How anti-ESG sentiments in the United States are affecting Canadian businesses

Amidst activism in the United States protesting diversity, equity and inclusion initiatives and ESG policies, several U.S. companies have scaled back their DEI and ESG practices. In an interview with The Globe and Mail, partner and co-head of Torys’ capital markets practice Rima Ramchandani spoke about how these anti-ESG sentiments could influence Canadian businesses.

“I don’t really think companies are changing their approach to how they prudently and responsibly manage and oversee risks,” she said. “Because of the politicization, some companies are choosing to be more cautious about what they say.”

Despite ESG and sustainability targets being scrutinized in the United States, the piece quotes Torys’ 2024 climate disclosure report, which states that “95 per cent of the companies in the composite index publish some form of ESG, climate action or transition report, and nearly four-fifths include ESG, climate, environmental or sustainability within their board skills matrix.” It also showed that 59% of companies tie executive pay to climate-related targets.

These positive metrics, however, should not give rise to complacency, authors of the climate disclosure report stress. “At the same time, companies must carefully navigate a rising wave of anti-ESG sentiment, including anti-ESG laws spreading across the United States, and manage potential liability for ‘greenwashing.’”

“Given the interconnectedness of the Canadian and U.S. markets, Canada will undoubtedly be monitoring developments in the United States,” authors of the report say. “However, it appears that Canada, consistent with other significant markets around the globe, is moving in the direction of mandatory reporting.”

Read the full report, “Disclosure on the rise: 2024 climate disclosure report”, here.

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