March 7, 2023

Director spotlight: Barbara Zvan

President and Chief Executive Officer, University Pension Plan

Director Spotlight is a regular feature that provides an opportunity for a prominent director to discuss practical insights and critical developments on climate governance important for boardrooms. Chapter Zero Canada recently spoke with Barbara Zvan, President and Chief Executive Officer at University Pension Plan and Corporate Director. We discussed recent climate governance trends and developments, including factors affecting the institutional investment decision-making process, and best practices in sustainability reporting. 

What are some recent climate trends and developments, both within Canada and internationally, that boards need to monitor carefully and ensure they are including within their boardroom conversations? 

One of the more significant trends that should be on every Board’s radar is the increased commitment from the investment community to fund a well-managed transition to a stable climate and net-zero greenhouse gas emissions. Over the past few years alone, we’ve seen a propagation of net-zero commitments, with more than 1,600 companies setting net-zero targets—accompanied by deep strides in carbon foot printing practices. It is becoming the expectation and will influence the way investors assess opportunity and risk, as well as the demands placed on external investment partners and portfolio companies.  

However, we know this progress is happening against a backdrop of geopolitical unrest and market volatility—which underscores the importance of a viable and actionable approach. The Glasgow Financial Alliance for Net Zero (GFANZ), a global coalition of leading financial institutions, recently released guidance on expectations for ‘real-economy’ transition plans and measuring portfolio alignment by considering the credibility of transition plans.  

As more companies make net-zero commitments, there is a corresponding level of scrutiny around implementing of those commitments, particularly regarding target setting, transition planning and engagement activities. In Canada, the Canadian Securities Administrators recently reviewed ESG disclosures as part of its continuous disclosure review, identifying concerns with greenwashing and overly promotional ESG information.  

On the global stage, the International Financial Reporting Standards (IFRS) is set to release new standards for sustainability-related financial information and climate-related disclosures by mid-2023, raising the bar from current sustainability reporting. These new global standards, which will set guidelines for the disclosure of material sustainability information by publicly issuing companies, will establish a baseline for expectations, much like the IFRS accounting standards have set expectations for accounting. 

How are climate-related factors becoming more integrated into the institutional investor decision making process and what implications might this have for a board’s climate oversight role? 

While organizations may be at varying stages in their climate journey, we’re seeing deeper and broader integration of climate factors into investment analysis, including in asset classes previously not considered. For UPP’s part, we view material ESG factors no differently than any other major risk or opportunity, and this is reflected in our core investment beliefs.  

This comprehensive integration coincides with increasing portfolio emission targets and stewardship activities aimed to drive stronger alignment and measurable progress against investors’ overarching climate objectives.  

Given the complex and evolving nature of ESG considerations, it is critical that directors fully understand the realized and potential impacts of climate change on their organizations—not only from a risk and opportunity perspective but also from monitoring and reporting requirements.  

This highlights the importance of both dedicated and frequent board education initiatives. Many industry organizations, including the Canada Climate Law Initiative, the Responsible Investment Association, and the Institute of Corporate Directors, deliver these services. It’s something our responsible investing team places heavy emphasis on, and climate and other ESG topics are recurring board agenda items.   

Aligned with increased public interest and scrutiny, there’s been an increase in shareholder and/or stakeholder climate ligation to hold companies and their directors accountable for misrepresentation of a company’s climate performance or inaction on climate change. Activist groups have utilized unique approaches to existing laws to argue that directors are breaching their fiduciary duties – and should be held personally liable. It is expected that this trend will continue to grow as new standards and frameworks are formalized.  

From an institutional perspective, what are some benefits for organizations for having a more robust climate change reporting, disclosure and communications framework? 

There are many benefits from a long-term resiliency and value perspective, but a key benefit is a sharper view of the scale and scope of the climate challenge within your institution’s context. This improved visibility enables practical long-term strategic planning and helps position the organization to best contribute to and prosper in a net zero society.  

For companies, a critical component of that strategy is communicating a clear and science-based picture of how the institution fits into the climate transition. This gives investors confidence and encourages capital flows in domestic and foreign financial markets. The alignment between companies and investors brought by improved disclosure and transparency helps inform better decisions while fostering more sustainable and collaborative relationships. 

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