No clean water for beer? Here are climate change risks keeping Canadian companies up at night
Quebecor Inc. executives considering worst-case scenarios that could befall their business as a result of climate change suggest buried internet infrastructure could be at risk from rising sea levels.
At Molson Coors Brewing Co., meanwhile, management is thinking about how they’ll make enough beer to meet consumer demand if competition heats up over scarce supplies of clean water.
Those are among the concerns raised by more than 6,000 companies in submissions to CDP, a London-based global non-profit organization that gathers information from companies and ranks them on the comprehensiveness of their disclosure, awareness and management of environmental risks.
CDP said many of the firms made their submission at the request of investors seeking information to help them make decisions and manage their own risks. The CDP study comes as regulators in Canada, the United States, and Europe are pushing companies to increase disclosure of environment, social, and governance issues to help manage risks and allow investors to make more informed decisions about long-term performance.
“Even where water is widely available, water purification and waste treatment infrastructure limitations could increase costs or constrain our operations,” said the submission by Denver- and Montreal-based Molson Coors, which scored a B in CDP’s latest climate change rankings released this week.
“Climate change may increase water scarcity and cause a deterioration of water quality in areas where we maintain brewing operations,” the beer maker stated in information released by CDP.
The submission from Quebecor said a primary driver of climate-related risk to the operations of the media and telecommunications company is “increased severity of extreme weather events such as cyclones and floods.”
The Montreal-based company noted recent studies that suggest buried internet infrastructure is at risk from sea levels rising in as soon as 15 years.
Quebecor’s submission characterized the risks as “unlikely” to play out, however, and said the magnitude of any impact from what the characterized as a long-term risk would be low. It received a score of D.
Cogeco Inc., a rival Montreal-based telecommunications company, appeared more concerned about the potential impact of rising sea levels. In its 15-page report to CDP, Cogeco said it could lead to an increase in capital costs, particularly at facilities and portions of its network located in areas close to the coastline, such as in Florida.
“Rising sea levels could result in inundation of coastal and underground infrastructure,” Cogeco said. “These meteorological phenomena could heavily impact and destroy the facilities, the network, and therefore would prevent the delivery of services to customers.”
Cogeco rated the risk as “likely” and “short-term” and characterized the magnitude of impact as “medium-high.”
Explaining the potential financial impact, the cable firm, which received a climate-change score of C from CDP, said networking maintenance costs could increase due to floods, and that the financial impact would depend on the facility concerned. Cogeco noted that insurance related costs could also be impacted.
Different views on the same issue may come down to what a company considers material information for investors, said Catherine McCall, executive director of the Canadian Coalition for Good Governance, who says the issue of materiality creates “the mother of all questions in this area.”
“Is it helpful to disclose risks no matter how distant or uncertain, for example? The problem is always going to be ‘what’s material’ and there is no precise answer simply because discretion and judgment will invariably come into play,” she said.
“Erring on the side of caution and including a risk may be the most prudent way to go.”
Companies are making these judgment calls to meet increasing investor and regulatory demands for information about the risks and opportunities related to climate change and other environmental, social, and governance issues, she said. Large institutional investors, such as those behind the CCGG, are demanding this information to help them forecast the long-term financial performance of the companies they invest in.
Last week, the International Organization of Securities Commissions (IOSCO) issued a statement emphasizing the importance of companies disclosing ESG matters that could have material short-term and long term impact on their business operations.
In its statement, IOSCO noted that investors are seeking “enhanced reliability and comparability of ESG information and disclosures, in order to facilitate a more accurate assessment of risk and, accordingly, more informed investment decisions.”