by Mark Brownlie 

November 23, 2011 - The industrial sector in Canada with perhaps the most significant financial and regulatory risks related to climate change is doing a poor job of letting investors know how they are managing those risks.  

Results from the 2011 Carbon Disclosure Project (CDP) show that only 54 percent of Canada's largest energy and utility companies responded to the request for information on greenhouse gases.  

The CDP is a collaborative global effort of 550 institutional investors with more than $70 trillion of assets. Signatory investors include Morgan Stanley, Barclays, HSBC and the big Canadian banks and institutional investors. The annual CDP questionnaire asks companies to share their greenhouse gas strategies, targets, risks and opportunities, and emissions amounts. The questionnaire was sent to Canada's 200 largest companies, and more than 6,000 companies worldwide. 

The overall response rate for Canadian companies was 54 percent, the same as that of the energy and utilities sector. However, given the potential for climate change regulations and impacts to financially affect energy companies disproportionately higher, the relatively low response rate suggests that energy companies are either not taking the issue seriously or are not ready for an increasingly transparent world. Compared with the 67 percent response rate for the lower risk communication and high tech sector, the energy sector's showing is baffling. 

Among the bigger players in the oil and gas business not responding to the 2011 survey were TransCanada, MEG Energy, Pengrowth, Precision Drilling, and Athabasca Oil Sands. On the transparent side, Suncor, Cenovus, ARC Resources, and Encana were highlighted as carbon disclosure leaders. 

It's no secret that information is the key that allows investors to better understand, evaluate and assess potential risk and return. Markets value transparency. When the information is missing, investors can't make good decisions. 

In addition to typical financial data, institutional investors are looking for a broad range of environmental and social information because they are factors that drive long-term profitability. The CDP signatory investors believe that managing greenhouse gas emissions and minimizing climate change impacts are fundamental to achieving strong returns for shareholders. 

Once a company starts measuring and reporting greenhouse gas emissions, the company starts managing them-creating programs, setting targets, introducing internal incentives, and reducing risk. 

Institutional investors, financial analysts, stock exchanges, governments, and environmental and social advocates are increasingly pressuring companies for greater non-financial disclosure to help make more balanced decisions and to restore confidence in business.

In response, sustainability reporting-covering the triple bottom line of economic, environmental and social performance-is rapidly emerging as a valuable business practice among leading companies.

These publications provide readers with information not commonly found in annual financial reports. In addition to information on greenhouse gases, they also often cover water use, land reclamation, spills, employee learning and development, safety, community relations, corruption and a host of other issues of interest to stakeholders.  

Not surprisingly, 88 percent of the companies not responding to the CDP questionnaire did not publish a company sustainability report.

Note: The 2011 Carbon Disclosure Project Canada 200 Report was released in October and can be downloaded here