By Lauren Bailey
The $12.8B University Pension Plan Ontario (UPP) has submitted a shareholder proposal requesting that convenience store and gas station operator Alimentation Couche-Tard Inc. publish an emissions-reduction strategy that keeps pace with its “self-described” industry peers.
The filing was facilitated by the Shareholder Association for Research and Education, UPP’s partner for engagement with public companies in its portfolio and comes ahead of the Couche-Tard’s annual meeting in September. In an interview with Markets Group, Delaney Greig, UPP’s director of investor stewardship, said the jointly sponsored pension plan was driven to act after several years of extensive engagement on climate risk and disclosures, primarily through Climate Engagement Canada, that has now culminated in an impasse.
UPP’s shareholder proposal requests that Couche-Tard disclose mid-term targets covering material Scope 1 and 2 greenhouse gas (GHG) emissions — defined as emissions the company directly controls, or that result from its energy consumption. It’s also asking the organization to articulate an approach to Scope 3 emissions, which come from its upstream and downstream value chain.
While she acknowledged that Couche-Tard has shown some initial progress, including beginning to measure Scope 3 emissions, Greig said it still lacks a coherent plan for how it will deal with its emissions. “I think there’s sometimes a misconception that Couche-Tard just runs convenience stores and retail companies, but the majority of its revenues comes from fuel sales. And so that is the issue that raises the biggest concern in terms of climate transition risk.”
Although Couche-Tard has an emissions reduction target, Greig noted it doesn’t align with internationally recognized standards, making it very difficult for investors to understand what it means for their businesses. Without a comprehensive decarbonization strategy, she said investors are left questioning how much emissions have been reduced and what proportion of emissions are covered. What’s more, she pointed out Couche-Tard’s target is set to expire this year.
“There’s a question mark as to what comes post-2025, so that’s why the request is for a climate strategy overall to do with the broader risk and then specifically mid-term targets, which would be ideally in the next five to 10 years, to see the direction that they’re going.”
Through Climate Engagement Canada, an initiative with 57 Canadian and international investor participants, UPP was able to see how Couche-Tard compares with benchmarks among its Canadian peer group. The initiative has a series of indicators that align to the Climate Action 100+ global initiative, which provides a view of how Couche-Tard compares domestically and among global peers, said Greig, noting in addition to engaging in discussions with several people at the organization, UPP has reached out to Couche-Tard’s board.
A recent report released in February by the University of Toronto’s Rotman School of Management reviewed 700 Canadian shareholder proposals and 6,500 U.S. shareholder proposals, finding in 2023 and 2024, the largest proportion (more than 50%) for both countries is now focused on environmental and social issues.
The research was led by Poonam Puri, professor of law and research chair with Osgoode Hall Law School, and head of the Capital Markets Initiative at the Johnston Centre for Corporate Governance Innovation at Rotman.
“Even if a proposal ‘passes’ by receiving more than 50% support, the results aren’t generally legally binding on management,” said Puri, in the report, which also noted the number of proposals that clear this threshold is low.
She pointed out that many shareholder proposals that get less than 50% support could lead to discussions on the issue or negotiations with management.
Indeed, Greig noted there is still time for Couche-Tard to negotiate a withdrawal of UPP’s proposal before the annual meeting, particularly if it took immediate steps to put a proposal on the table.
“A shareholder proposal can be withdrawn even up to the day of the annual meeting, so that is definitely still an option. We’ve had some discussion since we filed, but we could have further discussion and withdraw. What we would like to see in order for that to happen, essentially, is that they would put forward a plan of their intentions for setting mid-term emission reduction targets and for putting together a strategy to address climate risk and the broader emissions impacts of their business.”
While UPP noted Scope 3 is extremely material for Couche-Tard since it sells fuel, right now, it’s prioritizing Scopes 1 and 2 for an actual target, acknowledging the organization has the most control in these areas.
“They do have a very large footprint of physical retail real estate — essentially their buildings — their businesses or their sites, so there is a lot that can be done within Scopes 1 and 2.”
Couche-Tard is a global player and one of Canada’s flagship companies, said Greig. “Globally, there’s a movement toward addressing climate risk in a very structured way that we are just catching up with in North America. We see this as important for this company in particular [and] in terms of the way other Canadian companies are attracting global capital.”
When domestic companies are aligned in their targets and strategies in for addressing climate risk, it further fuels investor confidence in Canada, she said. “We want all the Climate Engagement Canada Focus List companies, ultimately, to be disclosing emissions, setting targets, having climate strategies that are standardized, that are recognizable, and that are comparable, so investors have an easier time in the Canadian market.”
Markets Group has reached out to Couche-Tard for comment but has not yet received a response.
