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A ranking of 30 Canadian companies with strong management leading them on the Road to Net Zero

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We’re committed as a society to going net zero by 2050. Companies know what the end goal is—reducing their emissions enough to align with a 1.5°C rise above pre-industrial temperatures—but do they have realistic plans to get there? To start answering that question, Morningstar Sustainalytics created the Low-Carbon Transition Rating (LCTR), comprised of two components: a company’s exposure to specific carbon risks and opportunities, and its management of those risks. What it boils down to is this: If a company were to continue on its current emissions path to 2050, how likely is it to hew to that 1.5°C goal?

Sustainalytics’s analysts sift through thousands of data points to calculate the LCTR score, and so far it has rated 8,000 companies globally, including 260 publicly traded corporations in Canada.

It’s not perfect, however, thanks to incomplete reporting on greenhouse-gas emissions. This stems in part from Canada’s regulatory environment, which is less rigorous than other jurisdictions, meaning some relatively benign companies score very poorly on the exposure-to-risks component, and vice versa. Why? Consider this: Without mandatory reporting requirements, many Canadian oil and gas producers neglect to account for the emissions created when end users actually burn their fossil fuels. By focusing only on the operating emissions released when pulling the resources out of the ground, these companies distort their total impact, since operating emissions account for just 15% of the industry’s total. That yields a list that in some cases rates oil producers higher than a company making metal drawer pulls.

The sad truth is that corporate Canada is still at the beginning of the decarbonization process, and companies with executives who are taking credible steps to get closer to net zero are the leaders we need now. So we decided to focus on the management portion of the overall LCTR—“a measure of how much of the company’s exposure can be managed, based on its investment alignment to net zero and our assessment of the company’s transition preparedness,” as Sustainalytics puts it. It comprises two equal parts: transition preparedness, based on the company’s disclosure of key management indicators, and investment alignment, based on disclosure of its climate investment plans.

Sustainalytics looks at up to 85 management indicators—among them emissions targets, carbon-price integration and pay incentive plans tied to emissions—which are used in different combinations depending on industry. Banks, for instance, are assessed on how much of their lending portfolio is allocated to green investments; oil and gas companies, meanwhile, are assessed on things like methane management.

But it’s important to note—lest we be accused of greenwashing—that having a high management score doesn’t mean a business is environmentally friendly or a sustainable investment: Suncor, which gets a “strong” management rating, digs for fossil fuels, and all of the Big Banks, also rated “strong,” continue to finance the global oil industry even as they tout their strides toward net zero. It does, however, indicate that a company has done more to set up governance structures and management programs to address the transition risks it’s exposed to. In other words, the companies that rank “strong” in this category are doing better than their peers at adhering to Canada’s existing regulatory requirements and moving in the right direction. By no means does it mean they’ll achieve their net-zero targets or be sustainable in the long run.

But accountability has to start somewhere, and in this case, it’s in the data. In our Road to Net Zero package, we list the 30 Canadian companies that ranked “strong” on the management portion of the LCTR, highlighting what the top 10 are doing right and where they’re falling down. Hopefully this will be a guide for other companies as they begin the urgent process of shifting to a low-carbon future.

Road to Net Zero


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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 29/05/24 4:00pm EDT.

SymbolName% changeLast
BNS-T
Bank of Nova Scotia
-2.35%63.51
CP-T
Canadian Pacific Kansas City Ltd
-1.06%105
BCE-T
BCE Inc
-0.68%45.53
POW-T
Power Corp of Canada Sv
-1.61%39.17
MFC-T
Manulife Fin
-1.79%35.15
BMO-T
Bank of Montreal
-8.86%119.48
TD-T
Toronto-Dominion Bank
-1.06%74.98
IGM-T
Igm Financial Inc
-1.62%35.85
TA-T
Transalta Corp
-0.31%9.67
NA-T
National Bank of Canada
+2.55%115.89
STN-T
Stantec Inc
-2.11%107.93
SLF-T
Sun Life Financial Inc
-1.04%67.44
EMA-T
Emera Incorporated
-2.87%46.33
CNR-T
Canadian National Railway Co.
-0.23%168.96
RY-T
Royal Bank of Canada
-1.64%140.96
GIL-T
Gildan Activewear Inc
-2.46%49.52
T-T
Telus Corp
-1.26%21.96
L-T
Loblaw CO
+0.68%155.05
CM-T
Canadian Imperial Bank of Commerce
-2.34%64.66
TRI-T
Thomson Reuters Corp
-1.49%231.85
QSR-T
Restaurant Brands International Inc
-0.9%90.92
CLS-T
Celestica Inc Sv
+0.21%81.24
SU-T
Suncor Energy Inc
-1.93%54.47
RCI-B-T
Rogers Communications Inc Cl B NV
-1.25%53.11
GEI-T
Gibson Energy Inc
+0.04%22.55
MFI-T
Maple Leaf Foods
-1.59%22.86
CGO-T
Cogeco Inc Sv
-1.81%50.5
ELD-T
Eldorado Gold
+1.66%22.04
FCR-UN-T
First Capital REIT Units
-2.48%14.53
KEY-T
Keyera Corp
0%35.88

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