A long way to go to insurers’ net zero

Two of Canada’s largest insurers, Sun Life and Manulife, have a ton of work to do to meet their climate commitments, according to new research from Investors for Paris Compliance.

The advocacy group, which seeks to hold Canadian public companies to their climate commitments, commissioned Amsterdam-based Profundo NV to estimate the total value of the emissions financed by the insurance giants.

That research concluded that Sun Life Financial finances at least 121 million tonnes of CO2 equivalent emissions within its investment portfolio, based on available data that Profundo extrapolated to an estimated 222 million tonnes. The research assumes that the average emissions intensity of the publicly-disclosed data extended to its entire portfolio.

On the same basis, the company estimated that Manulife finances at least 115 million tonnes, based on available data, which it extrapolated to 277 million tonnes for the entire portfolio  — again, extrapolating from average emission intensity.

The report acknowledged that these estimates are “imperfect,” but nevertheless stressed that they highlight the firms’ significance in the capital markets, and in addressing the threat of global warming.

“As major owners and managers with almost $3 trillion in [assets under management], Sun Life and Manulife have a huge influence over capital flows and whether those foster increased emissions or the necessary rapid transition to a clean energy economy,” it said.

The report noted that both firms have committed to achieving net zero in their financed emissions by 2050. “Both are taking steps towards implementation,” the report said.

To that end, it also set out recommendations for the firms to meet their objectives, including measuring and disclosing financed emissions (including material scope 3 emissions); setting reduction targets; and adopting portfolio decarbonization strategies to meet these targets.

“Sun Life and Manulife have much work to do to decarbonize their portfolios, and there is an urgency to act,” the report said.

Manulife is “exploring all mechanisms to achieve decarbonization to meet our emission reduction targets,” said Sarah Chapman, chief sustainability officer with Manulife, in a statement emailed to Advisor’s Edge.

“We welcome the opportunity to engage with stakeholders like Investors for Paris Compliance and we are open to listening to new thinking,” said Alanna Boyd, chief sustainability officer with Sun Life, in a statement emailed to Advisor’s Edge. “Last year, we shared our net-zero goals and since then we have been taking the necessary steps to work towards achieving this objective, while meeting our fiduciary responsibilities.”

The challenge of measuring, disclosing and combatting emissions relies — in part — on the adoption of widely-accepted disclosure standards.

Last year, the Canadian Securities Administrators (CSA) proposed new climate-related disclosure requirements, but those proposals did not envision mandatory disclosure.

While the CSA has yet to finalize its requirements, both the U.S. Securities and Exchange Commission (SEC) and the International Sustainability Standards Board (ISSB) have since proposed stiffer requirements of their own.

It remains to be seen where regulators land on climate-related disclosures, which is a prerequisite to investors accurately measuring and addressing their own exposures.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.