Canadian companies are falling behind in their competitiveness by not preparing credible climate transition plans, according to a new report from Business Future Pathways.
The inaugural report from a new working group, with leading Canadian pension fund representatives, found corporate transition plans can help businesses prepare for climate disruptions but aren’t being developed and published.
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“Transition plans can help companies identify and prioritize climate related risks and opportunities,” says Jonathan Arnold, research director of sustainable finance at the Canadian Climate Institute and a lead author of the report. “[It] can help improve the strategic alignment of a company and its internal capacity to pivot and really take advantage of new opportunities as they emerge.”
Uptake of climate transition plans among Canadian companies is relatively low, indicating a risk of falling behind global peers. This gap may increase, the report noted, since countries around the world are implementing policies to accelerate transition planning.
These climate transition plans aren’t fully appreciated, he says, especially when used as an engagement tool with institutional investors and governments to build trust and strengthen reputation among stakeholders.
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The success of a transition plan will be heavily dependent on the actions of a regulatory body with actions like putting a price on carbon emissions, he adds. “If enough businesses are doing credible transition planning within a certain sector that can really help identify and illustrate the types of policies that are needed to get them there.”
Investors are looking for credible transition plans that display how a business understands the impact of climate change to its operations but there’s a lot of inconsistent information, he says. Indeed, even from the investor side there’s challenges with the consistency of what’s required by such plans.
That’s where Business Future Pathways wants to step in and bring expertise about what investors are looking for exactly. The working group launched earlier this year — with participation from Barbara Zvan, president and chief executive officer at the University Pension Plan — is planning to launch new reports in the coming months.
The report noted two of the leading global standards for transition planning include a credible transition plan, detailed actions to achieve a company’s ambitions and accountability measures to stay on track. But Canadian financial institutions aren’t aligned on what credible transition plans should include.
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