Canadian financial firms among laggards on ESG disclosures

PwC report reveals that lack of reliable data makes it hard for investors to make informed choices

Canadian financial firms among laggards on ESG disclosures
Steve Randall

Investors who want to make informed choices about the companies they invest in will struggle to find reliable data from Canadian firms.

A new report from PwC Canada looked at ESG disclosures from the 250 top publicly-listed Canadian companies and found continued shortcomings in the information provided.

Although many firms have made a commitment to cut their carbon emissions, the analysis found that just 30% of the companies reviewed have a net-zero target.

ESG disclosures of 70% of the firms included lack the independent oversight and credibility of adequate external assurance and 77% of companies do not disclose a Task Force on Climate-related Financial Disclosures (TCFD) report, leaving them potentially unprepared for upcoming mandatory reporting requirements.

"We are seeing an improvement compared to last year, however, actual progress is failing to keep pace with rising stakeholder expectations. Canadian companies are missing important opportunities to add credibility to their sustainability disclosures," said Sarah Marsh, partner, National ESG Report and Assurance Leader, PwC Canada. "It's crucial to have a clear plan of action, as the demand for transparency among stakeholders remains an imperative, and investors and supply chains continue to push for ESG initiatives."

Where the gaps are

Less than 4 in 10 firms disclose policies around Indigenous relations and reporting of diversity and inclusion is generally below par.

With reports tending to focus on LGBTQ2+ and gender inclusion, information regarding individuals with disabilities and visible minorities is limited.

Reporting of climate-related risk is also lagging with just 48% of Canadian companies reporting their process for identifying, assessing and managing climate risks.

Little more than a third of firms disclose their expectations of future restrictions on the availability of their natural capital and their strategy for managing this scarcity.

Banking and finance

In the banking and financial services sector, PwC’s analysis found that only 28% included ESG skills in their board skills matrix.

"Stakeholders want more transparency of comparable and reliable information. Investors are looking to understand how a company is identifying its material ESG risks and opportunities, including the linkage to the financial implications of those activities," says Caroline Gadbois, Director - ESG Reporting and Assurance at PwC Canada. "Organizations need support in the implementation of processes, internal controls, and systems to collect all ESG data to evaluate performance and measure the impact of sustainable finance.”

Gadbois added that this coherent story is “the difference between a compliance-based approach to ESG and one that demonstrates true value creation."