Driven by aggressive provincial housing mandates, multibillion-dollar federal investments in clean energy and electric vehicle supply chains, and the push to unlock critical minerals in regions like Ontario’s Ring of Fire, we are accelerating infrastructure and resource development at a pace not seen in decades. At the same time, Canada has committed not only to protect nature, but to halt and reverse biodiversity loss by 2030 and put nature on a path to full recovery by 2050.

These goals are typically framed as being in conflict. But the real problem is not the tension between development and nature. It is that we have never built a system that allows them to work together.

Canada’s growth agenda is not optional. Housing shortages, energy systems and major infrastructure projects must move forward quickly. The question is not whether we develop. It is whether we continue to do so in ways that degrade the natural systems our economy depends on, or whether we build a system that allows development and nature to advance together.

The missing piece isn’t capital – it’s architecture

Over the past decade, a familiar argument has taken hold: nature is valuable, essential to the economy and increasingly at risk. The conclusion seems obvious. Capital should flow toward protecting and restoring it.

But it hasn’t, at least not at the scale required.

The reason is not a lack of capital, policy intent or even progress on measurement. It is a lack of architecture. Nature largely remains outside the systems that drive investment decisions. It is measured inconsistently, accounted for incompletely and governed through fragmented, project-by-project processes. The result is predictable: nature remains economically invisible and therefore largely non-investable.

That is now beginning to change.

The economic stakes are enormous. Globally, an estimated $700 billion per year is required by 2030 to halt and reverse biodiversity loss. At the same time, Canadian pension funds and institutional investors manage hundreds of billions in capital seeking long-term, stable returns.

The issue is not capital. It is the absence of structures that allow it to flow into nature.

A convergence of conditions

Canada’s emerging nature strategy signals a structural shift. It positions nature not just as something to protect, but as a foundation of long-term economic prosperity. More importantly, it introduces tools that could fundamentally reshape how development and conservation interact.

One of the most significant is the use of regional assessments under the Impact Assessment Act. This tool is designed to evaluate cumulative environmental, social and economic effects across entire regions, including past, present and future activities.

This is a quiet but profound shift. For decades, environmental decision-making in Canada has been reactive and project-based. Regional assessments are emerging as a mechanism to shift toward proactive, forward-looking land-use planning that can define ecological limits in advance.

They are more than a planning tool. They are the foundation of a functioning nature market.

By defining cumulative impacts, ecological thresholds and development scenarios at a regional scale, regional assessments create the clarity and predictability that capital requires. Without this, nature remains too uncertain to price, too fragmented to manage and, ultimately, too risky to invest in.

If Canada is serious about becoming a nature-positive economy, regional assessments cannot remain occasional exercises. They must be institutionalized, scaled and embedded into how development decisions are made across the country – and quickly.

At the same time, other foundational elements are falling into place. Advances in ecosystem measurement and accounting frameworks are improving how nature is understood and valued. Financial frameworks are beginning to integrate nature-related risks into decision-making. Artificial intelligence, satellite monitoring and environmental data are making it possible to measure and verify ecological outcomes at scale.

Crucially, Indigenous stewardship is emerging as a central pillar of both conservation and economic participation. Large-scale Indigenous Protected and Conserved Areas, such as the Seal River Watershed, demonstrate how Indigenous leadership can secure vast carbon sinks and protect biodiversity at scale. Mature initiatives like British Columbia’s Great Bear Forest Carbon Project show that conservation can also be highly investable, generating long-term revenue streams through verified ecosystem services.

Paired with financial tools such as Indigenous loan-guarantee programs, Indigenous communities are uniquely positioned to become primary suppliers and equity partners in nature-based solutions.

The constraint is no longer the absence of data alone. While important gaps remain, advances in environmental measurement, accounting and monitoring are rapidly reducing this barrier.

Individually, these developments are important. Together, they represent something more: Canada is no longer missing the pieces. It is missing the architecture.

From protection to recovery – and the case for net gain

This shift is reinforced at the global level. Under the Kunming–Montreal Global Biodiversity Framework, countries have committed not only to protect nature, but to halt and reverse biodiversity loss by 2030 and restore ecosystem integrity by 2050.

That ambition goes beyond conservation. It implies a transition from minimizing harm to actively restoring nature – from “no net loss” to net gain. Over time, development must not only reduce its impact, but contribute to rebuilding natural systems.

From limits to markets

If regional planning defines ecological limits, it also creates something markets require: certainty.

That certainty can be translated into a simple but powerful mechanism.

When major projects affect ecosystems, they are generally expected to follow the mitigation hierarchy: avoid, minimize, restore and only then offset residual impacts. In practice, however, its application remains uneven and fragmented, limiting its effectiveness as a foundation for consistent, investable outcomes.

What if those residual impacts were consistently quantified and priced? What if developers were required to deliver not just mitigation, but net-positive outcomes?

This is not theoretical. In the United Kingdom, “biodiversity net gain” rules have already created a functioning market that channels private capital into restoration and conservation.

Canada is now in a position to build its own version – potentially more ambitious and more integrated.

A Canadian nature-positive market

At its core, the system would be straightforward:

• Regional plans define ecological limits and priorities. 
• Developers are required to address impacts, with residual effects converted into measurable obligations. 
• Markets allow those obligations to be met through investment in restoration and ecosystem services. 
• Indigenous communities, conservation authorities and landowners become suppliers of nature-based solutions. 

Over time, this could expand beyond biodiversity to include carbon, water, flood mitigation and habitat, creating multiple, stackable revenue streams.

With the right structure, these projects begin to resemble infrastructure investments, with long-term, stable returns tied to measurable ecological outcomes.

Sticks, carrots – and a familiar playbook

For this system to scale, it will require both regulation and incentives – and, crucially, alignment between federal environmental ambition and provincial jurisdiction over natural resources.

In practice, this means a combination of “sticks” and “carrots”: clear ecological limits, mandatory net-gain requirements and enforceable obligations, alongside tax incentives, blended finance and public guarantees that reduce risk and attract capital.

Canada has used this model before. Flow-through shares and public–private structures helped build the oil, gas and mining sectors. The same logic can now be applied to nature.

A nation-building opportunity

This is not environmental policy. It is economic strategy.

Canada has a once-in-a-generation opportunity to move from protecting nature to financing it, embedding natural assets into the same systems that fund roads, energy and housing.

The choice is no longer between development and conservation. It is between continuing with fragmented approaches that fail to scale or building a system where growth and nature are structurally aligned.

The pieces are now on the table. What remains is the architecture.

Peter van Dijk is a former global finance executive, adjunct professor at Brock University, and incoming PhD researcher at the University of Ottawa focusing on nature finance and the economic architecture for a nature-positive future.

The post How to put nature at the centre of investment decisions appeared first on Corporate Knights.

But the hope of federal governments to unlock supposedly sleeping animal spirits is a long-standing one, and the problem has proven resilient. What is required is a break with models whose narrative doesn’t match results and a decision to upset cornerstones of Canada’s economic framework. 

To unlock investment and corresponding productivity gains, the Carney government will need to bring real competition for markets and workers to a corporate sector that has been doing better than ever under the status quo.

Do profits drive investment?

A quick survey of moves by the Carney government on the economic-policy front reveal reforms to the tax system to encourage investment, work to address regulatory barriers across borders and governments, and the spinning up of public-sector funding bodies to complement private-sector investment.

The narrative is that Canada’s productive capacity is held back by taxation that blunts financial rewards, a regulatory system that throws sand in the gears of private enterprise, and a public sector reticent to invest. For taxation in particular, the logic seems clear: why invest if you can’t keep a meaningful portion of the profits? But recent experience at home and abroad suggests that this proposed remedy for unlocking lagging investment and productivity growth comes with a caveat.

If profit and investment move in a pack, Canada should be in the midst of an investment golden age. Changes to the taxation of corporate profits to spur investment – both those enacted in the most recent budget bill and further cuts requested by business groups – come at a time when Canadian corporations have never been more profitable. 

Since 2020, there has been sustained growth in Canadian private-sector profits without a corresponding increase in capital expenditures. Except for oil and gas extraction, sectors that have seen real growth in capital expenditures – mining, utilities, transportation – have experienced relatively flat profits since the pandemic. This suggests that the link between profits and investment is not as clean as initially pitched. Amid an all-time high in macro-level profits, the tax incentives designed to drive investment brought in through Budget 2025, the “productivity super-deduction” and “scientific research and experimental development” tax credit enhancements, might at best change the timing of investment decisions already on the books. 

But recent efforts do not bode well for this strategy. The previous government’s suite of clean-economy tax credits, designed to encourage investment in greener economic activities such as carbon capture, utilization and storage, still a plank of the current government’s approach to climate change, have seen little uptake. As of July 2025, the auditor general of Canada reports that clean-economy credits related to carbon management, hydrogen development and greener manufacturing have seen no uptake. 

A fair response is that these tax credits were misguided in the first place in their attempt to spur investment in sectors where the business case, credit or not, does not exist. But what, then, of more broad-based efforts to use tax reform to spur investment?

The Tax Cuts and Jobs Act (TCJA) of 2017 brought in by the Trump administration represented the largest cut to the United States’ corporate tax system in a generation. While the headline figure was the reduction of the federal corporate tax rate from 35% to 21%, the act contained several investment-specific provisions, including a similar super deduction accelerating the expensing of capital investment for businesses. While the uptake of the tax cut has been universal, adding more than a trillion dollars to the United States’ annual deficit, the promised investment gains have been scarce. A 2023 analysis by the think tank American Compass showed that, despite allowing U.S. corporations to keep billions more on the books, the TCJA has had no measurable impact on investment-driven growth. 

What can spur investment?

If at the macro level Canadian corporations are already awash in profits, what can Canadian policymakers do to unlock desired investment and corresponding productivity growth? 

The answer, counterintuitively at a moment when Canadians have never felt less secure of their place in the world, is competition. While a sufficient return is a necessary condition of investment, it is the competitive process that keeps the flywheel in motion. The rivalrous process of competition, being chased by another firm attempting to outdo you and steal share, is what ultimately spurs companies to continue to invest in new and better ways of doing business. 

Studies show that competition is a driver of productivity-enhancing investment, and the relaxing of the competitive constraint is a recipe for complacency. While academics such as Philippe Aghion make the case for a point at which competition is so fierce that it ultimately blunts competition, a market singularly obsessed with beating out the competition to win the business of customers seems like a side effect worth bearing.

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In this area, the Carney government has made encouraging moves. Efforts to reduce interprovincial trade barriers can create the conditions for greater competition among Canadian regional businesses and economies. Though rarely framed in these terms, we are exposing our own companies to greater competition. On the sectoral front, Carney is finally set to open up Canada’s infamous banking oligopoly, a move the Trudeau government set in motion.

The most recent spring economic update provided a clue that this thinking might be resonating on a deeper level within the federal government. The headline of “Driving Productivity and Affordability Through Competition” teased a “whole of government” approach to spurring competition that is desperately needed. But, so far, what’s on offer is platitudes about red tape and a promise of future action.

To successfully drive productivity, the government must take an imaginative approach to the project of a more competitive Canadian economy.

Rather than cutting red tape, Ottawa must understand that regulation can be a powerful tool for opening markets for contestation. Long-standing oligopolies must be broken – open if not necessarily up – whether through orders to spin off business lines or regulation that erodes walled gardens. Here, the example of progress on competition in the banking sector is encouraging and cautionary. Encouraging because a growing list of firms angling to break down the gates and cautionary because of the sheer volume of sand incumbents were able to throw in the gears of the modernization of the plumbing of Canada’s banking sector.

The Carney government must also understand an underappreciated vector of driving productivity: competition for Canadian workers. While often framed in terms of vying for market share, competition for inputs is a critical driver of productivity. As the recent oil price shock has shown, make an input more valuable and you increase the incentive to reduce your reliance on it. Paradoxically, competition for Canadian workers must drive wages higher to drive the adoption of the technologies to augment their productivity.

This runs counter to Canada’s pitch as a source of high-quality, low-wage labour for companies both foreign and domestic. While the Temporary Foreign Worker Program has come under scrutiny, just as damaging to our productivity ambitions has been the discounting of our most qualified. By putting high-quality and relatively low-wage employees on offer, Canada has been able to attract businesses willing to set up branches within our borders. While this approach may have generated good jobs and recognizable logos on buildings, it has created a tension between generating the high wages that drive productivity and placating a corporate community dependent on cheap labour. Whatever the mechanism, a tighter labour market with more intense competition for Canadian workers will be key to breaking out of Canada’s persistent productivity slump.

The Carney government faces the unenviable position of breaking out of a secular productivity slump while familiar elements of our traditional economic model break away. Meeting that moment will involve breaking out of the policy responses whose narrative has fallen short of results. Allowing competition to flourish for both markets and workers is the path forward.

Keldon Bester is the executive director of the Canadian Anti-Monopoly Project and a fellow at the Centre for International Governance Innovation.

The post If Carney wants to drive investment in Canada, competition is the way appeared first on Corporate Knights.

Interest in Canada is growing by major European investors as they shift assets out of the United States to flee the chaos of the Trump administration. European investors also want data on corporate climate emissions, risks and policies to satisfy stringent sustainability reporting rules there, and demand for environmental, social and governance (ESG) investment funds.

Unfortunately, Canada is poorly positioned to meet Europe’s requirements for climate information. Policy work to align Canadian corporate disclosure rules with global climate reporting guidelines was halted in April 2025. Regulators said the time wasn’t right to impose new disclosure regulations given the uncertainty of rapidly changing economic and geopolitical conditions.

In response, researchers at the Institute for Sustainable Finance (ISF) at Queen’s University in Kingston have mounted a major initiative to study this disclosure gap. The project points to a firm conclusion: the absence of mandatory climate disclosure is hurting the country’s financial independence.

In a study published in early June, From U.S. Dependence to Global Capital: The Role of Climate Disclosure, ISF researchers examined changes in foreign investment in 206 Canadian companies after the United States announced its “Liberation Day” tariffs in early 2025. They also compared how much investment changed between firms without formal climate disclosures and companies reporting under the globally recognized Task Force on Climate-Related Financial Disclosures (TCFD).

Results surprising

TCFD-reporting firms experienced a 24.6% higher increase in foreign holdings over non-reporting companies after the Liberation Day tariffs.

“I was really surprised how strong the results were comparing the Canadian companies that disclose climate risk and the companies that don’t,” says Yrjo Koskinen, a finance professor at the University of Calgary and research director at ISF. The 24.6% differential “is a strong, strong result,” he says in an interview. European investors accounted for almost all of the difference between TCFD-reporting firms and non-TCFD companies. “It shows that climate disclosures are very important for European institutional investors.” (The differential is based on a model of capital measures controlling for factors such as firm size and sector and market-wide trends. It helps to better isolate the TCFD reporting effect.)

The ISF discussed the results of this study along with other research at a roundtable event on Parliament Hill in Ottawa on April 15 attended by representatives of business, the investment industry and academics. The roundtable was moderated by Daniel Tisch, chief executive officer of the Ontario Chamber of Commerce.

Evidence presented at the roundtable showed that the benefits of mandatory climate disclosure outweigh corporate costs, according to a briefing note on the discussion. Stronger disclosure is associated with better liquidity of company shares, a lower risk of share price crashes, more efficient risk pricing and stronger access to foreign capital.

Given that 40 jurisdictions are currently using or moving toward the global disclosure guidelines of the International Sustainability Standards Board (ISSB), Canada “is increasingly out of step with major markets,” the briefing note states.

Several roundtable participants also argued that publicly available ISSB disclosures will become more important as artificial intelligence models become more prevalent in ESG and financial analysis.

An illustration of how AI is being used in ESG analysis was revealed earlier this year when Norges Bank disclosed that it uses Anthropic’s Claude AI model to continually screen for ethical and reputation risks of companies in Norway’s $2-trillion pension fund.

“Standardized disclosure will become even more strategically important as AI increasingly shapes investment analysis,” the ISF briefing note states. “In that environment, weak, inconsistent or fragmented Canadian analysis could place Canadian issuers at a growing disadvantage in AI-assisted capital markets.”

Regulators continue to be opposed

Despite the growing body of evidence for mandatory reporting, the Canadian Securities Administrators – the network of provincial securities commissions – is adamant that its pause will continue. “The pause remains in effect until otherwise signaled by the CSA,” a spokesperson writes in an email to Corporate Knights.

One of the barriers to mandatory climate reporting in Canada is the power of the oil and gas industry, which has opposed mandatory reporting on climate scenario analysis and end-use emissions. Corporate reporting issues are also complicated by the recent oil-pipeline and carbon-capture agreement between Alberta and the federal government. By significantly raising oil-sands production without assurance of long-term demand or guaranteed carbon dioxide reduction, the agreement raises the industry’s climate risks.

The Alberta Securities Commission has expressed skepticism about mandatory climate reporting, saying disclosure costs are high for small companies, disclosure increases liability concerns, and mandatory reporting could hurt the industry’s competitiveness with the United States. Since the Canadian Securities Administrators is a network of provincial securities commissions, large provinces like Alberta can veto changes.

In a commentary published in the Toronto Star, Koskinen and Tisch responded to the Alberta Securities Commission’s concerns. They argue that mandatory climate reporting should be phased in, starting with large companies that are responsible for the majority of Canada’s carbon dioxide emissions. They also argue that the focus should be on “straightforward and impactful” information, such as direct Scope 1 and 2 greenhouse gas emissions.

Interest grows as investment summit approaches

The ISF research initiative comes at an important moment in policymaking as the government prepares for an international institutional investment summit in Toronto in September.

European institutional investors are expected to form a large contingent of the asset managers, investment funds and pension plans invited by Prime Minister Mark Carney. Climate change is expected to be top of mind among the European representatives after Europe’s record-breaking hot temperatures this spring and summer. They’ll be looking for companies that have low emissions and negligible climate risk, especially if they are involved in climate transition sectors, such as clean power, environmental industries, green steel and critical minerals.

The federal government is pushing for enhanced climate disclosure even though the provinces are directly responsible for securities regulation. On June 5, Ryan Turnbull, member of Parliament for Whitby and parliamentary secretary to the minister of finance, announced an additional $10 million in funding for the International Sustainability Standards Board office in Montreal, in addition to $8 million already allocated in 2022. Turnbull, who attended the ISF roundtable on April 15, has been a strong advocate inside the government for sustainable investment policies.

Turnbull was not available for comment for this article, but a Finance Department spokesperson says the federal government “is working closely with provinces and territories to support the uptake of internationally aligned climate disclosure standards across the economy. Roundtables that bring together investors, issuers of climate disclosures, academics and other experts provide valuable feedback to inform this work and help to ensure a broad range of perspectives is considered. The government will provide an update on its engagement with Canadian regulators in the coming months.”

Despite the foot-dragging by the provincial securities commissions, Koskinen believes policy is moving forward in Canada. “For the first time in several years I am optimistic that we can actually get something done,” he wrote on LinkedIn. “Time to start implementing mandatory climate disclosures in a gradual and pragmatic way.”

Eugene Ellmen writes on sustainable business and finance. He is a former executive director of the Canadian Social Investment Organization (now the Responsible Investment Association).

The post Weak climate disclosure is hurting Canada’s financial independence appeared first on Corporate Knights.

But that standing is now colliding with fundamental market design flaws and governance gaps, raising concerns that what is being sold does not produce real benefits.

In late January, the head of Brazil’s federal audit court called the country’s flagship carbon market program “a true sea of uncertainty.” Vital do Rêgo Filho’s assessment came after auditors found that RenovaBio, created to curb emissions in the fuel sector, has weak metrics and poor oversight, leaving its real climate impact unclear.

“Emissions trading systems are not delivering the impact that was promised,” says Alexandre Prado, WWF-Brazil’s climate change lead.

Carbon markets come in two forms: regulated systems, like RenovaBio, where companies meet government-set targets; and voluntary ones, where participation works on an opt-in basis. Brazil ranks among the top five suppliers in the voluntary market – but integrity concerns are surfacing there, too. In recent years, police investigations have uncovered criminal networks generating millions of carbon credits backed by Amazon land that had been seized illegally.Brazil’s carbon markets are now at a crossroads. “We have a serious problem, one that has to be addressed, because otherwise the whole system loses its purpose,” Prado says.

The next few years will determine whether the country can fix the deep-rooted failures in regulation, land tenure and oversight that have plagued both its regulated and voluntary markets. But how did it come to this and what lessons can be learned?

A powerful green lobby

RenovaBio came into operation in 2020 as a tool to help Brazil meet its Paris Agreement commitments. The program requires fuel distributors to purchase decarbonization credits – called CBIOs – generated by certified biofuel producers, each representing one tonne of avoided carbon dioxide emissions. The theory is that biofuels, derived from organic matter such as sugarcane and soy, are less polluting than fossil fuels because the plants absorb carbon dioxide as they grow.

In its first five cycles, the program transferred around $2.2 billion (all figures in U.S. dollars) from the fossil fuel sector to biofuel producers. But its origins reveal more about industry interests than climate ambition. Lira Luz Benites Lazaro, a postdoctoral researcher at the University of São Paulo, calls RenovaBio a case of “sophisticated green lobbying,” a strategy shaping policy in the industry’s favour while projecting a climate-friendly image.

“RenovaBio was not simply a response to the Paris Agreement, but the result of a long-standing industry push for regulatory certainty and market mechanisms to boost ethanol,” says Lazaro, who researches Brazil’s green lobby.

Lawmakers approved RenovaBio in 28 days, compared to a legislative average of more than three years. Industry groups, including UNICA, the sugarcane sector’s main trade body, dominated public hearings on the bill, while academics and environmentalists were largely absent.

Structural shortcomings

Lazaro credits RenovaBio with a sound technical basis and real climate-policy value but notes that the heavy industry influence, combined with the speed at which the program was approved, “helps explain some of its current shortcomings.” By focusing only on carbon emissions, the program leaves unaddressed the broader dimensions of bioenergy systems, she says. “This is not unique to Brazil; it is a common feature of climate policies built around carbon metrics alone.”

The audit found major structural gaps in RenovaBio: the program relies on a single carbon-intensity indicator that fails to capture net emissions, leaving its actual climate impact unverified. Weak traceability systems allow 60% of the biomass used by certified producers to pass unchecked for deforestation links – and auditors warned that expanding biofuel production could, in some cases, increase emissions as native vegetation is cleared.

The final audit report also showed that just three fuel distributors control 55% of mandatory CBIO purchases. “This report raises deeply shocking findings on the program’s oversight,” Vital do Rêgo Filho told a hearing in January.

Brazil’s National Oil Agency, which oversees the program, tells Corporate Knights the audit was “an important contribution to strengthening RenovaBio,” while acknowledging that CBIO regulation “requires constant updates” to keep pace with the program’s growth and ensure its integrity. The agency says it is working to improve data sharing with certifiers and tighten oversight of auditing firms.

Federal authorities have made adjustments along the way, tightening penalties and updating certification rules. In February, Brazil’s Supreme Court backed the government, lifting injunctions that had shielded non-compliant distributors.

However, RenovaBio’s underlying architecture was left intact. For Prado’s WWF-Brazil, that is the core problem. “The way it is structured, oversight will always be limited,” he says.

The rise of ‘carbon cowboys’

The voluntary carbon market has existed for decades, but the 2015 Paris Agreement laid the groundwork for its rapid expansion in the following decade. Signed by 196 countries, the deal set new emission-reduction targets and introduced Article 6, which allowed countries to trade carbon credits across borders.

Brazil followed suit, though voluntary projects operated largely unchecked. Fuelled by corporate money, the scramble for forest carbon spawned a new class of unregulated brokers known as “carbon cowboys.” These individuals and companies target forest communities and disputed federal lands, forging land documents, misrepresenting credit values, and binding communities to decades-long contracts – before selling the credits to corporate buyers.

In June 2024, federal police launched Operation Greenwashing, the country’s largest carbon-credit investigation, uncovering a carbon-cowboy criminal network that had used forged titles, with help from public officials, to seize more than 500,000 hectares of Amazon land – roughly the size of Canada’s Prince Edward Island – and sell fraudulent credits worth $33 million to multinationals.

Two indictment reports have since been submitted to federal court, with searches spanning 22 companies, land registries and public agencies. Those arrested await a charging decision from federal prosecutors.

A path to credibility

In December that same year, a new law established Brazil’s first regulated carbon market, joining the European Union, China and South Korea among those with mandatory emissions-trading systems. It also brings the voluntary market under a legal framework for the first time, requiring projects to follow methods of the regulated market, yet to be defined.

As of March this year, the government had just held its first meeting to draft the rules that will make the system operational. Critics flagged that heavy lobbying secured an exemption for agriculture, the country’s second-largest source of emissions.

A public consultation by BNDES, Brazil’s development bank, published in early 2026, revealed deep frustration with the country’s voluntary certification, where a single international certifier, Verra, handles more than 90% of forest carbon projects.

Verra tells Corporate Knights that Brazil is a priority market and that it allows methodology adaptations to reflect local social and environmental contexts. The certifier says it requires project developers to demonstrate a legal right to operate in the area and to work with a Verra-approved independent verification body. Projects must obtain free, prior and informed consent from communities affected.

Underlying Brazil’s carbon market ambitions is a structural problem that few international actors are equipped to navigate: the Amazon’s long history of overlapping claims, fraudulent registrations and contested boundaries has created deep land tenure insecurity. “How can you sell credit for avoided deforestation if you don’t know who owns the land?” Prado asks. “There is no way to have carbon credit projects without land regularization first.”

Still, he’s optimistic. “We know the problems, because we learned them along the way. And because we know them, we can see a way forward.”

Flávia Milhorance is a Brazil-based journalist covering the country for international outlets, including The New York Times and The Bureau of Investigative Journalism, and an editor at environmental website Dialogue Earth.

The post Can Brazil save its carbon markets? appeared first on Corporate Knights.

The support, which included both direct lending and underwriting of bonds, shares and loans, was provided by 65 large banks worldwide, according to the annual Banking on Climate Chaos (BOCC) report published June 9. The report is considered the world’s most comprehensive annual assessment of publicly available data on fossil-fuel bank financing.

The report estimates that since 2016 – a year after the Paris Agreement on climate change was adopted – $8.7 trillion in fossil fuel financing has been extended by the banks (all figures in U.S. dollars). The report states if these trillions had been used to finance the renewable sector instead, the world energy system of today would be “more affordable, more resilient, more secure and more climate-proof.”

More than half the 2025 total – $508 billion – was for expansion projects, primarily in the United States. These included new oil and gas pipelines, liquefied natural gas facilities for gas exports to Europe and Asia, and gas-fired power plants for a flood of new data centres. Coal-fired power infrastructure was also expanded, largely in China. Expansion financing grew by 27% in 2025 compared with a year earlier.

While overall financing increased, it has also become more concentrated, with a larger share of financing coming from the top 12 banks. In 2025, they provided $474.3 billion to oil, gas and coal companies, nearly 40% of the global total.

In addition to locking in decades of new carbon dioxide emissions, this rapid expansion is having a ripple effect through the global economy. Growing levels of debt by natural gas distributors and pipeline companies are contributing to growing gas-fired power utility costs. These are being passed on to electricity customers, many of whom are low-income people least able to afford higher prices.

“The more debt these fossil-fuel firms have, the more profit they need to service that debt,” says Niko Lusiani, climate and energy research director for Rainforest Action Network, the lead organizer of the report. “This creates constant pressure for short-term returns to shareholders, which has impact on price volatility but also inflation in gas prices and utility prices.”

The report, now in its 17th edition, is compiled by Rainforest Action Network; BankTrack; the Center for Energy, Ecology, and Development; the Indigenous Environmental Network; Oil Change International; Reclaim Finance; the Sierra Club; and Urgewald.

Back to peak financing

The $906 billion in bank fossil-fuel financing in 2025 marks the second year it has increased since reaching a low of $727 billion in 2023. (Organizers restated estimates from last year’s report after adjusting some of the financing criteria last year.)

The 2025 figure is equal to the previous peak in 2021, which was triggered by the post-COVID energy demand recovery. Financing declined in 2022 and 2023, then rebounded in response to the continuing wars in Ukraine and the Middle East. Combined with the recent invasion of Iran and the oil bottleneck caused by the closure of the Strait of Hormuz, the world is now in the largest energy supply disruption in history, according to the International Energy Agency.

“We’re facing a new reality,” Lusiani  says in an interview. “Relying on fossil fuels for our primary energy source globally is no longer reliable, it’s no longer affordable, and it’s no longer actually secure.”

Clean-energy investment is growing faster than fossil fuels despite the rapid expansion in gas infrastructure. The International Energy Agency estimates that clean-energy investment will be $2.2 trillion in 2026, primarily for grids, renewables, storage, nuclear, low-emission fuels, energy efficiency and electrification. Investment in oil, gas and coal is forecast at half that, $1.2 trillion.

Twenty-six out of the 65 banks in the BOCC report appear to agree that fossil fuels are not as attractive as they once were and reduced their oil, gas and coal financing in 2025. These are primarily European banks, led by La Caixa Group, Commerzbank, Groupe BPCE, UBS and BNP Paribas. Canadian-based CIBC, Bank of Montreal and Toronto-Dominion Bank also reduced their oil and gas financing last year. La Banque Postale of France was notable for having zero fossil-fuel financing in 2025.

But the remaining 39 banks ramped up their financing last year. “When you have more of the decision-making happening in smaller circles, it is more prone to group think [and] continuing models that have long surpassed their usefulness,” Lusiani says.

JPMorganChase is top lender

The top fossil-fuel lender and underwriter in 2025 was JPMorganChase, the largest bank in the United States and the world’s largest non-Chinese-owned bank. The New York–based bank extended $58.2 billion in fossil-fuel financing in 2025, a 12.5% increase from 2024. The report estimates that last year JP MorganChase was responsible for 4.7% of global fossil-fuel bank financing, as tallied from about 2,000 banks around the world.

The bank maintains that fossil fuels will be a necessary part of the global energy mix for many years to come and that it has a responsibility to finance both fossil fuels and clean energy. “As one of the world’s largest financiers of energy, we support the full range of energy solutions and technologies, with a focus on reliability, affordability, security and long-term resilience,” a JPMorganChase spokesperson said in an email response to the BOCC report. “We believe our data reflects our activities more comprehensively and accurately than estimates by third parties.”

The bank has committed to financing $1 trillion by 2030 in climate initiatives and sustainable resource management, including low-carbon energy solutions. It issued $309 billion toward this goal between 2021 and 2024. JPMorganChase is also one of the few banks to agree, under pressure from shareholders, to publish its annual energy-supply financing ratio. As of 2024, that ratio was 1.13:1, meaning that for every $1 of fossil fuel financing it provided in 2025, it financed $1.13 in clean energy.

Still, Lusiani argues that JPMorganChase is at the heart of a relatively small number of banks – mostly based in the United States – that are at odds with the energy transition. “Over 4% of global bank fossil-fuel financing is done by JPMorganChase, so they’re the kingpin of what you would call a new oligopoly of fossil-fuel financing.”

The other major U.S. players in this oligopoly are No. 2-ranked Bank of America ($47.3 billion in 2025), No. 5-ranked Citigroup ($45.3 billion) and No. 6-ranked Wells Fargo ($42.5 billion). Japanese banks Mitsubishi UFJ Financial and Mizuho Financial came in at No. 3 ($47.0 billion) and No. 4 ($46.5 billion), respectively. The Royal Bank of Canada stood at No. 7, at $36.6 billion.

Are bailouts coming?

The expansion of fossil-fuel financing in 2025 came as the Net-Zero Banking Alliance closed its doors last year, shutting down the global coalition of banks working toward the industry’s net-zero transition. The BOCC report argues that the NZBA collapse and continued expansion of fossil-fuel financing in 2025 show the limitations of voluntary commitments as a route to meaningful climate action.

The report calls for bank regulators to require comprehensive disclosures and robust testing of climate risks, increased capital requirements for banks extending high-carbon-footprint loans and mandatory climate transition plans.

The banks are entering a period of rising risk, as high oil and gas prices push individuals, companies and countries to seek out cheaper renewable-energy alternatives. This poses a growing risk that the billions of dollars in oil, gas and coal infrastructure now being financed could become stranded assets.

For Lusiani, policymakers need to jump in, even if it seems to cut against the grain of current thinking in the United States and around the world to loosen climate regulation. The alternative could mean multibillion-dollar government bailouts of energy companies in the future, he says.

“The question is going to be: Where are all these massively indebted LNG and pipeline companies going to go, and how are they going to pay back that debt? I worry about public bailouts of some of these companies. They are so over their skis.”

Eugene Ellmen writes on sustainable business and finance. He is a former executive director of the Canadian Social Investment Organization (now the Responsible Investment Association).

The post Banks up the ante on fossil fuels — again appeared first on Corporate Knights.

But like many other developing nations that are feeling the increasing burden of climate change, the main challenge is finding the money. To assemble the financing, Nigeria is turning more and more to a tool that is already yielding results: the green bond. Late last year, the government issued its third and fourth tranche of sovereign green bonds totalling 300 billion naira (US$220 million).

Nigeria started down this path back in 2017 when it became the first African country – and the fourth worldwide – to issue a sovereign green bond, valued at ₦10.69 billion (US$7.85 million). Certified by the London-based nongovernmental organization Climate Bonds Initiative, investor demand outstripped the offer and the bond was oversubscribed.

Two years later, the West African nation issued another sovereign green bond valued at ₦15 billion (US$11.16 million). Like the first, the 2019 sovereign green bond saw a 220% oversubscription, bringing the total value of subscriptions to ₦32.93 billion ($23.57 million).

Like regular bonds, green bonds pay a fixed rate of interest to investors, but they keep the focus on raising capital for environmental and climate-related projects, from renewable-energy and clean-transportation to afforestation and climate-change-adaptation projects. The success of the inaugural 2017 green bond and the subsequent tranche in 2019 “signals growing investor appetite for green assets even in emerging markets,” says Dare Ogunbona, chief executive officer at Green Advisors Limited..

Green bonds gaining traction

Launched in 2007 by the European Investment Bank, the market for green bonds is growing steadily worldwide, reaching US$2,625 billion as of December 2024. In that year alone, $522 billion of new green bonds were issued, up from $135 billion the previous year, according to French asset manager Amundi’s 2024 Green Bond Impact Report. However, Africa is yet to fully tap into this potential. The continent accounts for about US$5.1 billion – less than 1% – of the total $2.2 trillion green bond market. But in recent years, the market on the continent is making major gains. For example, green bond issuances grew by 125%, from $600 million in 2022 to $1.4 billion in 2023.

Other countries on the continent are also picking up on the trend. In 2020, Egypt became the first country in the Middle East and North Africa to issue a sovereign green bond. That bond, too, was oversubscribed, leading the government to increase its initial offering from $500 million to $750 million.

Back in Nigeria, Ogunbona credits green bonds with “meaningful structural progress.” Proceeds from green bonds issuances have helped the Nigerian government to fund projects such as afforestation programs, the 10-megawatt Katsina wind farm power project, and off-grid solar power plants. However, these projects have been severely challenged, including by inadequate monitoring and weak sustainability frameworks. An investigation by a local newspaper also found that green-bond-financed afforestation projects failed largely because of poor implementation.

Given that so many climate projects still need to be funded, Ogunbona believes that green bonds will remain a viable option for the Nigerian government, especially as investors show increasing commitment to sustainability. “As of March 2025, 95.44% of proceeds from the 2019 green bond had been deployed to approved green projects,” he says. “For investors with a medium to long horizon and appetite for emerging market risk, Nigeria’s green space is very much in play.”

Saint Ekpali is a Nigeria-based journalist who covers the environment, health and energy in Africa.

The post A wave of green bonds is reshaping climate finance in Africa appeared first on Corporate Knights.

Rather, the new strategy is to ask companies – often in private – to address the financial risks of short-term profit-seeking in oil and gas while long-term forecasts point to the success of cheaper, cleaner energy alternatives. This puts the focus on corporate transition plans, especially in utilities, oil and gas, and banking, three sectors at the front lines of climate risk.

“Those who are filing shareholder resolutions are keen that the company actually takes a holistic approach to decarbonization and starts undertaking activities that are on a pathway to reducing emissions,” says Felix Nagrawala, senior research manager at U.K.–based non-profit ShareAction.

In an April webinar hosted by the non-profit shareholder action group As You Sow, Annie Sanders, director of shareholder advocacy for U.S.-based sustainable fund company Green Century, said that climate-oriented shareholder proposals are increasingly focused on how companies operationalize credible, science-based transition plans. “The goal here is to create a road map, adjust as you go and be transparent about it for greenhouse gas reduction.”

In the last three years, Green Century has negotiated agreements with five semiconductor companies, including Intel and Nvidia, to disclose key elements of their climate transition strategies. The company has ramped up its work this year, engaging with nine companies on climate and securing two commitments to publish transition plans.

Shareholder campaigns at BP and Shell this spring illustrate this new strategy. Dutch-based shareholder advocate Follow This and 23 investors managing €1.5 trillion filed proposals calling on the London-based fossil fuel giants to publish their plans for managing capital expenditures, oil and gas production, and cash flows under International Energy Agency scenarios of declining fossil fuel demand in the 2030s.

Resistance backfires on BP

BP decided to reject the Follow This resolution from its April 23 annual meeting agenda, saying it didn’t meet legal standards for inclusion. The decision, along with management proposals to scrap existing climate-change reporting requirements and to move from in-person to virtual annual meetings, backfired badly on the company.

Shareholders voted more than 50% against the management proposals in what The Guardian called a climate rebellion by investors. As a result, Follow This was able to preserve valuable climate reporting and in-person meetings and bring considerable attention to BP’s lack of public transition planning.

In marked contrast with BP, investor response to climate issues at the Shell meeting on May 19 was lukewarm as discussion was dominated by the Iran war oil crisis. The climate transition resolution attracted only 13% support, lower than previous years’ proposals from Follow This. Investors “should not be distracted by temporary war profits and lose sight of the medium and long-term,” Follow This founder Mark van Baal said.

In Canada, shareholder attention on climate issues is focused on Canadian banks, which are major lenders and underwriters to the country’s large oil and gas sector. This spring, Royal Bank of Canada, the country’s largest, and third-ranked Scotiabank cancelled their financed emission-reduction targets in a sign of the banking industry’s retreat from climate issues.

In the last two years, the Shareholder Association for Research and Education (SHARE) and a coalition of investors including the large Danish PFA pension fund, shifted their attention, filing resolutions and engaging privately to encourage the banks to publish their energy finance ratios (EFRs). The EFR is a metric comparing each bank’s lending and underwriting in low-carbon and high-carbon energy sources.

This year, Scotiabank became the first Canadian bank to release its ratio, and National Bank said it would disclose its ratio starting next year. At 0.65:1 low-carbon to fossil-fuel financing, Scotiabank’s ratio is a far cry from what’s needed. BloombergNEF estimates that a ratio of 4:1 is needed worldwide to limit global warming to 1.5°C.

SHARE associate director Amanda Carr says disclosure of the EFR can be a useful tool to focus bank management on its role in financing the energy transition. “We know that for many of the banks we are engaging with, this ratio is now reported to the C-suite quarterly,” she says in an email. “It puts the energy transition into dollars and cents, something that all financial institutions work with every day.”

A split between U.S. and European investors

In Europe, support for environmental and social resolutions is still quite strong (about 91% on average in 2025), according to Morningstar. In the United States, average support for ESG resolutions by large investors was 31% on average, down from 42% in 2023.

The number of social and environmental resolutions has also dropped sharply in the United States. According to As You Sow’s recent Proxy Preview report, 184 environmental, social and sustainable-governance-related shareholder resolutions were filed in the United States in 2026, 47% lower than last year.

The drop is due to continued hostility for sustainable investing in the United States created by Republican-led states, members of Congress and right-wing social media celebrities. In 2024, ExxonMobil further intensified the chill on shareholder activism by filing a punishing lawsuit against As You Sow and Arjuna Capital, challenging their right to file ESG proposals.

The Securities and Exchange Commission under the second Trump administration has also made it easier for companies to exclude proposals from their annual meetings. In November, the SEC announced it would no longer rule on the admissibility of shareholder proposals submitted to annual meetings, giving companies the right to reject any proposals except on very narrow grounds.

But this doesn’t mean that shareholders have become powerless. Some shareholders have sued companies for their right to be heard after companies rejected their proposals. Other companies have decided to hear shareholders out in private, rather than assume the reputational risk of the courts and a poisonous social media environment.

The future is murky. Forecasters are saying the protracted Iran war means that oil and gas prices will stay higher for longer, creating fossil-fuel-industry demands on government to support expansion of liquefied natural gas projects and oil pipelines, particularly in North America. At the same time, higher prices are also expected to erode global fossil fuel consumption, especially in China and India. This raises long-term risks for investors in fossil fuel companies just as short-term gains appear to be rising.

For Andrew Behar, CEO of As You Sow, the shareholder process will become even more important, although in a behind-the-scenes kind of way to escape growing polarization over fossil fuels and climate.

Shareholder engagement will be conducted “increasingly through private dialogues to avoid the toxicity and unpredictability of the public square,” Behar told the As You Sow webinar in April. “Trust that’s built on long-term relationships serves both parties to get the work done and not be distracted by trolls seeking to inject politics into good business practices.”

CORRECTION: A previous version of this article incorrectly described PFA as a Dutch pension fund. It is a Danish pension fund. The article has been updated to reflect this.

Eugene Ellmen writes on sustainable business and finance. He is a former executive director of the Canadian Social Investment Organization (now the Responsible Investment Association).

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The Local Power program is “a significant opportunity for the U.K.’s community energy and crowdfunding sectors,” says Lisa Ashford, co-CEO of Ethex, an ethical crowdfunding platform, in an email statement. The policy framework and government support “should help to unlock a larger pipeline of investable local power projects, creating more opportunities for communities to directly invest in renewable energy in their own areas.”

Ethex has pledged to work with Great British Energy (the agency responsible for implementing the Local Power Plan) to bring local communities, individual investors and institutional capital together ​​to help leverage ​the billion-pound grant and loan program ​promised by the government.

“However, we want to emphasize that public funding should complement retail investment, not replace it,” Ashford says, adding that public funding can act as “catalytic capital to get more projects off the ground, reduce risk and co-exist with community and retail finance.”

What is investment crowdfunding?

The purpose of the Local Power Plan is to build community energy projects financed with public funding and crowdfunding, a strategy that proponents see as a way to democratize the capital markets. Distinguished from reward- or donation-based crowdfunding, investment-type crowdfunding is offered with the expectation of financial returns through interest, dividends or rising share values.

In some cases, investment crowdfunding is done through community bonds or innovative investment savings accounts as a way for local people to finance a non-profit or civic project. In others, it can enable investors to buy an equity share in a private company, usually as a start-up but sometimes in a more advanced growth stage.

In either case, the investment is typically locked up for a considerable period – usually five years or more – to prevent participating investors from exiting before the project or company matures to a stage in which investors can get their money out.

​​Capital crowd-surge – and slump​​​

Historically, private investments have been restricted to wealthy sophisticated investors or institutions like pensions and venture capital. Starting in 2014, the U.K. Financial Conduct Authority began to amend the rules, reducing restrictions and setting specific conditions for crowdfunding purchases. Since then, the domestic market has grown considerably​​. In​​​ ​2024 (the most recent figures), the value of the total U.K. crowdfunding market was US$1.06 billion, including loans and bonds, equity and even donation-type offerings.

​​While loans and bonds are gaining ground, m​​​​​arket growth has tapered off in recent years in the equity segment of investment crowdfunding, which involves buying shares in private firms. In the United Kingdom in 2021, there were 569 equity crowdfunding offers that together raised a total of £773 million. By 2024, this had fallen to 297 deals worth £324 million (about US$414 million in 2024 dollars).

​​​Investment markets of all kinds bubbled in 2021 as hundreds of thousands of individual investors – bored and at home during COVID lockdowns – experimented with new ways to make (and lose) money. Along with meme stocks and crypto ownership, equity crowdfunding soared in 2021 and 2022, buoyed by low interest rates, rising global investment markets and established crowdfunding platforms like Crowdcube and Seedrs (later taken over by U.S.-based Republic).

Since then, rising interest rates, growing international conflicts and the chaos of the Trump administration have made investors more cautious. Inevitable losses from fledgling start-ups and long capital lockup periods also dampened some investor enthusiasm for equity crowdfunding.

​​The ‘hybrid model’ for green growth​ ​​

In contrast, investment-type crowdfunding in environmental, socially responsible and ethical offerings has grown steadily, although incrementally. Social enterprise bonds and share offerings have carried less risk than equity shares in start-up and growth companies. It’s customary for renewable-energy projects, for example, to come with reliable income streams or civic infrastructure projects to be backed by municipal borrowing guarantees. Ethex, Abundance and Triodos UK ethical crowdfunding are among the online platforms specializing in this market and are poised to benefit from the £1 billion Local Power strategy.

As well, crowdfunding platforms focusing on the energy transition are expected to benefit from ​an expected annual growth rate of U.K. climate tech of 21% between now and 2030, although this growth won’t happen directly from the Local Power program.​​​​​​ ​ ​Globally, a​ 2024 report by RMI (formerly Colorado-based Rocky Mountain Institute) states that US$2 trillion will be needed globally to finance the industrial, transportation and infrastructural changes needed to shift the global energy system from fossil fuels to electricity.

The RMI report says this opens new opportunities for crowdfunding, which are already appearing in the United Kingdom, where climate tech is attracting attention from individuals as well as venture and private equity investors. British climate-tech transportation company Sunswap raised £17.3 million in 2024 (US$21.8 million in 2024 dollars), partly from crowdfund investors and partly from venture capitalists. The company has developed a ​​​​groundbreaking ​refrigeration unit for trucks powered by a separate battery and solar ​unit to reduce ​fuel costs and ​carbon dioxide emissions from transport trucks. The Republic crowdfund platform hosted the offer along with support from institutional investors such as Shell Ventures, an arm of the Shell oil and gas giant.

Antoine Beine, co-founder of the France-based climate tech crowdfunding network Keenest, says this so-called hybrid model (including both crowdfund and institutional investors) is becoming the norm in the United Kingdom and Europe. “This is where a democratic dimension of investment may emerge within the private sector, not simply for capital access, but in embedding transparency and public scrutiny around issues such as sovereignty, climate transition, privacy, and ethical practices,” he says in an email.

Ethex’s Ashford says that one of the exciting opportunities offered by the Local Power Plan is the prospect to pool government funding with crowdfunding capital. “If implemented effectively, the Local Power Plan could mark a step change in community power investment by combining public support with people-powered finance to accelerate a more democratic energy transition.”

The government’s aim in the Local Power Plan is to build 1,000 community energy projects. In the process, it could also help to deliver a jolt of popular democracy into the United Kingdom’s capital markets.

Eugene Ellmen writes on sustainable business and finance. He is a former executive director of the Canadian Social Investment Organization (now the Responsible Investment Association).

The post The U.K. has a plan to crowdfund clean energy appeared first on Corporate Knights.

“For the first time in our history, every Canadian will hold a direct stake in what’s built,” he said April 27 in launching the fund, which will be known as the Canada Strong Fund. “We will make it easy for individual Canadians to invest in the fund and therefore own a small piece of nation-building projects and share in their returns.”

The idea of a sovereign wealth fund to invest public funds for the public interest is not new, even in Canada. The Heritage Savings Trust Fund operates on this basis in Alberta. The Caisse de dépôt – a public pension fund manager – operates with an economic development mandate in Quebec. Around the world, many governments have established national wealth funds, sometimes investing enormous surplus revenues from their oil and gas assets.

The distinguishing feature of the new Canadian fund is its individual investment mandate. The government is promising to create a retail product to support the fund, which it says will be widely available to average investors.

Green investors beware

On paper, the product sounds like it could be a hit, harkening back to the Canada Savings Bonds that were enormously popular with individual Canadians in the 1960s and 1970s as a way of earning decent returns while supporting the national interest.

The government said projects will be selected from the government’s Major Projects Office and other national-interest projects. The list will likely include port expansions, electric grid improvements, clean-energy facilities and public transit projects, which will have broad support. But the list could also include a whole host of controversial fossil fuel ventures, including liquefied natural gas terminals, pipelines and carbon capture projects, limiting the fund’s appeal.

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Tim Nash, president of Good Investing, a consulting firm that works with individual investors to create sustainable investment plans, says there won’t be much demand for the fund from green investors, who will be put off by its fossil fuel investments. But it could be very popular among investors who are concerned about Canada’s independence and want to support the country’s long-term development and economic security.

“The exciting thing for me is that Mark Carney talked explicitly about a retail offering, which to me is phenomenal,” Nash says. “I think this is targeted at a wider swath of Canadians who are really interested in Canadian sovereignty.”

A door to more?

According to the government’s spring economic statement, the product will be easy to purchase, hold and transact, and will provide investors with protection for their initial capital. The fund will be an independent Crown corporation, professionally managed and operating on an arm’s-length basis from the federal government, investing in national projects on a fully commercial basis.

This is good politics, this is good economics. Across the board, we need a retail offering. I think there’s going to be a lot of energy around this.

– Tim Nash, president, Good Investing

Initial seed capital for the fund will come from a three-year, $25-billion commitment from the federal government. Carney said he expects the fund to grow over time as investments are sold and capital is reinvested.

Nash says he hopes the fund will inspire other retail investment products with government support. An investment product based on the Canada Growth Fund – similar to the Canada Strong Fund but with a clearer cleantech focus – would be very attractive to green and conventional investors, he says. Similarly, he says a Canada green bond widely available to individual investors would have strong demand.

Many questions remain

The background materials provided by the government are light on details, and a consultation is now proposed to iron out the many remaining questions. It’s not clear how the investment product will be structured, or whether it will be available through bank branches, financial advisers or directly from the government. It’s also not known how the principal investment guarantee will work or how much access investors will have to their funds given the long-term nature of the underlying investments.

Nash also says a top question is whether the fund will be eligible for tax-advantaged accounts, such as registered retirement savings plans. He calls this an absolute necessity to avoid the modest returns from the fund being depleted by income taxes.

If the government can get the basics right, however, Nash says, it could be very popular and replicated across other government programs to help bolster private investment. He says investment offerings in public programs could help to create popular support for them by giving people a direct stake in their success.

“This is good politics, this is good economics,” he says. “Across the board, we need a retail offering. I think there’s going to be a lot of energy around this.”

Eugene Ellmen writes on sustainable business and finance. He is a former executive director of the Canadian Social Investment Organization (now the Responsible Investment Association).

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One of the main opportunities AI presents for financial oversight and regulation is analyzing large data sets and identifying new opportunities. Several research projects have explored how AI can assess climate risk cases from text, and how it can be used to track and disclose the environmental impact of supply chains.

But questions remain about its effectiveness and whether its energy use is worth the cost.

Central banks are experimenting with AI

Central banks are already exploring how AI can be used in their own work, including for understanding climate risks.

A Banque de France research note explores how AI could help estimate corporate carbon emissions and finds that it predicts carbon intensity in 69% of cases but struggles with extremes such as heavily polluting emitters. And in Vietnam, the deputy governor at the State Bank of Vietnam has said that AI could be used to improve ESG reporting.

Meanwhile, the Bank for International Settlements (BIS) has two projects in its innovation hub focused on AI use around climate: Project Gaia and Project Symbiosis. Project Gaia uses a large language model (LLM) to automatically extract climate-related indicators from publicly available reports. The objective, BIS says, is to overcome a lack of global reporting standards in order to compare information on climate-related risks. The Gaia project is still ongoing with additional use cases and “is relevant in a much broader context than climate-related data analysis,” a BIS summary of the project states.

Project Symbiosis builds on the work done in Gaia by using various machine-learning subsets like LLM, deep learning and natural language. The collaboration looks at how AI can be used to collect, interpret and calculate Scope 3 emissions, identify opportunities to reduce emissions, and use the data to match suppliers with funding sources to decarbonize the supply chain.

With 95% of financial sector emissions falling within Scope 3, the project aims “to showcase how novel technologies offer a viable technical pathway to positively impact core stakeholders . . . by reducing critical information gaps impeding the climate transition.”

The findings from the project are in line with other AI and risk work and could set the basis for more standardized emissions and help improve issues around standardizing Scope 3 calculations.

AI’s usefulness for assessing climate risk

Interest in the use of AI for climate risk mitigation goes beyond central banks.

Several projects are exploring how to apply AI to imagery data, such as satellites, and advancing multi-input models that compile data points from imagery and text together.

This includes aspects like using image segmentation to look at the carbon footprints of certain areas, or classifications based on which plants are known to grow in those areas, says Peter Schwendner, a machine-learning expert at the Zurich University of Applied Sciences.

If done with intention, and if the levers are applied in a focused manner using AI production, the impact can be really, really meaningful and positive.

 – Mattia Romani, partner, Systemiq

From a regulatory perspective, he says, such AI use is “about improving market transparency, and then the financial market should improve the asset allocation with the objective of allocating more capital to, say, sustainable assets. This should work both in investing and in lending.”

It’s exactly the type of project that spaceborne AI firm Kuva Space hopes to expand on. The Finnish company has partnered with WWF Indonesia to explore how AI can be applied to hyperspectral imaging to understand changes to the region’s coastal ecosystem.

Hyperspectral imaging uses advanced satellite cameras to capture images in areas that are often difficult to reach. Kuva Space’s AI system is able to signal potential changes or anomalies, such as changes in the status of seagrass, an important marine carbon store, which can then be confirmed by scientists on the ground.

While the program is in a pilot stage, the project could have a larger impact for not only tracking ecosystems; it could also help regulators and investors identify and track project areas for sectors like blue carbon.

Investors and regulators are asking for this information, but they don’t have it, says Malathy Eskola, commercial director at Kuva Space. “We’re actually going to be making it more science-based or evidence-based, and provide that information so that the decision-makers can be confident.”

Needed: better data (and more of it)

But for AI to be truly effective in understanding climate risk and nature loss, more data is needed, especially from companies, Schwendner says.

Companies themselves do not need to crunch the numbers or create the models, but they do need to provide the raw data for analysis. “Academics and data providers are very eager to work with this data, so I don’t think it’s necessary for the public to invest a lot here,” he says. “This can be done by, say, collaborations between scientists and data providers, but the raw data on the company’s operations needs to be available.” 

This includes information such as which companies are sourcing raw materials, at what volumes and from which locations. “At the moment, we only know this in very rough terms, and we need to know exact numbers . . . If we know that, and if we know the production volumes, if we know the energy, where it comes from at this local production facility, then we can estimate . . . the environmental consequences. Then we can estimate the climate impact.”

While more data was expected this year as a result of the European Union’s climate disclosure rules, the bloc’s sustainable omnibus measures have meant there may be less information available than anticipated.

Will AI be positive or negative for the environment?

The other burning question around using AI to mitigate climate-change risk is whether it’s worth the energy use and environmental impacts.

AI consumes a lot of energy and water, and those working on AI projects in the climate space are aware of the contradiction in using something for environmental aims that itself uses a lot of natural resources.

The biggest issue with AI consumption, experts say, is the type of models being used and how they are being applied. Training models requires a lot of energy, increasing the electricity demand for data centres. It accounted for 1.5% of all demand in 2024, but is projected to account for 10% of energy demand growth by 2030.

Even researchers from the BIS innovation hub noted in their report on Project Symbiosis that “any use of AI is likely to generate significant emissions, even as electricity grids worldwide continue to slowly decarbonise at different paces.”

But some say AI could have a positive environmental impact.

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A study from the London School of Economics finds that AI could reduce global emissions by 3.2 to 5.4 billion tonnes of carbon dioxide equivalent by 2035 if applied in key areas such as innovating resource efficiency, nudging behavioural change, modelling climate and policy system interventions, and managing resilience and adaptation. “If done with intention, and if the levers are applied in a focused manner using AI production, the impact can be really, really meaningful and positive,” says Mattia Romani, a partner at Systemiq and one of the authors of the report.

AI could also be used to help streamline the collection and accessibility of company data. There is an issue around responsible data sharing, Romani says, which is where regulators can step in to ensure safe data practices to “enable private actors to contribute data without risking a competitive or legal exposure.”

If AI is used for practical applications like emissions reductions, then its intentional use could justify the added cost of energy, Romani says. “If you continue to use AI to sell you more stuff on Instagram, then the emissions associated with the additional power, I’m afraid, are going to be substantial.”

Moriah Costa is an award-winning U.S. journalist based in Paris.

This article was originally published by Green Central Banking. It has been edited to conform with Corporate Knights style. View the original here. 

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