Canada’s oil and gas sector circumvents the Paris Agreement by pressuring companies
Over the past decade, we have seen various climate-related commitments from companies in the Canadian oil and gas sector.
At first glance, it might seem like we’re making progress, at least by acknowledging the problem and committing to being part of the solution. Yet a closer look reveals a less than rosy picture of the role Canadian oil and gas companies are playing when it comes to climate goals, regulations, and Canada’s roadmap to net zero.
Arguably, the most important work a company can do right now is to commit to – and then get to work on – reducing emissions in absolute terms. But there are other important ways in which oil can impact or hinder climate action nationally and globally. One is the extent to which its government relations, or “lobbying” activities align or do not align with the climate actions Canada must take to prevent the worst impacts of climate change. climatic conditions wreak havoc on our planet.
A rapidly growing number of investors are coming together to take a deep dive into the companies they own and carefully assess their management of climate risks. But shareholder advocacy and voluntary corporate commitments alone will not get us to net zero in time. Government and regulatory intervention is needed to significantly and aggressively reduce greenhouse gas emissions. Simply put, companies that actively support strong public climate policy are aligned. Those who fight it, or remain silent, are not.
The Association of shareholders for research and education (SHARE) recently rated and ranked 13 Canadian oil and gas companies on the TSX Capped Energy Index on the quality of their lobbying disclosure, including their public stance, policies and commitments, governance and management, transparency and general alignment. The results indicate that while companies have made progress in closing some disclosure gaps, the 13 oil and gas companies fail to demonstrate how their association memberships align with Paris Agreement goals.
In 2020, SHARE conducted research of a similar nature, establishing a initial benchmark of 22 companies listed on the S&P/TSX Capped Energy Index. Since then, we have started to see some modest progress in the oil and gas sector, but the overall quality of disclosure in the Canadian oil and gas sector still remains quite low. On average, companies scored below the 40th percentile in all categories (Suncor and PrairieSky Royalties are the only companies to score above 50%, with PrairieSky significantly improving its disclosure, scoring 80%).
This general lack of transparency contrasts with the progress seen in the United States and Europe, inside and outside the oil and gas sector. In 2021, several large US issuers, including Exxon Mobil, published standalone reports review the alignment of their trade association memberships with Paris ambition in response to investor pressure. Information about a company’s approach to climate, including its position, policy and commitment, is the first step towards transparency.
Climate-conscious investors want and need to understand how companies are positioning themselves on climate issues, especially in relation to the Paris Agreement. A pathway, including lobbying activity, consistent with a 1.5°C limit on global temperature rise is only possible if the private sector – particularly those actors who contribute the most to global warming, namely oil and gas companies – redirects their lobbying efforts towards actively supporting aggressive government action to stop the worst impacts of climate change.