Road to Net Zero Ranking 2025

Is a net-zero strategy a burden for a company in chaotic economic times, or a benefit?

Not long ago, business school professor Yrjö Koskinen was discussing corporate sustainability, and how Canadian companies were dealing with the backlash against any hint of it in the United States – especially action on climate change.

Koskinen, a professor of sustainable and transition finance at the University of Calgary’s Haskayne School of Business, offered a compelling theory: By sticking to its guns in the quest for net-zero carbon emissions, Corporate Canada could actually be more competitive in the race for green capital.

In the U.S., President Donald Trump has famously called the science behind climate change a scam. Since returning to the White House, he’s cancelled a raft of sustainability policies at the federal level, and aims to stamp out environmental, social and governance initiatives in the business world, too.

Meanwhile, his damaging tariffs have prodded Ottawa to seek stronger trade ties with other jurisdictions, such as those in Europe and Asia, and many of those remain focused on the Paris Agreement goal of limiting temperature gains to 1.5°C above preindustrial levels.

So, in the spirit of the “Buy Canadian” movement consumers embraced in the grocery aisles this year, Canadian companies may capture opportunities by doubling down on sustainability at home, Koskinen says.

The concept is gathering steam. Some of the country’s major pension funds and other big investors are loudly voicing their support. They haven’t backed off their demands for more emissions data and tougher targets as they navigate the financial risks of climate change for their beneficiaries.

There’s much work to do. In the 2025 edition of Road to Net Zero, Morningstar Sustainalytics has taken note of improvements from last year’s results in reporting key climate-related metrics among some of the top-performing Canadian companies, including tallying emissions. There are leaders in the services, utilities and mining sectors. But there are still gaping holes everywhere, notably in developing and reporting effective strategies that put them on a track that aligns with the Paris target.

This is the second year Report on Business has documented how Corporate Canada scores in Morningstar Sustainalytics’ Low-Carbon Transition Rating. It’s a method of slicing and dicing numerous metrics to determine which companies are on a pathway to hit the 1.5°C global goal. As it turns out, of the 226 Canadian companies it analyzed this year, none hits the mark.

An obvious question is whether Ottawa’s newly enacted anti-greenwashing provisions under Bill C-59 have prompted companies to stop disclosing data that could help their ratings. Morningstar Sustainalytics analyst Alex Osborne-Saponja says she doubts the new rules had a major impact in the 2024 numbers presented here, though they may affect next year’s results, depending on how companies react.

Canada’s not alone in falling short of targets. The organization runs the numbers on about 12,000 companies worldwide, and just like last year’s report, not one meets the test.

There’s no doubt – we’re in rough patch in the transition to a low-carbon economy. Mark Carney scrapped the consumer carbon tax as one of his first orders of business after becoming prime minister. Canadians are more amenable to tightening energy security by building more oil and gas pipelines. All of the country’s big banks have withdrawn from the Net Zero Banking Alliance, a global coalition (established by Carney) to marshal capital for decarbonization. Securities regulators shelved their efforts to establish mandatory climate reporting standards, blaming economic uncertainty brought on by the trade war.

There’s still progress, though. Companies may not be crowing about it like they did a few years ago, but many across high-emitting sectors like energy and transport are making strides on the decarbonization path, according to Climate Engagement Canada, an organization made up of 51 institutional investors with $7-trillion in assets under management.

The group reported late last year that of the 41 companies it tracks, nine have disclosed some type of transition plan for the first time; seven conducted climate-specific scenario analysis; and the boards of all of them now employ some measure of climate oversight. In a national first, three businesses – Canadian Pacific Kansas City, Enbridge Inc. and TransAlta Corp. – began aligning capital spending plans with emissions-reduction targets.

Another bright spot: Some of the country’s wealthiest families and their foundations are also stepping up in the climate change fight, even as governments and regulators waffle. An effort by a group called the Clean Economy Fund has gathered several to band together in its Climate Champions program to devote nearly $500-million toward advancing the net zero economy. It hopes to recruit more deep-pocketed participants to the cause over the next year.

But if Canada wants to achieve its climate targets, it’s going to require both more buy-in on credible strategies and capital from the corporate sector, as the Morningstar Sustainalytics numbers show. If warding off the worst effects of climate change isn’t incentive enough, perhaps the forces of capitalism can prompt companies to do the right thing as a way of improving their access to capital.