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Last month in Santa Marta, Colombia, the world’s first international conference dedicated to transitioning away from fossil fuels convened 57 countries representing more than half of global gross domestic product, 30% of the world’s population and 20% of global fossil-fuel production.

Together, participants sent a powerful signal to markets, investors, industries and governments: the future belongs to clean energy, resilient economies and fossil-free development.

The conference took place against a background of increasing geopolitical, economic and security concerns, all of which are accelerating the energy transition.

Recent instability linked to tensions in the Strait of Hormuz once again exposed the fragility of fossil-fuel dependence. The temporary closure of the strait triggered what the International Energy Agency has described as the worst energy crisis in modern history.

Countries that have invested in renewables are proving to be far more resilient. China is leading the transition, Pakistan has seen rapid rooftop solar expansion, India is accelerating solar deployment, while Indonesia has developed a massive solar strategy, and enormous new investment in renewables is being made across the globe, including in Latin America and Europe. All of this demonstrates that energy security increasingly means renewable-energy sovereignty.

The global transition is underway, gaining momentum, and becoming irreversible. Indeed, global investments in the energy transition reached a record US$2.3 trillion in 2025, while renewable capacity expansion continues to accelerate worldwide.

Financial institutions are sounding the alarm

Salient discussions at Santa Marta revolved around the strong warnings coming from central banks, insurers, economists and financial regulators who are increasingly viewing fossil-fuel dependence as a major destabilizing risk. In fact, the European Central Bank now views fossil-fuel dependence as a macroeconomic stability risk, which makes the transition away from fossil fuels a matter of monetary policy.

The recent report from asset managers Impax stresses that financial markets are dangerously underpricing physical climate risks, as investors, insurers and lenders increasingly recognize that many assets exposed to floods, fires, hurricanes, droughts and heatwaves are likely significantly mispriced, overvalued and vulnerable to sudden repricing.

And the era of perpetual fossil fuel expansion is ending. While this doesn’t mean that oil and gas will disappear overnight, it does mean that betting national economic futures on long-term fossil-fuel growth is increasingly becoming a high-risk strategy.

Countries that continue to double down on oil and gas dependency will become exposed to a variety of risks: stranded assets, declining export markets, rising insurance costs, fiscal instability, trade disadvantages and growing geopolitical vulnerability.

Countries investing early in the transition – including electrification, clean manufacturing, renewable deployment, storage, critical minerals, energy efficiency and resilient infrastructure – are positioning themselves for industries of the future.

A momentous conclusion coming out of discussions in Santa Marta was the growing recognition that voluntary climate promises are no longer sufficient. Implementation requires binding legislation and aligning budgets with climate commitments.

Moreover, many studies show that the uptake for voluntary standards based on risks and opportunities has been limited in scope and depth and has not resulted in meaningful change.

Legislation can provide clear and consistent rules that can level the playing field and ensure an orderly transition. This in turn could foster the predictability needed by the private sector to attract domestic and foreign investment. In a time of high economic uncertainty and rapidly evolving geopolitical shifts, the ability to diversify economies and attract investment becomes more important than ever.

The Climate-Aligned Finance Act: a Canadian example

The Climate-Aligned Finance Act (CAFA), which is currently being considered by Canadian lawmakers, is a legislative tool designed to modernize the country’s financial governance. It intends to provide the structure and legal clarity needed for Canada’s financial system to operate consistently with our climate commitments. The act provides clear expectations and ensures that financial decisions support long-term prosperity, creating stability for investors.

At its core, the act is about accountability and transparency. The legislation would protect Canada’s economy and could support competitiveness in the global clean-energy economy. It offers a constructive, science-based framework that would help Canada to attract public and private finance for renewable energy and to build resilience and establish energy sovereignty.

The act would operationalize climate alignment through five concrete regulatory mechanisms: strengthening fiduciary and governance duties; tying capital adequacy requirements to climate risk; mandating auditable transition plans for federally regulated financial institutions; mandating a national action plan to phase out high-carbon financial instruments and promote genuinely sustainable ones; and mandating timely public review of progress on these actions, to ensure iterative learning and enhanced accountability.

Notably, CAFA establishes climate alignment as a duty for directors and executives of federally regulated financial institutions and state-owned Crown corporations and requires the appointment of at least one individual with climate expertise to certain boards of directors. To address the growing risk of stranded assets, the act encourages the financial regulator to ensure that financial institutions hold sufficient capital against high-carbon exposures. Furthermore, entities to which the act applies would be required to publish science-based, credible plans, targets, and reports on meeting climate commitments to ensure progress, not just promises.

We need credible and consistent policy to provide clarity and guidance to the financial sector for the biggest economic transformation we have seen since the industrial revolution. The act comprehensively provides investors with the certainty and security they need to invest in Canadian capital markets, helping to ensure investment-readiness well into the future while maintaining the competitiveness of our economy in a global market that increasingly values sustainable investment opportunities.

In January, the House of Commons’ Standing Committee on Environment and Sustainable Development released its report on the impacts of Canada’s financial system on the environment and climate change, which reflected the committee’s in-depth study conducted in 2024 during the previous parliament. The first recommendation was “[t]hat Canada’s financial system be reformed to align with climate commitments . . . the Climate-Aligned Finance Act . . . which would itself provide a robust, science-based regulatory framework for conducting transition plans and annual progress reports and address greenwashing concerns around climate action.”

Legislation like CAFA is needed now more than ever because economic competitiveness, innovation and energy independence are dependent on capital flows being directed toward renewable- and clean-energy projects, as well as community-led initiatives to build resilience. Furthermore, the act’s integrated approach to addressing the greatest existential crisis of our time seeks to tackle the root cause of the multiple cascading crises we face: biodiversity loss, affordability, climate change and health.

Advancing global sustainable finance governance

The governance logic underpinning CAFA is transferable across jurisdictions, and governments might be inspired by the process used to develop CAFA. The act was created in collaboration with dozens of national and international experts and was refined based on feedback received during Senate committee study through further consultation with climate scientists, legal scholars and financial experts.

The act is grounded in climate science, financial expertise and the best international regulatory and voluntary practices. In short, the process adopted modelled the best practices of open parliaments, which favour a holistic understanding of the interdependence of complex problems such as climate change and finance and the development of evidence-based policies.

Climate‑related financial risks are increasing. The Climate-Aligned Finance Act demonstrates that effective alignment of finance with climate objectives requires enforceable governance. For central bankers and financial regulators worldwide, the imperative is no longer whether to act, but how quickly credible, accountable frameworks can be put in place to future-proof their economies.

Rosa Galvez is a civil-environmental engineer and an independent senator for the province of Quebec.

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The government calls its “climate competitiveness strategy” a “central pillar” of the plan to make Canada the strongest economy in the G7 – based on “results, not objectives.” While these initiatives provide continuity, they fall short of the acceleration needed to compete in a global economy already moving toward clean technology.

The new post-2030 carbon-pricing trajectory and the “improved backstop” simply repackage commitments made years ago. The much-touted carbon contracts for difference are likely too small to transform markets, while the suite of refundable tax credits extends programs launched between 2022 and 2024. The Critical Minerals Sovereign Fund, worth $2 billion over five years, re-profiles existing Natural Resources Canada initiatives.

Global trackers rate Canada’s climate action as “highly insufficient,” and while extreme weather devastates our communities, the measures presented in Budget 2025 are unlikely to shift this metric.

Fiscal storytelling

The government’s new “capital budgeting framework” gives the deficit a makeover, recasting almost every dollar as an “investment.” The plan promises to balance day-to-day spending with revenues by 2028/2029 while nearly doubling capital expenditures: from $32.2 billion in 2024/2025 to $59.6 billion in 2029/2030, to spur productivity and long-term growth. By then, 100% of the deficit would be branded as investment spending.

But branding isn’t proof. Budget 2025 offers no metric of return, no measure of efficiency, and no test of climate alignment to show whether these billions are building resilience or simply deepening debt. The intent to modernize fiscal planning is welcome, but transparency on the real return of these investments – economic, social and environmental – is essential for public trust.

The government’s focus on modernization and efficiency is understandable, especially amid fiscal pressures. But to save $25.2 billion over four years, Ottawa will cut operating costs by 15% through “reducing inefficiencies” and “automating processes.” Uniform cuts rarely have uniform effects: departments with smaller budgets lose a far greater share of their operational capacity.

Environment and Climate Change Canada, for instance, is expected to save $1.1 billion in four years – a staggering sum for a ministry already stretched thin – largely through automation and program wind-downs. Natural Resources Canada must find similar savings of up to 15% over three years by “optimizing processes” and ending initiatives such as the Two Billion Trees program. Efficiency and modernization are laudable goals, but cutting capacity in key departments undermines the outcomes modernization seeks to achieve.

Small steps forward for preparedness

Budget 2025 takes small steps toward climate preparedness but falls short of the scale the crisis demands. It commits $40 million over two years to launch a Youth Climate Corps to train young Canadians to respond to climate emergencies and strengthen community resilience. It also allocates $257.6 million over four years to Natural Resources Canada to lease four aircraft and boost aerial firefighting capacity, and $55.4 million to Public Safety Canada to develop a new National Public Alerting System for timely disaster warnings.

These are positive measures, but modest when measured against record-breaking wildfires, floods and insurance losses that already cost Canada billions each year. Training youth to respond is vital; equipping the country to prevent and withstand these disasters is what leadership requires.

Incremental movement in climate finance

Canadians needed six clear signals of climate-aligned financial leadership in yesterday’s budget, but few appeared. Under “Mobilising Capital for Transition to Net-Zero,” the budget reconfirmed the intent to move forward with a “Made-in-Canada” taxonomy, with completion delayed until 2026, and indicated its intention to explore the development of a sustainable bond framework. These steps are within reach. Together, they would turn Canada’s fiscal promises into a credible plan for a resilient, low-carbon economy.

What was missing?

We need a green nation-building fund to enhance renewable energy and adaptation efforts in collaboration with Indigenous partners. Additionally, we propose a finance-sector alignment framework, such as the Climate-Aligned Finance Act, to ensure that banks, pensions and insurers align with our climate goals. We advocate for tax reforms that reward clean innovation while gradually phasing out fossil fuel subsidies. Furthermore, an Indigenous climate-leadership capital  fund should be established to finance community projects. To ensure accountability, we recommend regular audits and penalties for greenwashing. The government will update existing greenwashing provisions, removing certain aspects while maintaining protections against false claims.

Closing call – from rhetoric to results

Capital diverted to stranded assets is lost capital growth. Without climate-aligned financial flows, Canada faces a vicious cycle: inflation driven by climate shocks, rising indebtedness from bailouts or repair bills, and weak growth from stranded industries. Instead, we need a budget that funds clean growth and relies on a robust framework to shift finance toward low-carbon growth, fights inflation and secures long-term prosperity.

Other G7 economies are already integrating climate risk into regulation, creating taxonomies and redirecting investments toward clean growth. Without similar accountability, Canada risks becoming a “stranded-capital nation” – reliant on devaluing fossil assets while others seize tomorrow’s markets. Left unchecked, climate risk is inflation risk, debt risk and competitiveness risk.

Budget 2025 could have been the moment when fiscal discipline met climate ambition. Instead, it leans on past frameworks, future promises and cuts that weaken delivery. The tools exist to align dollars with duty and finance with the future.

In 2024, global investment in the energy transition exceeded $2 trillion. Capital is moving, and Canada must act or risk forfeiting future prosperity. History will judge not intentions but courage. This budget needs to seize the chance to invest in Canada’s future, not cling to its fossil past.

Rosa Galvez is a civil-environmental engineer and an independent senator for the province of Quebec.

The post Canada’s budget must finance our future – not our fossil past appeared first on Corporate Knights.

Why Trump? Why now?

To say Trump’s victory represents an anomaly is to misunderstand the global state of democracy.

Democratic systems in the West are under siege, eroded not just by external threats but from within by glaring environment-associated crises, abysmal socio-economic disparities and intense political disillusionment. As U.S. philosopher Jason Stanley aptly puts it, democracy erodes when trust in its pillars fails. The United States has reached this critical juncture. Evidence has been piling up in plain sight for those most affected by it – the working class, youth and disenfranchised minorities – while the self-absorbed, self-serving “high class” elites failed to pay it much attention.

Poverty, economic inequality and unchecked corporate influence have paved the way for populist demagogues. People are desperate for change – any change. And when establishment figures like Kamala Harris fail to ignite hope amid economic or environmental anxiety, voters turn to characters like Trump, believing that a strongman can “fix” a broken nation.

The chasm between social and economic realities in the United States has reached staggering proportions. The CEO-to-worker pay gap has grown dramatically from 21:1 in 1965 to 31:1 in 1978, and to 290:1 by 2023. While CEO pay skyrocketed by 1,085%, worker wages rose just 24%, adjusted for inflation – highlighting glaring inequality.

The illusion of the business saviour

Many Americans perceive their country as a business (now in decline), believing that only a savvy businessman can save it and run it. Unfathomably, Trump, despite a string of bankruptcies, erratic behaviour and 34 felony convictions, fits that bill. His appeal is rooted not in policy but in persona – a paradox where the perceived “outsider” is more entrenched in the elite than most career politicians. People like Trump, and even tech moguls like Elon Musk, present themselves as anti-establishment, despite their wealth and privilege – a form of political gaslighting. Judging by Trump’s cabinet and staff nominations, the United States is at risk of becoming an oligo-technocracy disguised as a democracy, where power cycles between a handful of influential figures who brand themselves as saviours.

Failure of the establishment

Despite endorsements from influential celebrities, Vice President Harris failed to block Trump’s return to power because of public disillusionment. The Democratic Party’s ties to industries marked by scandals only served to deepen voter mistrust – think Hollywood with the Jeffrey Epstein, Harvey Weinstein and Sean “Diddy” Combs scandals, and real news anchors appearing in apocalyptic films, blurring the line between fiction and reality. For decades, guns and violence have been glorified by the entertainment industry, while disenfranchised young people have turned to violence online and in real life. The UnitedHealthcare CEO killing and Trump assassination attempts are recent examples, and that’s not counting the 76 school shootings last year as of November 11, 2024.

What we see is not a government standing up and protecting the most precious of a nation, the children; instead, we see a system of corporatocracy protecting its own. Americans live in a system where corporate actors that influence and shape laws inflict damage to society: the pharmaceutical industry fuelling the opioid crisis, oil and gas driving global warming, the finance sector causing economic turmoil, and the insurance sector deepening the health crisis.

Climate rollback

Climate scientists and activists who have been fighting to combat climate change are surely among the most concerned by Trump’s election. The potential setbacks were apparent during the United Nations’ latest Conference of the Parties on climate change in Azerbaijan in November. The denial of climate science by certain leaders and the weaponization of global-warming skepticism feed into the larger narrative that the “system is rigged,” further fuelling both environmental and democratic crises.

Trump’s energy and climate policies could jeopardize the progress generated by Biden’s Inflation Reduction Act (IRA) that financed green development. He has promised to repeal the IRA, halt climate action and roll back climate regulation. It is clear that Trump will not embrace the vision of an eco-centric, nature-based circular economy – a transformative approach essential for a sustainable future. Instead, he appears tethered to the outdated, wasteful linear economy that depletes our planet’s resources and accelerates environmental collapse. However, hope thrives at the state and city levels, where innovative sustainable initiatives will not only survive but have the potential to flourish. It is imperative that we build alliances with these localized efforts, driving meaningful progress from the ground up.

Lessons for other democracies

Canada must watch closely. With Trump’s return to power, Canada has a difficult choice: continue business as usual or adapt to ensure we do not follow the same misguided path. The reality is that although not yet sworn in, Trump is already disturbing Canadian politics.

Perhaps we should heed the calls for ditching the status quo made by Bernie Sanders, who easily won a fourth Senate term, warning that the Democratic Party’s focus on defending the status quo has alienated working-class Americans, including white, Latino and Black workers, who now demand meaningful change.

Incontrovertibly, these are lessons applicable to Canada’s upcoming election. The future of our democracy depends on systemic changes to bridge economic divides and foster trust.

We must strengthen economic equality, tackle the affordability crisis and reinforce social safety nets, through progressive taxation, living-wage legislation and affordable-housing initiatives, while also fostering community resilience through investment in community-led mitigation and adaptation initiatives. We must also strengthen environmental and social resilience through the adoption of a comprehensive strategy for a just transition that ensures job creation, environmental protection and social equity.

While Trump may slow the pace of climate action in the United States, his re-election will not influence Canada’s commitment to climate action, according to Environment and Climate Change Minister Steven Guilbeault. Moreover, Trump will not stop the energy transition given the high economic momentum that already exists for renewable energy, the many state-level initiatives, the new market dynamics and investor interests, and the exponential increase in the costs of extreme weather events.

The path forward

The longevity of democracy relies on upholding the rule of law, transparency and accountability, reinforced by independent oversight and strict campaign finance laws to curb undue influence and foreign interference. Leaders must prioritize informed public discourse, civic education, media literacy and digital democracy tools to empower citizens and foster inclusive governance. By creating spaces for civil debate and multilateral collaboration, we can bridge ideological divides and address the world’s greatest challenges.

Trump’s return should not just alarm but also galvanize democratic nations to act. If Canadians want to maintain their standing as a G7 nation – and avoid similar democratic backsliding – the next four years are pivotal. We must nurture critical thinking and tell new stories that frame civic duty as a hero’s journey. If we fail, the consequences could echo far beyond the 2024 U.S. election.

The Honourable Rosa Galvez is a civil-environmental engineer and an independent senator for the province of Quebec.

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