How Canadian companies are responding to the ESG backlash
Feb 25, 2025
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Jeffrey Jones, an ESG and sustainable finance reporter for The Globe, dives into the rising concerns surrounding environmental, social, and governance (ESG) factors. He discusses the backlash against DEI initiatives in the U.S. and its influence on Canadian companies, particularly banks, which are reassessing their climate commitments. Additionally, he explores new legislative changes in Canada, like Bill C-59, and the implications of moving towards mandatory sustainability reporting. Will this pressure alter the ESG landscape in Canada?
The backlash against ESG policies in the U.S. has influenced Canadian companies to reassess their corporate commitments to sustainability and ethics.
Despite some withdrawal from international coalitions, most Canadian companies continue to publish ESG reports and align executive compensation with sustainability goals.
Deep dives
Understanding ESG and Its Components
Environmental, Social, and Governance (ESG) frameworks assess the sustainability and ethical impact of companies. The 'E' in ESG refers to environmental aspects such as climate risks and biodiversity, while 'S' encompasses social issues, including diversity, equity, and inclusion (DEI), alongside traditional human resources concerns like worker safety. Governance, the 'G', focuses on business policies related to environmental and social factors, as well as executive compensation. This comprehensive approach reflects a growing recognition that profitability should coexist with responsibility toward society and the environment.
The Rise and Backlash of ESG Policies
Over the past few years, the dialogue surrounding ESG and DEI has evolved significantly, particularly following events such as the pandemic and the killing of George Floyd. Initially, there was a surge in funding for ESG-related investments, with companies committing to hire diversity executives and enact sustainability targets. However, beginning in late 2022, a backlash emerged, particularly in Republican-led U.S. states, where ESG policies were criticized as anti-business and anti-job. This backlash initiated pressure on companies to reverse their commitments, as political and social debates intensified around these frameworks.
Responses from Canadian Companies
Canadian companies have shown some signs of responding to the backlash against ESG policies, though the change has been less pronounced than in the U.S. Major Canadian banks have withdrawn from international coalitions aimed at achieving climate goals while maintaining their individual climate commitments due to regulatory requirements. Despite this withdrawal, reports indicate that a vast majority of Canadian companies still publish ESG-related reports and tie executive compensation to sustainability goals. The overall sentiment suggests a quiet commitment to ESG principles, albeit with a shift towards integrating these practices more as standard business operations rather than vocal advocacy.
Since returning to office, the Trump administration has taken aim at diversity, equity, and inclusion (DEI), with major American corporations scrapping their policies and programs in response. But the backlash goes beyond DEI — corporate climate commitments are under attack, too.
The progressive policies being rolled back fall under ESG (environmental, social and governance). ESG factors help businesses evaluate their practices related to sustainability and ethics, and help investors decide who to support. But with major political shifts taking place in the U.S., could Canada’s ESG boom go bust too?
Jeffrey Jones is the Globe’s ESG and sustainable finance reporter. He’ll explain the rise of ESG, the growing backlash, and whether we could see Canadian companies roll back their own environmental commitments in the coming months.
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