(Bloomberg) -- Manulife Financial Corp. and Sun Life Financial Inc., Canada’s two largest life insurers, each finance emissions roughly equal to those of Ontario and Quebec, making it imperative for the firms to accelerate their climate plans, according to an advocacy group. 

Manulife finances emissions of about 277 million tons of carbon dioxide equivalent, and Sun Life has about 222 million tons, according to a study conducted by Dutch sustainability researcher Profundo and commissioned by Investors for Paris Compliance. The two figures each are on par with the combined 226 million tons of emissions for Ontario and Quebec in 2020, according to the study, released Wednesday. 

Global banks, insurers and asset managers have been committing to zero out the emissions from the firms they finance with their lending or investing activities by 2050 to help the world avoid catastrophic global warming. While Manulife and Sun Life have pledged to reduce financed emissions, the companies manage combined assets of C$2.84 trillion ($2.13 trillion) and need to be aggressive to hit their goals, according to Investors for Paris Compliance, a shareholder group that seeks to hold companies accountable for net-zero pledges.

“It’s important to put into context the influence that these companies have on the Canadian and global economies, and how important it is for them to be taking meaningful action,” Kyra Bell-Pasht, director of research and policy at Investors for Paris Compliance, said in an interview. “Hopefully our report is helping them understand what that climate action really involves.”

Manulife and Sun Life need to do a better job of measuring and reporting financed emissions and set interim targets to reduce them that align with climate science, the group said. The companies also need better strategies to meet those targets, including fossil-fuel phase-out policies, plans to engage with portfolio companies that aren’t transitioning to net-zero emissions and better investments in climate solutions, the group said.

Aviva, APG

The group highlighted firms with more-advanced policies already in place, including London-based insurer Aviva Plc, which has pledged to divest from companies that make more than 5% of their revenue from coal unless they have signed up to the Science Based Targets initiative, and Amsterdam-based APG Asset Management NV, which has committed to an absolute interim emissions-reduction target of 50% from 2019 levels by 2030.

Manulife and Sun Life both plan to release interim targets for reducing financed emissions later this year or next year.

“We give credit to them for the fact that they’re trying and putting systems in place right now,” said Matt Price, director of corporate engagement for the finance sector at Investors for Paris Compliance. “But it still feels like early days, and it feels like they’re a bit behind their international peers.”

Price also said the Profundo estimates of the firms’ emissions involve a significant amount of extrapolation and that the firms could have legitimate criticisms of their figures.

Manulife rose 0.3% to C$22.72 at 10:12 a.m. in Toronto, while Sun Life gained 0.4% to C$57.52. Both companies are based in Toronto.

Manulife is in the final stages of setting short-term financed emissions targets for its general-fund investments and aims to disclose them in its 2022 ESG report, Chief Sustainability Officer Sarah Chapman said in an emailed statement. The availability of high-quality emissions data, particularly in private markets, is an issue in the industry, and the company is constantly improving its measurement and disclosure, she said.

Green Assets

The company also continues to expand its C$42 billion portfolio of green assets, engage in developing climate-related public policy, maintain strong ESG standards for its own business and monitor and push portfolio companies to use best practices, she said.

“We remain focused on contributing to global goals that seek to combat climate change alongside industry stakeholders who share the same values,” Chapman said.

Sun Life believes “climate change is the defining issue of our lifetime” and welcomes the chance to engage with Investors for Paris Compliance and listen to new thinking, Chief Sustainability Officer Alanna Boyd said in an emailed statement. 

Sun Life already has work in progress on many of the group’s recommendations and plans to set interim emissions-reduction targets for its general account later this year, she said. The company also is advocating for more rigorous sustainability disclosure standards, which is “one of the toughest challenges” in the push for net zero, she said.

“We’re confident in our approach and committed to working with the companies we invest in to further their transition to a low carbon economy,” Boyd said. “We believe the steps we’re taking will allow us to achieve our long-term goals, and we’re committed to ongoing engagement with all our stakeholders and our industry.”

(Updates with share prices in 10th paragraph.)

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