Aligning GHG reporting: Joined the Partnership for Carbon Accounting Financials to accurately measure its GHG emissions in its lending and investing activities using recognized methods.
Why it matters: To our knowledge, Desjardins is one of the first financial institutions with a 2040 net zero timeline, while most globally are targeting 2050 (see the Glasgow Financial Alliance for Net Zero [GFANZ] here). Recall, Desjardins first announced its climate mitigation/ESG integration strategy in 2017. It also explicitly stated how they were going to engage carbon-intensive sectors, including energy, transportation, and real estate.
What it means for those sectors—Increasing pressure to align emissions goals in order to maintain access to capital: As more financial institutions evaluate lending/investing activities in the context of climate risk and as more institutional investors sign onto climate change coalitions, we believe companies in hard-to-abate industries will continue to face increasing pressure to establish emission reduction goals that are in line with providers of capital.
Majority of energy companies on the TSX have emissions reduction goals; not so much for other sectors: Although we do not know which companies are in Desjardins' loan book/portfolios, we can use the TSX as a proxy for these industries. We note that of the 23 companies listed under the Energy GICS category (which includes oil & gas producers, midstream companies), the majority of them (16 or 70%) have stated emissions reduction goals (e.g. SU, CNQ, ARX, TOU, ENB, TRP). Under Transportation, there are three (or 38%) out of eight (namely AC, CNR, CP). Meanwhile out of the 26 companies under the Real Estate category, there are approximately eight (or 31%; e.g. CHP.UN, CIGI, D.UN, REI.UN) with stated goals.
In our view, integrating ESG and climate risk into corporate strategy is no longer a nice-to-have but is a growing requirement in order to maintain access to capital— not just for hard-to-abate industries but likely all industries over time.