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May 27, 2020

Canadian investors pledge to maintain climate focus amid pandemic

Companies should prepare for continuing questions on climate risks, finds report

Canadian institutional investors plan to maintain their focus on climate change despite the upheaval caused by Covid-19, according to new research. 

While the pandemic is the number one concern for investors right now, climate change remains a key issue and companies should prepare for a continuation of ‘challenging questions’ on the subject, notes the report from Millani, an ESG consultancy.

The study, which surveyed the views of 23 Canadian institutions with a collective $2.3 tn in assets under management, finds that 87 percent say climate will remain a key issue for investors in 2020.

‘Climate change is still in our top three key themes,’ comments one respondent quoted in the report. ‘We are still facing the physical impacts so can’t see how climate change can be left out of the conversation.’

In recent years, investors have stepped up engagement with companies over the impact of global warming and related extreme weather events, such as fire, floods and storms. Underlining this shift, BlackRock, the world’s largest asset manager, said in February that climate change had ‘become a defining factor in companies’ long-term prospects’.

Investors believe companies should keep up with their climate initiatives during the pandemic, says the Millani report. Companies should identify areas they can report on now, and also work toward the long-term goal of reporting in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), explain the authors.

The TCFD recommendations offer advice on climate change reporting in four areas: governance, strategy, risk management and metrics. Launched around three years ago, the reporting framework has quickly gained popularity and now counts more than 1,000 organizations as ‘supporters’ that have declared their backing for the project. 

The Millani research also adds to the body of evidence that shows coronavirus has increased investor focus on ESG issues. Around three quarters of respondents (74 percent) say they think Covid-19 will have a positive impact on ESG and sustainable finance. 

‘There will be much more focus on the social issues that are sometimes less obvious and harder to measure and convey, compared with environmental issues,’ states the report. ‘These are human capital issues like worker protection, health benefits and supply chain sustainability.’