CDP DEVELOPS TEMPERATURE RATINGS In an effort to guide investors toward decisions that will facilitate the transition to a net-zero economy, the CDP has developed a new “Temperature Ratings” service aimed at providing investors with data that can be incorporated into climate-related risk analysis. 183 CDP’s temperature ratings are designed to help investors benchmark, communicate and reduce the impact of their portfolios and products on global temperatures. The ratings provide a temperature pathway for over 2,850 global companies, based on emissions-reduction targets covering all relevant emissions in a company’s value chain. The temperature ratings are intended to reflect the long-term global warming potential if global GHG emissions were to be reduced at the same pace as the company’s emissions. More specifically, the service leverages the CDP’s vast collection of climate-related disclosure to produce a temperature rating, either for companies individually or as part of an investment portfolio that analyzes the emissions-reduction targets of a company and projects those targets into long-term temperature outcomes. This, in turn, is intended to enable investors to better understand how ambitious a given emissions- reduction target actually is. The temperature pathways used in CDP temperature ratings are derived from the UN Intergovernmental Panel on Climate Change 1.5°C report and the Integrated Assessment Modelling Consortium database of climate scenarios. 184
With respect to Climate Disclosure specifically, OMERS recommends the use of the TCFD framework and recommendations, and says that that it will generally support proposals that request disclosure of information on the impact of climate change on a company’s operations, as well as associated policies and procedures to address risks and/or opportunities. OMERS will consider withholding votes from the chair of the relevant committee if, in its assessment, a company is not taking the appropriate steps to mitigate the risks stemming from climate change. Consistent approaches to ESG generally, and Climate Disclosure specifically, are also being taken by other large Canadian institutional investors, such as the Canada Pension Plan Investment Board, 179 the Alberta Investment Management Corporation, 180 and the Ontario Teachers’ Pension Plan (Teachers’). 181 And as discussed above, those approaches are not limited to Climate Disclosure, but are rather aimed more broadly at a wide range of ESG issues. For example, Teachers’ states in its proxy voting guidelines, “We encourage companies to demonstrate leading practices in human capital management to support a healthy work environment and culture. […] We typically support proposals requesting a company to report on, or develop policies related to: antidiscrimination, freedom of association, improving diversity and inclusion, pay practices, and employee health and safety.” 182
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Governance Insights 2020
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