The group of students of Amr Addas, assistant professor at Concordia University, awarded the award for best sustainable development report (SDR) to OceanaGold Corporation (OceanaGold) and TransAlta Corporation (TransAlta). For the 7th edition of the IFD-FM competition for the best sustainable development report 2020, the jury comprised of young people involved in sustainable investment evaluated the disclosure practices relating to environmental, social and governance (ESG) issues of Canadian companies in the gold and infrastructure sectors.
This competition allows Mr. Addas to illustrate to students how responsible investing is becoming a key component of investment strategies. “This is a great opportunity for their involvement in analyzing corporate social responsibility (CSR) reports and understanding relevant information for investors, in addition to being a way for companies to get quality unbiased reviews of their reports and the recognition of a full year of work for some of them,” he explains.
Methodology and results
Students were required to use the rules of the Competition, the criteria for evaluating the materiality, performance indicators and quality of disclosure, as well as details on the additional points to be awarded to companies whose SDR was particularly remarkable. The students needed to agree on the results of their analysis and submit their conclusions to Mr. Addas at the end of the semester. He then identified the team that presented the best analysis.
Representative of the chosen team, Mohammed Haidar focused on companies in the metals and mining sector listed on the Toronto Stock Exchange. Putting himself in the shoes of an investor, the student emphasizes the importance of net profits and other financial indicators in the content of an effective SDR. “When you demonstrate the link between ESG performance and financial performance, it's very helpful to our understanding of the data,” he says.
“One of our tasks was to comprehensively assess the company's ability to identify the most material issues that impact business operations from an ESG perspective,” he recalls. Mohammed and his group were therefore interested in companies that did not just mention their use of the Global Reporting Initiative (GRI) platform, but rather those that knew how to identify the factors it targeted. “Some do it very well, and in terms of the 9 SDRs we analysed, the average score was 10/15."
Among the companies that have distinguished themselves, OceanaGold has been able to provide qualitative and quantitative data, on themes such as: labor, local procurement, community complaints, environment, performance, biodiversity, closure planning, and waste management. “Also, the report paired these factors with cost-benefit analyzes, allowing us to better understand their effect on day-to-day operations,” says Mohammed.
In addition, the Concordia University jury noted that few companies share information on the chronological evolution or long-term vision of ESG performance indicators. “Working in a safe and healthy environment is especially important when it comes to gold companies and the COVID-19 situation requires even more awareness,” says Mohammed. "And when it comes to business safety, you'd expect to see injury frequency data over the past few years," he says.
Another element to assess was the clarity of the content. Only the top three SDRs included footnotes to clarify the meaning of acronyms and jargon. “Much remains to be done when it comes to transparency,” says Mohammed.
One of the SDRs analyzed dealt with long-term targets in line with the United Nations Sustainable Development Goals. “There was no corrective action, however, nor a timeline for achieving these goals, so we couldn't really award points for that information,” says Mohammed.
In addition, social impact was addressed by the three highest scoring companies. “Their reports described the assistance provided to local communities through the creation of employment opportunities and their environmental footprint, including greenhouse gas (GHG) emissions, water disposal, as well as tailings and waste management, ” shares Mohammed.
Another decisive factor in choosing the winning companies was the mention of the GRI protocols, the Carbon Disclosure Project (CDP) and the Task Force on Climate-related Financial Disclosures (TCFD), in addition to the comparison with the competing companies.
Sustainable development: an obvious choice
Mohammed is very excited to follow the path of responsible investing as his career progresses and to inspire start-ups to advocate responsible growth. A friend told him about his work in corporate banking, and the sustainability assessment process. “He does the same exercise as us but on a larger scale, providing loans at lower interest rates to sustainable businesses, in comparison to their competitors,” he says. “I find that very good, but above all, I am very interested in venture capital and I believe that technological progress, such as what we see right now in artificial intelligence, has great potential for clean technologies and sustainable solutions to be offered to the over the next few years.”
TransAlta Corporation’s unified approach
We caught up with Matthew Toohey, Global Lead, Sustainability at TransAlta Corporation, to discuss the company’s contribution to ESG disclosure. TransAlta owns, operates and develops a diverse fleet of electric power generation assets in Canada, the United States and Australia. It is also one of the largest producers of wind power in Canada.
The company has been publishing SDRs for over 25 years, leveraging many long-established systems for data collection. The whole process must move quicly, as sustainability data is now integrated into financial reports and must meet strict financial reporting timelines. “We track around 81 Key Performance Indicators (KPIs) and each business unit generates all sustainability data reports by the end of January,” explains Toohey. “The sustainability team uses our internal control methods to ensure quality, and third-party assurance is also carried out by Ernst & Young with regard to certain material indicators in particular,” explains Mr. Toohey.
Monitoring its data on various issues such as greenhouse gas (GHG) emissions, environmental issues affecting land and water, as well as employee safety, social intentions and community investments, TransAlta follows the TCFD and SASB recommendations, in addition to GRI.
TransAlta is exposed to certain climate risks, including transition and devaluation risks relating to its coal assets. “We have achieved a reduction of 21 million tons since 2005, which is equivalent to the GHG profile of many small countries,” says Toohey. In addition, the company has developed a huge renewable fleet of power generation assets since 2000 and will phase out the use of coal by 2025.
Inspired by Europe and South Africa, where the trend for an integrated approach to sustainable development data management is much stronger than in North America, TransAlta chose five years ago to integrate ESG data within financial data, which allowed it to go from a 70-page report to 20-pages of integrated content within its company’s annual report. “To report outside financial reporting is like being in space, outside the spacecraft,” says Toohey. "Integrating sustainability data into the financial report ensures ESG performance and management is getting the same rigour, review and attention as financial data, which is crucial to long-term ESG success – the end product is not as sexy, but it’s more relevant and useful to capital markets."
Mélanie Pilon, journaliste for Finance Montréal's Finance and Sustainability Initiative
