Tried this at two different listening posts today (both Echo type). First post had two mechs, call them A and B. Threw the flare near mech A, mech B was probably twice as far. Both lost their shields. Mech A lost all its red health bars and was down to 50% on the last. Mech B still had one of its red bars and about 70% on the previous. Second post had one mech. Threw the flare at the feet of the mech and it ended up similar to Mech A from the first post. Didn't seem to do much damage to my character of her companion (both of whom were probably closer to that last mech than they normally should be).
Never really tried this on a mech before because I expected the shields would provide protection. Actually seems more effective than the regular explosive skydrops.