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TransCanada endorses shareholders resolution for climate-risk analysis

Pipes destined to be used in TransCanada’s Keystone XL oil pipeline sit at a depot in Gascoyne, N.D., in November 2014.

ANDREW CULLEN/REUTERS

TransCanada Corp. management has endorsed a shareholders resolution requiring the company to provide an analysis of how its long-term business prospects would be affected by a transition to a low-carbon economy.

The resolution submitted by two Quebec religious orders will be voted on at TransCanada's annual meeting in April, and is part of a broader effort by institutional shareholders to assess the climate-related risks faced by the public corporations in which they invest.

The proposal would require TransCanada to report on how it is assessing long-term risks and opportunities that arise as a result of global efforts to avert the worst impacts of climate change, AEQuo Shareholder Engagement Service Inc. said in a release on Tuesday. The company should also provide analysis based on various scenarios, including one in which governments act to limit the average increase in global temperatures to less than 2 degrees Celsius.

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Calgary-based TransCanada has been front and centre in North America's contentious climate-change debates, with its proposed Keystone XL project that was rejected by the Obama administration in 2015 and resuscitated by the Trump administration last year, and with its proposed Energy East oil sands pipeline that the company abandoned after a series of regulatory delays.

"TransCanada has long recognized the need for transparency in our greenhouse gas reporting," spokesman Mark Cooper said in confirming management's support for the resolution. "We are committed to continually improving our disclosure, and we welcome this opportunity to provide – within reason – external reporting that meets the needs and expectations of shareholders and stakeholders on this increasingly important issue."

The company already includes a discussion of climate-related risks in its annual report. It also submits an analysis of risks and opportunities each year to the U.S.-based Carbon Disclosure Project (CDP).

In its 2017 CDP report, TransCanada outlined the growing prevalence of carbon pricing and other regulations across North America, and highlighted its ownership stake in the Bruce nuclear facility in Ontario that is investing $13-billion to extend the life of its reactors for emissions-free electricity. It also states that concern about climate change has had an impact on its ability to win project approvals and represents a "reputational risk" as well as an operational one.

However, the company focuses largely on its direct emissions, and has not analyzed how a rapid transition to a lower-carbon energy economy would affect the demand for pipeline capacity from the North American oil and gas producers.

Mr. Cooper said the company believes that oil and gas will continue to be "a key source of reliable and affordable energy for the foreseeable future," even as renewable sources take a bigger share of the market.

Institutional investors are putting increasing pressure on energy companies in particular to disclose their climate-related risks in a manner that can be used to compare industries and companies within sectors on their vulnerabilities.

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While more energy companies are issuing climate-related risk reports, they are often little more than statements of existing regulations and efforts to play down the impacts, AEQuo chief executive Jean-Philippe Renaut said Tuesday.

"In theory, any information on the markets that helps investors understand how the company evolves in this context is useful," Mr. Renaut said in an interview. "If the investors don't find it convincing, it is their duty to push back and say this is not worth the paper it is printed on, or is not rigorous enough."

Under securities law, companies are already required to outline any material risk that may arise from climate change, whether that be a threat to physical infrastructure from extreme weather events or more costly carbon regulations.

In a report last year, Chartered Professional Accountants of Canada concluded that, while many Canadian companies are issuing statements on climate-related risk, the information often provides little guidance for investors.

"Our study often found insufficient context was provided when it came to helping investors understand both the existing and the potential risks and opportunities posed to that specific entity," the report's co-author Sarah Keyes said on Tuesday.

With files from Jeff Lewis

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