not engaged by CEC Participants provided feedback on their preliminary assessments in the inaugural CEC Net Zero Benchmark in 2023. This underscores the high level of engagement these companies have with CEC and the assessment process of the CEC Benchmark.