Trump In, Trudeau Out: Where is Sustainable Finance?

Abstract: The article explores the evolving landscape of sustainable finance amidst political shifts in Canada and the U.S. With a move away from policy-driven approaches, there is growing recognition of climate risk as a material financial concern, driven by the increasing frequency of natural disasters like hurricanes and wildfires linked to carbon emissions. As political leaders step down and regulatory mandates fade, businesses are increasingly adopting sustainable finance strategies that go beyond compliance, seeing climate risk as an opportunity for innovation and profitability. In this new era, sustainable finance is emerging as a crucial business imperative, where financial institutions integrate climate risks into decision-making to build resilient, green economies while ensuring long-term financial growth.

With all the political activity, where did Sustainable Finance land? With key political transitions in both Canada and the United States, an important shift is in play—from policies designed to regulate sustainability to an emerging focus on the business of climate risk. As new administrations take office, one thing is clear: sustainable finance will become more relevant across our sector, not because of mandates, but because of its growing relevance to the bottom line.

The policy-driven approach to sustainable finance, which dominated discussions during the years of Prime Minister Justin Trudeau and former President Barack Obama’s tenure, is fading. Today, an era of renewed skepticism in global climate mandates is ushering in a new paradigm. In the United States, Trump’s policies have not only reduced support for broader international climate agreements but also drawn a firm line when it comes to domestic financial regulations aimed at reducing carbon emissions. The recent devastating impact of hurricanes and wildfires, linked to extreme weather patterns exacerbated by rising carbon emissions, has underscored the urgency of addressing climate risk in both policy and business. Such events demonstrate the real, tangible costs of climate change, creating both immediate financial losses and longer-term systemic risks.

In the US, in a notable departure from its earlier position, the Federal Reserve withdrew this month from the Network of Central Banks and Supervisors for Greening the Financial System. This move has underscored the political resistance to global climate regulations, influencing how financial institutions respond to climate risks.

In Canada, the political landscape is undergoing its own transformations. The resignation of Finance Minister Chrystia Freeland and the resignation of Justin Trudeau will lead to a rethinking of how finance and politics intersect with climate goals.

Way Beyond Compliance

Despite these shifts, sustainable finance goals remain on track. The narrative; however, is no longer one dominated by the language of regulatory compliance. Instead, it is a story of financial pragmatism—of the business case for sustainability. The message from global markets is becoming increasingly clear: climate risk is no longer an abstract concern, but a tangible and consequential factor with direct ramifications on the financial performance and resilience of companies across industries. The financial sector is learning that failing to incorporate climate risk—especially with increasing news headlines of natural disasters from wildfires to rising sea levels—posing a threat not just to the environment but to the bottom line.

Lenders and investors are increasingly adopting a more sophisticated approach to climate-related risks, integrating them into fundamental business decisions. The growing sophistication of tools to measure and manage these risks, such as climate stress testing, ESG bonds, and green finance strategies, signals the market’s move toward understanding these issues not only through the lens of policy but as material financial risks that will shape future investment landscapes.

In Canada

In Canada, businesses are accelerating efforts towards sustainable finance solutions that transcend regulatory discourse. Green bonds, low-carbon lending portfolios, and investments in renewable energy sources continue to flourish, demonstrating that sustainability is not just a policy ideal but an emerging market force. As investors and businesses begin to treat climate risk as a critical financial consideration, the opportunity to build profitable, resilient portfolios in the green economy is becoming increasingly evident.

The emerging challenge—and opportunity—for lenders and financial institutions lies in capturing the commercial value of sustainability efforts, whether by funding the green projects of tomorrow or factoring climate risk into lending criteria today. The real driver for innovation will be the embrace of solutions that seek tangible, measurable outcomes with clear financial benefits. With traditional approaches to regulation on the wane, businesses now have the chance to lead the way, developing products and financial instruments that bring measurable, profitable outcomes while maintaining a focus on environmental stewardship.

As the political winds shift and the global investment climate continues to evolve, sustainable finance is poised for the next stage of its journey. In this new era, it is not the policies that will sustain sustainable finance, but the realization that the most effective driver of change is, simply put, business. For financial institutions, this is the moment to take a bold step toward making climate risk an integral part of their portfolios—and to profit from the opportunities that arise from doing so.

In 2025, sustainable finance is not just an ethical pursuit but a profitable business imperative. The future will be defined by this shift—from a focus on regulatory mandates to an ecosystem in which business success and sustainable outcomes are intricately linked. The future of sustainable finance lies in innovative solutions that deliver tangible, profitable outcomes, proving that sustainability and financial growth are no longer mutually exclusive.

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