Getting Real About the Energy Transition

The Issue

Climate change is a systemic global problem that demands a systemic solution. There is broad scientific consensus that part of the solution is a transition from economic dependence on fossil fuels to a low-carbon energy system. Yet demand continues to grow and future prosperity hinges on the availability of affordable energy. All consumers and all business sectors have a role to play: reduction of carbon emissions from energy production is vital, but will be ineffective without tackling fossil fuel use across the economy, and speeding the development of alternatives.

ESG Perspective

Ensuring the shift to a low-carbon economy is a smooth transition, rather than a catastrophic financial shock, is critical for Canadian investors: at present the energy sector represents a quarter of the value of the TSX Composite. Are companies in the energy sector overvalued based on current business models? How are they reducing environmental impacts and engaging stakeholders to build the social licence that will allow them to develop projects and achieve market access? Are they preparing for a future in which fossil fuel reserves may no longer be valued the way they are today? Do climate regulation and carbon pricing represent a massive investment opportunity, or will they leave oil and gas companies with "stranded assets" — projects that are no longer financially viable? Will new technologies emerge that disrupt the dominance of fossil fuels in the energy system?

Our Response

We engage companies on both the supply and demand side of the energy equation in dialogue on:

  • Improving disclosure on GHG reduction policies and performance

  • Reducing GHG emissions and finding innovative solutions to lower their footprint

  • Adaptation to address risks created by climate change that can no longer be avoided

  • Public support for the development of effective climate policy

We also engage oil and gas companies in dialogue on:

  • Addressing the stranded assets risk by diversification into renewables and other energy solutions

  • Integrating future carbon pricing into capital expenditure plans

  • Public support for a price on carbon

  • Responsible unconventional oil and gas, including improved environmental and social performance in the oil sands and adoption of good practices in hydraulic fracturing

We engage with policy-makers on the development of effective climate policy.

We support and participate in initiatives with investors and other stakeholders to explore carbon risk, create support for effective climate policy, and advocate for the protection of the Canadian Boreal Forest.