Canadian Companies Lag on Emissions Reduction, Just Transition
Despite “incremental progress” investor-led engagement initiative’s benchmark finds firms still have room to improve on net zero commitments.
Climate Engagement Canada’s (CEC) second annual Net Zero Benchmark has found investee companies are still performing poorly on short-term greenhouse gas (GHG) reduction targets and just transition plans.
The Net Zero Benchmark from the investor-led engagement initiative assesses 41 carbon-intensive Canadian companies – including oil companies, public utilities, transportation companies and manufacturers – on their progress against climate goals to increase alignment with the Paris Agreement.
The Canadian Climate Institute has estimated that the country will suffer annual losses in economic growth of C$35 billion (US$25 billion) by 2030 as a result of climate change.
According to the Canadian government, between C$15 billion to C$25 billion of public and private investments are being made each year to cut its economy’s GHG emissions.
The CEC’s focus list firms were found to have made “incremental progress” on eight of the ten benchmark indicators, but in certain key areas progress has been slow or, in some cases, has gone backwards.
“It is crucial that Canada’s highest emitters further progress towards aligning with the Paris Agreement,” said Katie Wheatley Head of Canada at the UN-backed Principles for Responsible Investment and CEC Steering Committee Vice-Chair. “Investors will be looking for ambitious and comprehensive emissions reductions targets to accompany the growing number of net zero commitments being made.”
The CEC flagged that despite an increase in companies with net zero commitments, more than half are yet to set “adequately ambitious or comprehensive” long-term emissions reduction targets. Less than 40% of the companies had even a partial short-term GHG reduction target, with three firms seeing their scores for the indicator decline compared to 2023.
Just two of the 41 companies have partial just transition strategies in place. In response the CEC said companies’ decarbonisation plans had “systematically fail[ed]” to acknowledge the social impacts, risks and opportunities presented in activities needed to achieve emission reduction goals, heightening the potential that just transition matters have not been appropriately considered.”
More than half of the companies are also yet to disclose sufficient climate-related scenario analysis, including for a 1.5°C temperature rise.
“It’s encouraging to see incremental progress across nearly all key indicators in the 2024 Benchmark,” said Barbara Zvan, President and CEO of University Pension Plan and CEC Steering Committee Chair. “However, we must recognise that while commitments to net zero are increasing and accountability for climate action is improving, greater action is needed to ensure Canadian companies can meet investor expectations and remain competitive in global capital markets.”
CEC’s membership includes 51 institutional investors representing almost C$7 trillion.
Engagement and encouragement
While CEC’s benchmark showed there are areas requiring improvement from focus companies, others saw notable progress. Transparency on advocacy and industry involvement improved, with 11 more companies disclosing their climate-related lobbying activities compared to the 2023 benchmark.
Accountability for climate action also improved, with formal board oversight in place across all 41 companies. Meanwhile, 26 firms have linked executive remuneration to climate change performance, with 21 specifically linking pay incentives to progress on the company’s GHG targets.
CEC outlined seven engagement priorities for asset owners and managers to support continued improvement in the scores of companies in 2025. These included encouraging firms to establish strong medium- and long-term goals, ensuring targets cover Scope 1, 2 and material Scope 3 emissions, requesting detailed transition plans, and confirming companies have conducted a 1.5°C scenario analysis.
“We’re seeing company actions to ensure board oversight on climate change, disclose transition plans, and improve transparency in areas such as climate related lobbying,” said Maia Becker, Senior Director of Responsible Investment at RBC Global Asset Management and CEC Technical Committee Chair.
“These are all positive signs and show positive momentum, but it’s also important to recognise that the results of the benchmark also provide a useful roadmap of where to focus dialogue between investors and companies as part of engagements as we move forward.”
Government intervention
Earlier this week, Canada’s government introduced draft regulations to limit on GHG pollution from oil and gas production, equivalent to 35% below 2019 levels.
Canada is the world’s fourth-largest producer of oil and the fifth-largest producer of gas. The proposed regulations looked to set limit on pollution rather than production, and was informed by “extensive engagement” with industry, Indigenous groups, provinces and territories.
Last month, the Canadian government announced its intention to deliver a national sustainable finance taxonomy and introduce mandatory climate-related disclosures for large, federally incorporated private companies. A government statement said the new commitments were essential for market certainty, to unlock net zero investment opportunities, and to uphold the goals of the Paris Agreement.
The Canadian government predicts that reaching net zero by 2050 while growing the economy will cost between C$125 billion to C$140 billion of investment a year. It added that as well as incentives to attract investment to Canada, investors need “robust and transparent” guidelines to credibly classify their investments into the clean economy for net zero.
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