Nov 2024 –Jan 2025
Assignment Title: Comparative Evaluation and Critique of a Company’s
ESG Report
Assignment Format: Email
Unit Coordinator: Mr. Dexter Emrit
Student Name: Andres Elijah Lezama
Student ID: 2421607
Word Count: 1650
Due Date: 6th December 2024
Subject: Valued Shareholder with Evaluation of Scotiabank’s ESG reports of
2021 and 2023
To: Aaron Regent
From: Andres Elijah Lezama ID#2421607
Date: 29th November 2024
Dear Chairperson Aaron Regent,
I am an existing large scale capital investor of your organization and would
like to present an analysis of your Environmental, Social and Governance
reports for the year carded 2021 and contrast it against the year of 2023.
ESG reporting and application allow for a greater level of investor confidence
through more avenues of transparency to the organization’s goals and
sustainable practices. Through this report I have prepared you will find
valuable data on my perception on the companies’ notable areas of good
performance, critical short fallings and workable recommendations that can
be implemented and mobilized quickly to continue on a sustainable pathway
to the future. I know Scotiabank has a rich history of reinvesting in its
communities with high interest in its business ethics, going green climate
change and employee health and wellbeing. Scotiabank stands out to me as
a reliable and robust investment bank due to its international reach,
diversified portfolios, strong financial performance even in turbulent times
and commitment to risk management to negate unnecessary risk taking.
These factors make it a very appealing option for investors like myself
looking at reliable and consistent flows on income, with a well-equipped
financial institution with a growth and sustainability culture. Their continued
focus on emerging markets, particularly in Latin America and the Caribbean,
provides significant upside opportunity, while its conservative approach
assures some fall protection to their clients in times of market turbulence
and uncertainty. The organizations ability to be in so many different markets
and still abide by ESG principles and frameworks is commendable.
Scotiabank current market cap of ninety-seven billion Canadian dollars is one
indication of the businesses success and ability to sustain a positive growth
through the many years of operation, having a solid ESG principals are to
contribute to the continued sustainability and success of the business,
particularly in a more socially conscious world that is concerned for our
future generations to ensure they live in a world better than ours. Not the
least of which is their commitment to the climate and environment,
increasing their community’s investment about thirteen percent from
seventy-seven million dollars in 2021 to eighty-seven million dollars in 2023.
In its 2023 Climate Report, Scotiabank stated its climate-related goals,
including those of the financing climate-related activities, advancing towards
a net zero financed emissions, and reducing the bank’s own emissions
through reduced waste and materials use.
Meigan Terry, the SVP and chief sustainability officer of social impact, and
communications officer at Scotiabank, acknowledged the “challenging,
urgent, and complex work ahead of us in addressing climate change”
(Gonzales, Freschia).
The 2023 ESG report goals are provided more clearly and with easier to
understand illustrations and broken down sections of how certain funds
would have been allocated, for example in the 2023 ESG report community
investment on page seventy two has a clear list of how funds were allocated
as compared to 2021 on page fifteen where they stated only a total figure of
how much was spent in community investment but had no clear breakdown
of how these funds were allocated. The report uses the global reporting
initiative (GRI), the Task Force on Climate-related Financial Disclosures
(TCFD), Sustainability Accounting Standards Board (SASB) Standards in both
the 2023 year and the 2021 year, however they added to their framework of
reporting the following in 2023, the United Nations Global Compact (UNGC),
United Nations Sustainable Development Goals (SDGs) and Public
Accountability Statement (PAS, Canadian regulation) according to the 2023
Scotiabank ESG report. The both reports offer the metrics investors want to
see present within the first eight pages of the 2023 report and on the second
page in 2021 which would have been appreciated by those who want to get
to the numbers and values quickly. A welcomed inclusion on the 2023 report
was the awards and recognition section which boosts investor confidence
with third party credibility with companies like Sustainalytics which they
provided Scotiabank with a good score of 17 which put it in the bracket of
low risk (Sustainalytics).
Some omitted data would be on an explanation as to why there was a
reduction of the total economic value distributed of approximately seven
billion dollars, leaving room for speculation and a decline in investor
confidence. There was a significant reduction as well of value retained from
2021 at approximately ten billion dollars to in 2023 approximately eight
billion dollars, there is no expansion on this as the company’s economic
value retained is a critical part of determining an organizations financial
health as it would be able to cover debts and investors dividends, thus a
reduction is a cause for concern for myself.
Some notable achievements in good performance are the increase in
community investment spending in 2021 from seventy-seven million dollars
to in 2023 eighty-seven point two million dollars. This is a commendable
increase and one in the right direction as it shows the company’s investment
into the people. Another noteworthy achievement is the Scotiabank Women
Initiative, which has engaged over 25,000 women entrepreneurs worldwide
and has deployed $8bn in capital to women-led and women-owned
businesses in Canada since the fiscal year 2019 (Gonzales, Freschia).
Scotiabank has also achieved a major reduction in Greenhouse gases from
twenty five percent reduction from twenty sixteen to twenty twenty-one, to
in twenty twenty-three a greater reduction was achieved of thirty four
percent in these harmful gas emissions. Another one would be the
maintenance of their sustainability bonds from 2021 of thirteen billion to
about thirteen point one billion in 2023. This shows a minimal increase but
its acceptable for the time being as other areas that shareholders and the
people deemed more important saw a greater investment.
Some short comings of the company were the fall in the economic value
retained, which as explained above was not expanded on appropriately to
inform investors or reasoning why this occurred and a plan to reverse such a
decline in the loss of economic value retained. Secondly, the target set for
net zero 2030 seems unrealistic as the years close in and progress is not as
fast as they anticipated. The company ESG strategy leads it in a direction
towards a sustainable future, such as your company using fifty percent more
green energy from renewable sources which gained a twenty percent
increase from the previous year of just thirty percent (Climate Action). It
shows the company’s dedications towards the ESG principles and is actively
taking steps towards achieving the goal of Net Zero. This push also saw you
have a large portion allocated to sustainable projects a large sum of five
billion Canadian dollar’s worth, which is a rise from the three billion Canadian
dollars in 2021. These actions have shown that Scotiabank is committed to
supporting united nations SDG 13 (UN SDG)
Greenwashing is a major concern of mine and many other shareholders as it
has been considered one of the most detrimental falsifiers of modern
businesses to propagate the idea that companies are being clean and good
for the environment when in reality is a stark difference, scotiabank has been
proactively producing result to back up your ESG strategy and claims but
there still may be greenwashing in some of the metrics offered in your ESG
report. Although the large five billion Canadian dollar investment in
sustainable projects, you all can provide a better breakdown of the allocation
of what specific projects these funding has been provided. There could have
been for example four billion put into a solar renewable and only one billion
shared among other renewables. This information allows investors and
stakeholder to better assess an investments risk and the companies
credibility among these things. “Each of the five banks has made a
sustainable finance – or some similarly worded – commitment in the
hundreds of billions of dollars and lists this as a central way it will reach its
net zero target,” campaign group Investors for Paris Compliance said. ‘Yet
none discloses the emissions impact of deals in this business segment and
the complaint documents several instances where sustainable finance deals
have increased instead of reduced emissions” (Lee, Katy).
With these broad statements such as greenwashing, quantitative data must
be verified accordingly to ensure validity from external third party
sustainability reports that would clearly support the claims by Scotiabank’s
ESG on the sustainable financing, renewables and carbon footprint to name a
few. With these metrics and data verified by third parties and awards
credible and verifiable it allows for a much greater investors confidence and
transparency on the company.
Concluding my report, I am generally satisfied with the implementation of
the ESG strategy and progress between 2021 and 2023. The company needs
to focus on better data disclosure on its reductions also so its shareholder
can know that they are aware and would be working on a solution to these
short comings. The targets of scotiabank on more inclusion of the workforce
and net zero emissions may be difficult to achieve but the company seems
confident in itself and third-party verification of the performance shows
positive.
Although satisfied with the company ESG strategy, I am skeptical about the
future development of Scotiabank’s ESG strategies and would like to see
more clarity amount reduction in the company’s metrics to be transparent as
to why and how the board comes up with contingencies to address said short
falls and reductions. An important part of having this sustainable
performance is to ensure you uphold your ESG standards and commitment.
Although my skepticism is high right now the overall development and active
implementations of the ESG principles and strong community investment it
appears Scotiabank should be heading towards a sustainable operating
future.
Regards,
Andres Elijah Lezama
References
Climate Bonds (2019). Climate Bonds Initiative. [online] Climate Bonds
Initiative. Available at: [Link] Accessed 5th Dec.
2024.
Gonzales, Freschia. “Scotiabank Unveils 2023 ESG and Climate
Reports.” [Link], Benefits and Pensions Monitor,
15 Mar. 2024, [Link]/investments/esg-
investing/scotiabank-unveils-2023-esg-and-climate-reports/384585. Accessed
5th Dec. 2024.
Lee, Katy. “Campaigners File Complaint with Canadian Regulators over
Banks’ “Misleading” Sustainability Disclosures.” Green Central Banking, 15
Jan. 2024, [Link]/2024/01/15/complaint-canadian-
regulators-banks-misleading-disclosures/. Accessed on 6 th Dec 2024.
Reports, Responsibility . “Scotiabank.” [Link], 2023,
[Link]/Company/Scotiabank. Accessed 6 Dec. 2024.
SASB (2019). Sustainability Accounting Standards Board. [online]
Sustainability Accounting Standards Board. Available
at: [Link]
Sustainalytics. “Company ESG Risk Ratings and Scores -
Sustainalytics.” [Link], 2021, [Link]/esg-
rating/the-bank-of-nova-scotia/ Accessed 3rd Dec. 2024.
Scotiabank. ESG Publications & Policies - 2020 ESG Report | Scotiabank
Canada. [online] Available
at: [Link]
[Link]. 29th Nov 2024.
TCFD (2024). Task Force on Climate-related Financial Disclosures. [online]
TCFD. Available at: [Link] Accessed 24th Nov. 2024.
UN SDG. 2024 Report | United Nations [online] Available at
[Link] Accessed 21st Nov. 2024.