Climate Engagement Canada (CEC) has developed our Net Zero Benchmark (the CEC Benchmark, Benchmark, or Disclosure Framework) to provide a set of common standards for investors to evaluate corporate issuers’ progress towards aligning with the Paris Agreement’s ambition, limiting global warming to well below 2 degrees Celsius, while pursuing efforts to limit the increase to 1.5 degrees.

The CEC Net Zero Benchmark includes ten disclosure indicators—as recommended by the Technical Committee and its Just Transition/Indigenous Issues Working Group—whilst layering in additional context specific to Canada’s unique economy. The CEC Net Zero Benchmark was further refined by incorporating feedback from a consultation period, which involved CEC participant investors—including some of Canada’s largest asset managers and asset owners—, NGOs, and Indigenous representation. CEC participants will use the Benchmark for input and discussion in their collaborative engagement activities with Focus List companies. The results of the Benchmark also provide input to investor participants and other stakeholders on areas that require additional focus, research, or support.

The company data on Disclosure Framework Indicators are based on information readily and publicly available to investors about emissions reductions targets, decarbonization strategy, capital allocation alignment, climate policy engagement, governance, and just transition issues (e.g., regulated filings and voluntary disclosures such as ESG/Sustainability Reports). The CEC Benchmark also evaluates the extent to which companies disclose according to the framework recommended by the Task Force on Climate-Related Financial Disclosures (TCFD). The Benchmark draws on distinct analytical methodologies and data sets to provide investors and other stakeholders with a robust tool to facilitate engagement with CEC Focus List companies.   

The CEC has established a Focus list of companies that are the top reporting or estimated emitters on the Toronto Stock Exchange (TSX) and/or companies with a significant opportunity to contribute to the transition to a low-carbon future—and become a sectoral and corporate climate action leader in Canada. These firms operate across the Canadian economy in the oil & gas, utilities, mining, agriculture & food, transportation, materials, industrials, and consumer discretionary sectors. The CEC Net Zero Benchmark, provides a set of detailed and comparative common standards to support corporate issuers’ progress towards aligning with the Paris Agreement’s ambition.

CEC participants will use the Benchmark for input and discussion in their collaborative engagement activities with Focus List companies. The results of the Benchmark also provide input to investor participants and other stakeholders on areas that require additional focus, research, or support. In the coming months, CEC will continue to provide insight and input into the Benchmark results, trends, and opportunities for collaboration and engagement. The Benchmark and ongoing efforts will continue to support CEC’s goal of driving dialogue with Canadian corporate issuers to promote a Just Transition to a Net-Zero economy. 

The Benchmark compares Focus List companies on a national and international scale to other companies. Investors can utilize this information to determine whether a company’s declared decarbonization goals and its actual or projected decarbonization investments and activities are aligned. In the future, alignment assessments will be undertaken, including—but not limited to—a report on corporate lobbying associated with climate change covering individual companies and associations.

Yes, before the publication of the Benchmark final assessments, the CEC Focus List companies have received their assessment and associated methodologies.  Each Focus List company receives an assessment of their performance against the Disclosure Framework for review prior to publication. During a review period, the companies were encouraged to identify any missed disclosures or to provide additional references for evaluation against the Detailed Guidance (described in the CEC Benchmark). Final assessments are also shared with the companies before this information becomes publicly available.  

The CEC Benchmark measures commitments and targets that companies have established, and whether these are in line with the goal of the Paris Agreement to limit global warming to 1.5°C by the end of the century. A number of the indicators in the Disclosure Framework of the CEC Benchmark focus on this item.  For example, Indicator 1 confirms if companies have pledged to achieve net zero emissions by 2050, which is the level of ambition needed to limit global warming to 1.5°C. Other indicators, such as Benchmark metrics 2.3, 3.3, and 4.3, examine how closely a company’s emissions align with 1.5°C scenarios. Indicator 6 looks at whether companies plan to invest in ways that align with 1.5°C, while Indicator 7 assesses whether companies are lobbying in support of the Paris Agreement. Finally, Indicator 10 assesses whether companies have included a 1.5°C scenario in their climate-related analysis.  

According to the CEC Benchmark, in order to qualify as having a Net Zero Target, a company must clearly identify a base year and affirm that the target covers all or nearly all of the company’s Scope 1 and Scope 2 emissions. 

In its inaugural year, the CEC Benchmark was conducted on source documents published prior to and up to June 1, 2023. The establishment of a cut-off data was necessary to set a benchmark that can be assessed annually, and to allow Research Partners to conduct the assessment prior to publication. For material disclosures published after the cut-off date, the CEC plans to acknowledge interim progress in notes accompanying the Benchmark. Allowances were made for two publications released only a few days after the cut-off date as this was the first assessment year.

Investors should be able to readily access relevant sustainability reporting in company disclosures, including regulated disclosures (e.g., Annual Information Forms) and voluntary reporting—including but not limited to ESG/Sustainability reports or official company press releases.  HTML sites are easily modified, difficult to date, and potentially complex to navigate. As such, these are less reliable sources of information for investors.

Advocacy in support of climate policies consistent with the Paris Agreement, as well as ensuring that any trade association of which a company is a member does the same demonstrates alignment of a company’s activities with its commitments. Corporate advocacy activities that are inconsistent with commitments to meet the goals of the Paris Agreement may pose financial risks to companies and  investors, including:   

Regulatory risks – Delays in policy action on climate change could result in the need for stronger and more drastic regulatory interventions later, leading to higher costs for investee companies;   

Systemic economic risks – Delay in the implementation of the Paris Agreement could increase the physical risks from climate change, which elevates uncertainty and volatility in portfolios, and poses a systemic risk to global economic stability; and   

Reputational and legal risks – Investee companies may face backlash from their consumers, investors or other stakeholders if they, or the associations they are members of, are seen to be delaying or blocking effective climate policy.   

To develop a uniquely Canadian approach to accelerate the de-carbonization of our economy, Canadian investors are encouraged to reflect national commitments, such as the Calls to Action of the Truth and Reconciliation Commission, as well as the United Nations Declaration on the Rights of Indigenous Peoples.  

To put these commitments into action, the CEC Secretariat formed a Just Transition Working Group that, under the oversight of the Technical Committee and with the approval of the Steering Committee, determined that the CEC Benchmark should establish an indicator focused on Indigenous rights and reconciliation. Among the key considerations for having a separate indicator around Indigenous issues are to highlight the importance of incorporating an Indigenous lens to Canada’s net-zero transition, the unique legal and social context surrounding Indigenous rights, and the potential outsized impact that transitioning out of GHG-intensive industries may pose on First Nations, Inuit and Métis workers, communities, and customers.    

The CEC Just Transition & Indigenous indicators are informed by Canadian and International policy documents, including the CA100+ Just Transition Indicator, Section 35 of the Constitution Act 1982, call to action #92 of the Truth and Reconciliation Commission of Canada, the Paris Agreement, the International Labour Organization’s (ILO) Just Transition Guidelines, and the World Benchmarking Alliance’s Corporate Human Rights Benchmark (CHRB) and its Just Transition benchmarks, among others.  As such, Indicator 9 is crucial in ensuring that Canadian companies adopt practices that support a just transition and reconciliation with Indigenous Peoples.

“Indicator 1: Net Zero Ambition by 2050 (or sooner)” of the CEC Benchmark is designed to capture the company’s high-level commitment to net zero. Indicator 1 should be seen as complementary to “Indicator 2: Long-term targets” of the CEC Benchmark, which includes a verification step in the form of Sub-indicator 2.3 that evaluates whether a company’s long-term target (covering the timeframe from 2035-2050) is aligned with a 1.5C pathway for its sector. Sub-indicator 2.3 as well as Sub-indicators 3.3 and 4.3 come closest to SBTi’s approach, though they are not the same thing.   

Transition Pathway Initiative (TPI), which assesses Sub-indicator 2.3, 3.3 and 4.3 for CA100+, use a slightly different approach to verifying company targets, although both TPI & SBTi draw on the same foundations (both SBTi and TPI use the IEA’s Net Zero Emissions by 2050 – or 1.5°C – scenario and the Sectoral Decarbonisation Approach to map out 1.5C pathways for sectors). This means that they don’t always come to the same conclusion on whether targets are 1.5°C aligned or not.  In sum, Indicator 1 is framed differently than the SBTi standard, but together with Sub-indicator 2.3, it puts forth a similar level of ambition by checking whether companies have robust, 1.5°C-aligned long-term targets.   

The assessment of Sub-indicator 5.2 and related metrics leverage the Canadian Taxonomy and/or the European Union’s Green Taxonomy criteria on turnover, revenues, and/or green projects as appropriate and will continue to do so in future iterations of the Benchmark. The criteria used to assess companies with significant operations in jurisdictions subject to classification systems and regional taxonomies will be at the discretion of the CEC Steering Committee and Technical Committee and considered as part of the CEC benchmark assessment process.