Major pension funds are demanding more environmental data about the businesses they’ve invested in, but most companies are still not giving them key information about things such as energy and water consumption, according to a new review of corporate social responsibility in Canada.
Loblaw Cos. Ltd. L-T , Canada’s largest grocery chain operator, tops the ranking of corporate responsibility in the country, compiled by research group Corporate Knights Inc. The review assessed environmental, social and governance (ESG) practices of companies in Canada’s S&P/TSX 60 index.
The review found only 10 of 60 corporations in the index (17 per cent) disclosed detailed data on four environmental factors assessed in the ranking. Only 25 per cent of those companies provided data on their water use and waste production.
Fewer than half (47 per cent) reported their energy use, while 58 per cent disclosed their carbon-dioxide emissions.
“These four things – energy, carbon, water and waste – are the four things that are the most core and universally applicable indicators,” said Toby Heaps, editor-in-chief of Corporate Knights.
Among companies reporting all four criteria, Bombardier Inc. BBD.B-T had the best environmental performance, the review concluded. (Read: Bombardier ranks No. 1 for environmental practices )
The factors used in the assessment – a total of 12 criteria, including governance and social factors – were selected based on their broad acceptance as key ESG ratios, and because they are relevant among all companies regardless of what industry they’re in, Mr. Heaps said.
Unlike many other corporate responsibility rankings, the marking system is fully transparent; details of all factors considered are available in our methodology.
Some of Canada’s largest pension funds have been urging companies to improve their weak reporting in the environmental realm to make it easier for investors to analyze risks – and some are even using BP PLC’s BP-N Gulf of Mexico disaster to buttress their argument.
The Canada Pension Plan Investment Board has a five-person team that manages the fund’s ESG issues, including its participating in various global reporting initiatives such as the Carbon Disclosure Project, said executive vice-president Mark Wiseman.
Mr. Wiseman said ESG issues are potential investing risks, and CPPIB urges more disclosure from companies to help weigh factors like carbon emissions or social risks.
“We believe these issues are important and go to long-term value,” he said. “But the only way we as an investor can assess that impact is if companies provide us with appropriate disclosure around exposures they have.”
Doug Pearce, chief executive officer of the British Columbia Investment Management Corp., said as a long-term holder of shares, BCIMC cannot easily sell holdings because of environmental concerns. Instead, it has decided it is better to urge companies to adopt better ESG practices.
“It is a substantive risk component for long-term holdings like ours,” he said. “You just need to look at BP – that company is in deep trouble.”
Canadian companies are not specifically required to disclose any environmental data about their operations, but regulators do require companies to report on issues “material” to their operations. A new report commissioned by the Ontario Securities Commission concluded that the “materiality” requirement is good enough.
Mr. Heaps, however, said there are some factors that are widely reviewed by investors, including carbon emissions, energy use and lost-time injury rates, so regulators should start by requiring basic disclosure on those fronts where there is little controversy about their relevance.
A number of leading companies in the ESG realm say their voluntary disclosure is still evolving as they set internal standards and targets.
Iamgold Corp. IMG-T, which finished third in the ranking, is developing a new process to report water usage data, said Ross Gallinger, senior vice-president of health, safety and sustainability at the gold mining company.
