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. 

The post Central banks turn to AI for help navigating climate risks appeared first on Corporate Knights.

“Our pension funds are amongst the world’s largest and most sophisticated investors,” Carney told the World Economic Forum in Switzerland. The funds are one of Canada’s prized assets, along with the country’s educated workforce and its sizable reserves of energy and critical minerals. “We have capital, talent and a government with the immense fiscal capacity to act decisively.”

But some key questions were left unasked: If Canada’s pension funds are so powerful, why aren’t they investing more in their home country? Is it possible for these behemoths of global finance to commit more of their multitrillion-dollar assets to the Canadian economy in this time of need?

In the past, most of Canada’s major pension funds have pushed back against even a whiff of political interference. Yet recently, some pension CEOs are saying they are open to investing more in Canada, especially in strategic sectors of national interest. Deals like the recent Caisse de dépôt et placement du Québec (CDP) investment in renewable-energy company Boralex show that some of the funds are already moving in this direction.

Are these sleeping giants getting ready to pony up the capital needed to kick-start Canada’s critical industries? Here are the central issues in this debate.

The Maple 8’s global reach

Canada’s major pension funds rank among the top in the world. The eight largest, known as the Maple 8, manage more than $2.5 trillion in assets. The largest of these, the Canada Pension Plan Investment Board (CPPIB), is the seventh-largest pension fund in the world. At the end of 2025, CPPIB held $781 billion in assets for the CPP, which serves 22 million Canadian workers and retirees.

CDP, which manages funds for the Québec Pension Plan and other public funds and investors in Quebec, is number two in Canada at $517 billion. The Ontario contingent includes three large public-sector funds: the Ontario Teachers’ Pension Plan (OTPP), the Healthcare of Ontario Pension Plan (HOOPP) and the Ontario Municipal Employees Retirement System (OMERS). The Maple 8 also includes British Columbia Investment Management Corp. (BCI) and Alberta Investment Management Corp. (AIMCo), investing funds in B.C. and Alberta, and Public Sector Pension Investments (PSP), managing federal public-service pension funds.

The funds have developed a management style known as the Canadian model, marked by independence from the governments that established them, internal professional management (rather than outside managers) and global investment in stocks and bonds and alternative assets such as real estate. The formula has mostly been successful. The annual average return of Canadian pensions has outperformed all but a few countries since the financial crash of 2008, although gains have slipped in the last two years as a result of declining real estate and private equity assets.

Pensions already invest in Canadian stock markets. Could they invest more?

The global profile of these funds has sparked calls to invest more in Canada. A CBC investigation in February showed that most of the Maple 8 invest far more in the United States than in Canada. CPPIB, for example, has $366 billion invested in the United States (47% of its total) and only $98 billion in Canada (13%). OMERS’s portfolio is 55% American, and PSP is 41% invested in the United States.

The level of U.S. investment seems shocking, bordering on unpatriotic, considering the recent economic pain inflicted by the United States. Only three of the Maple 8 funds have more assets invested in Canada than in the United States – HOOPP, OTPP and AIMCo.

We have the capital available right now to make those investments. We’re just waiting for those opportunities to manifest themselves.

– Michael Wissell, CIO, HOOPP

But compared with Canada’s share of global markets, the pensions are actually over-invested in their home country. According to the MSCI World Index (a broad-based investment index holding companies across the globe), the United States represents 70% of total world investment markets. Canada’s share is tiny at only 3.6%.

The funds argue that their mandate is to invest across the world in markets, sectors and companies that will deliver the best returns at acceptable risk to ensure that they can meet their long-term pension payouts.

Paul Calluzzo, a professor at the Smith School of Business at Queen’s University and a researcher for the Institute for Sustainable Finance, points out that pension funds have a legal and ethical obligation to invest in the best interests of their beneficiaries. “If a pension fund was to invest more in Canada, or support strategic industries, or just invest in infrastructure that was strategically important, that would be a cross-subsidy where the pension holders are footing the bill for something that benefits everyone,” he says.

The pension funds contend that it’s prudent to over-invest somewhat in Canada because of their “home-field advantage” through their detailed knowledge of local companies and cultures. But governments should resist the urge to think of pension funds as a national piggy bank, Calluzzo says. “There’s a temptation to say, ‘We have these huge pools of capital; let’s do something with them that helps Canada,’” he says, adding that it’s important to be mindful that pensions don’t belong to governments. “Those huge pools of capital are from the people who have been paying into their pension all those years. That’s something that should be respected.”

Pension CEOs open the door, but just a crack

Nevertheless, over the last few months, several pension fund CEOs have said they are open to investing more in Canada.

“As a nation, we have a significant opportunity to build a stronger and more resilient future, and OMERS wants to be part of that,” CEO Blake Hutcheson said in February. “We like the advantage that our relationships and on-the-ground expertise offer.” OMERS is looking for deals that support the fund’s financial objectives and Canada’s growth, he said.

“We have the capital available right now to make those investments,” Michael Wissell, chief investment officer at HOOPP, told Reuters on March 10. “We’re just waiting for those opportunities to manifest themselves.”

Last June, PSP CEO Deborah Orida said her fund is actively looking for additional Canadian investments. After years searching for global alternative investments, she told Bloomberg, “at PSP we’re asking ourselves: Have we been underleveraging our home-ice advantage.”

And in a speech last September, John Graham, CEO of CPPIB, cheered what appears to be a new spirit of cooperation by federal and provincial policymakers. “Unity and coordination will initiate the nation-building projects Canada requires. And those are exactly the projects that international and domestic investors, including us, are eager to invest in.”

Two years ago, it was a different story. The funds vigorously pushed back against a letter signed by 90 Canadian business and financial leaders, calling for rules to require pension funds to invest more domestically.

But last year’s Trump tariffs have created an elbows-up mood among Canadians, including millions of members of the plans the funds manage. The funds are also confident that Carney – former central banker and Bay Street executive – will seek ways for them to finance national projects without increasing risk or jeopardizing returns. “We can do more together, respecting that they [pension funds] are independent but at the same time looking at opportunities,” Finance Minister François-Phillippe Champagne told CBC in February.

Key sectors: Energy, critical minerals, defence and infrastructure

So what are the strategic sectors that could be targeted for additional investment?

Certainly energy – especially electrification – is one promising area. According to a list of proposals by the Major Projects Office (MPO), the federal agency is looking at a number of clean-energy proposals, including small modular reactors in Ontario, northern hydro projects and a British Columbia transmission line. The Shareholder Association for Research and Education recently released a report saying $220 billion in proposed new investment is threatened unless Canada’s power grid is urgently modernized, a need expected to be a focus of the upcoming federal electrification strategy. Support for clean energy has also been triggered by the recent spike in oil and gas prices caused by the U.S.-Israel invasion of Iran.

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Last week’s $3.8-billion acquisition of Boralex by CDP and Brookfield Asset Management is a sign of growing pension interest in clean energy. The investment “aligns with our commitment to the energy transition and our determination to help build Quebec-based champions,” said CDP executive vice president Kim Thomassin. The investment follows the fund’s $10-billion takeover last year of Innergex Renewable Energy. (CDP is unique among the Maple 8, however, operating with both financial and Quebec development mandates).

Rising oil and gas prices from the Iran war also means that liquified natural gas projects and Alberta’s proposed Western oil pipeline could also be a focus for pension funds. Oil and gas investment hinges on how long the price hikes will last and whether they will minimize the future glut in fossil fuels caused by the global renewable-energy transition. AIMCo is a large investor in Alberta’s oil and gas industry, including a major holding in the Coastal GasLink pipeline. There have been suggestions that the Alberta government may pressure AIMCo to ramp up its provincial oil and gas investments. To date, though, AIMCo has not expressed interest in the proposed oil pipeline.

Critical-mineral projects have also been identified as priorities for the MPO. The federal government adopted a national critical-minerals strategy in 2022, aimed at promoting domestic production and processing. According to the most recent strategy update, there are 140 mining projects planned for development by 2034, worth $72.4 billion in potential investment.

The Carney government’s Defence Industrial Strategy could also create investment possibilities. No defence-related proposals have yet been identified by the MPO. However, the government’s “buy Canadian” approach aligning defence purchases to the battery and critical-minerals sectors, as well as its upcoming electrification strategy, has potential to generate additional defence-sector investment, said New Economy Canada, a coalition of 60 business, Indigenous and labour organizations.

Infrastructure including transport projects, data centres, waste and water facilities, and agriculture also hold future investment potential. CPPIB has already identified data centres as a key area, pointing to its $225-million data-centre investment in Cambridge, Ontario. Transportation, such as the Alto high-speed rail project, also holds potential. CDP is already taking a lead role in this proposal, joining the consortium developing the project.

Reaching out for help from Australia

With such a long list of potential projects, the funds have called on some of their colleagues in Australia to lend a hand.

Representatives of the Maple 8 funds (plus the Investment Management Corporation of Ontario, manager of Ontario government pensions) signed an agreement with a group of large Australian pension funds to foster joint investments. They pointed to “a shared heritage, open and resource-rich economies, strong credit worthiness” and legal institutions as solid terrain on which to build.

Like Canada, Australia has a group of fast-growing pension funds with a relatively small domestic investment market, prompting it to look for partners around the world, particularly for infrastructure investments. IFM Investors, one of the Australian signatories, already invests in two Canadian infrastructure companies, Global Container Terminals in Vancouver and Enwave Energy in Toronto. IFM said it intends to invest up to $10 billion in Canada over the next decade “with the right policy settings in place.”

With this agreement, the funds are exploring possibilities for a larger pool of infrastructure investors, a strategy that would reduce risk for any individual fund.

It’s all about the projects

In the federal budget in November, the government set a target of enabling $1 trillion in total new investments over the next five years in Canada. The government’s charm offensive is aimed at persuading pension funds and other investors to open their wallets to help meet this ambitious target.

Ultimately, it will come down to whether the right projects can be put on the table. Proposals will need to meet three requirements: they’ll need to be in the national interest, demonstrate a high probability of returns that meet or exceed fund benchmarks, and represent an acceptable level of risk. Governments, project proponents and pension funds are looking for investments that check all three of these boxes.

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 Can Ottawa convince Canada’s pension giants to invest at home? appeared first on Corporate Knights.

That’s the term given to industries based around the oceans, which cover more than 70% of the Earth’s surface and generate trillions to the global economy. In Canada alone, the blue economy contributes north of $30 billion to annual GDP, a figure that could jump to $220 billion by 2035 in shipping, fishing, energy and other sectors.

But not everyone benefits equally: local communities and underrepresented groups often bear the brunt of the impacts from these economic activities while receiving little of the benefit. The Ocean Equity Index was developed to correct this imbalance.

“There are so many inequities on many different levels” in global ocean governance, says University of Victoria professor Natalie Ban, an index co-author. “The real impetus behind the [creation of] the index is not to assess the inequity, but to assess it and come up with new steps” to improve equity across different dimensions.

The Ocean Equity Index is based on six principles of ocean equity: the promotion of Indigenous rights; respecting all relevant actors and their diverse knowledge systems; supporting a transparent and efficient decision-making process; promoting accountability; mitigating harms; and ensuring equitable sharing of benefits to all members of the ocean community.

The report authors say the index creates an objective assessment of who benefits from ocean initiatives, which can include economic development, ocean conservation or other programs, and also provides an opportunity for communities to improve the balance by acting on the findings.

Do quantified methods apply?

The initiative has come under scrutiny from some ocean equity scholars. “To me, the index is deeply problematic, because it’s not taking into account . . . the historical context of how people are being oppressed, and how people are dealing with the actual injustice,” says Cinda Scott, a marine biologist and co-director of Ocean Nexus. “When you create an index, I personally don’t feel that it’s necessarily the best way to represent issues such as human rights abuses, legacies of colonialism, racism, sexism and genderism.”

Other equity scholars are uneasy with the use of quantitative methods for such an expansive concept. “The first rule of equity work in general is never come up with a quantitative method for it,” says Simon Fraser University’s Andrés Cisneros-Montemayor. “I have a lot of respect for the authors, and this is the first-ever global index of ocean equity – but there’s a reason for that.”

Great Bear Sea’s blueprint for doing business with nature

Assigning numerical values for the index criteria, and then combining them, does not lead to clarity, Cisneros-Montemayor says. He gave a hypothetical example where “everyone was listening to everyone, except for women . . . Are you equitable now?” While he agreed on the fundamental need for ocean equity, “transitioning that to a quantitative index does much more harm than good,” he adds. “That’s not a meaningful way to address equity.”

Lead Ocean Equity Index author Jessica Blythe, of Ontario’s Brock University, says it “is designed to support community engagement by creating space to discuss context, reflect on divergent perspectives and identify actionable steps to improve equity.” She adds, “In our experience trialling the index, many organizations reported that completing an assessment broadened their understanding of equity.”

Market application

The use of indices to improve corporate behaviour has been attempted before with mixed results, says Adel Guitouni, a business professor at the University of Victoria. “When sustainability was seen as very important, Wall Street introduced the Sustainability Index,” he says. Companies received surveys and questionnaires, which were then compiled as guides for investors looking for greener investments. However, the problem with indices is that they are not objectively assessed, Guitouni says, which led to distortions in how companies were perceived, which did not align with their climate performance. “There’s no objective system,” he says. “Even when you try to include these metrics and criteria, there’s a lot of variability in how we measure, how we aggregate, what to exclude and include.”

The tool’s effectiveness will depend on political realities on the ground, Guitouni adds. An index of ocean equity could help move equity along, if the political and social reality is already moving in that direction, he says.

Effectiveness of such indices depend “on the political and regulatory framework that exists,” Guitouni says. However, if a country or region is firmly against practices of inclusion and equity, the index won’t help much, he says.

Jax Jacobsen is a Montreal-based journalist who specializes in mining, business and climate.

The post A new ocean equity tool seeks to give communities more power. Will it work? appeared first on Corporate Knights.

Enabling that goal is the objective behind the Business and Biodiversity Assessment report, a first-of-its-kind publication released on February 9 by the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES), an independent organization created in 2012.

A product of nearly three years’ work by 80 scientists and private-sector experts, the report was endorsed this month by representatives of the more than 150 IPBES member countries at a week-long plenary session in Manchester, United Kingdom. It is intended to serve as a key reference on nature-related risks for business – and how alleviating those risks hinges on policy change by governments.

“From my perspective, it plays a role for nature similar to what the [Intergovernmental Panel on Climate Change] has played for climate change,” says Thomas Walker, special projects lead at the Institute for Sustainable Finance at the Smith School of Business, Queen’s University, in an interview with Corporate Knights. “Canadian business leaders should pay attention because of Canada’s resource-based economy and because nature underpins the productive capacity of said economy.”

Stark warning

The report begins with a stark warning to businesses: they can either lead transformative change or “risk extinction.” The authors cite evidence of significant declines over the last 50 years in many categories of the natural “ecosystems services” on which business and economies depend. This includes things like raw materials from nature, pollination and seed dispersal, air and water quality, soil fertility, and amenities for tourism and recreation. Altogether, they underscore just how much business is at risk from nature’s collapse. The report presents a detailed guidebook of more than 130 actions that companies, along with policymakers and other enabling actors, can take to reverse it.

“What’s really fundamental here is that our experts looked at the methods and approaches that are available to understand what [risk from biodiversity loss] means in an individual business context. How you can, as a business, understand your exposure to that. How you measure your impacts and dependencies and therefore how you can understand your risks,” said Matt Jones, one of three report co-chairs and a senior officer at the UN Environment Programme, at the launch press conference.

The report’s release (for now, just the policy summary, with remaining chapters to follow in a few weeks) was well-timed, coming just one week before governments convened in Rome from February 16 to 19 to begin the first global review of nature action under the Kunming-Montreal Global Biodiversity Framework (GBF) since it was created in 2022. Mark Carney’s Liberal government is also expected to soon unveil its revised 2030 Nature Strategy, replacing the previous Nature Accountability Bill that failed to pass before the last election. The new strategy will spell out how Canada intends to meet its commitments under the GBF to halt and reverse biodiversity loss and protect 30% of lands and waters by 2030.

In an email to Corporate Knights, Samantha Bayard, a spokesperson for Environment and Climate Change Canada, emphasized the role of nature disclosure in addressing the role of business in biodiversity loss. “While adoption of nature-related disclosures is still at an early stage in Canada – hindered by, for example, capacity, expertise, and data limitations – a growing number of companies and municipalities have begun to address nature-related risks in their portfolios and integrate natural assets (e.g., wetlands) into their financial disclosures.”

Delivering transformative change

A core tenet of the GBF is that reversing biodiversity loss requires the “involvement of all society,” including companies. Significantly, among the GBF’s 23 targets is a call for government action to encourage and enable companies to better manage their impacts on nature and more accurately assess – and disclose – their risks and dependencies. Both sides of that equation are squarely addressed in the new IPBES report.

For businesses, it lays out actions at four decision-making levels: corporate, operational, value chain and portfolio. Asked to suggest some critical first steps, report co-chair Ximena Rueda, dean of the School of Management at Universidad de los Andes in Bogotá, Colombia, urged companies to choose their battles. “What is their highest dependency [on nature] or highest impact? Start from that.”

Government’s responsibility

However, the report also makes clear that voluntary efforts alone won’t be enough to deliver the kind of “transformative change that will halt and reverse biodiversity loss,” added co-chair Stephen Polasky, professor of ecological and environmental economics at the University of Minnesota. That will occur only if governments also step in “to change the set of conditions in which businesses operate.”

A key target here are the massive subsidies currently directed toward business activities that drive biodiversity loss. In 2023, according to the report, subsidies of US$2.4 trillion contributed to the estimated US$7.3 trillion in public and private finance flows that had direct negative impacts on nature. In contrast, just US$220 billion in private and public funds were directed to the conservation and restoration of biodiversity. “There is a big role here for governments and the financial system to provide incentives for business to do actions that are beneficial for biodiversity and to take away incentives to business to do actions which are harmful,” Polasky said.

The challenge of subsidy reform

According to the ISF’s Walker, the report’s concern about harmful subsidies “resonates” in Canada. Government fiscal and tax policies designed to encourage resource development and production have often failed to reflect environmental externalities or cumulative ecological impacts, he says.

While reforming subsidies will be “politically complex,” Walker says there is nothing to stop Canadian companies, which have “ample experience with climate disclosure frameworks,” to immediately start considering biodiversity in corporate decisions and disclosures. The disclosure framework established by the Task Force on Nature-Related Financial Disclosures in 2023, which is now being implemented through the work of the International Sustainability Standards Board, provides a blueprint for companies and their boards to follow.

“Structured disclosure can help integrate biodiversity into enterprise raisk management,” Walker explains. “Once nature dependencies are identified and quantified . . . they can be considered alongside climate, market and operational risks.”

Brian Banks is a writer in Cobourg, Ontario, who specializes in environment, business and sustainability.

The post A landmark study on biodiversity loss takes aim at harmful government subsidies appeared first on Corporate Knights.

With the book, Watsa partly wanted to ensure that outsiders understood Fairfax’s culture well enough not to dismantle it after he’s gone. I was drawn to the book not only because Watsa and I share an alma mater, the Ivey Business School, but also because of the curious gap between Watsa’s philosophy and the application of it when it comes to climate risk. 

The irony is that by carefully documenting why Fairfax is designed for permanence, the book also exposes how ill-prepared it is for the most significant long-term risk facing the insurance industry from which it derives most of its revenue. Fairfax prioritizes reducing long-term losses over achieving short-term gains, led by a founder who cares about doing good and having a positive impact on the world. Yet it is the world’s third-largest insurer of fossil fuel projects and has little to no plan on how it manages climate risk. 

I’ve spent the last two years trying to approach both Fairfax and its shareholders to address the climate risk that is facing their industry and business. This includes two shareholder resolutions, a bunch of letters – they refuse to meet – and even a complaint to the Ontario Securities Commission over lack of disclosure. 

A long-term philosophy meets a long-term risk

Watsa’s value-investing philosophy favours patience, downside protection and trust over market fashions and short-term profits. This long-term orientation makes Fairfax’s position on climate risk harder to reconcile than for companies that justify inaction by pointing to short-term shareholder pressure. 

“Our favourite holding period is forever” is a Warren Buffett line that Watsa returns to often. In the abstract, this is a refreshing counterweight to short-termism. In practice, it raises uncomfortable questions about the kinds of assets Fairfax intends to hold indefinitely. Those holdings include oil and gas investments, and “forever” is a long time to finance industries whose business models depend on expanding physical risk across the global economy, thereby biting the insurance industry.

Climate change barely appears in The Fairfax Way. A short section acknowledges that catastrophe losses are increasing and that Watsa finds watching the weather channel nerve-racking. Missing is any explanation of how accelerating climate damage fits into Fairfax’s commitment to downside protection, sound underwriting and enduring value creation. The company is simultaneously betting on long-term stability while underwriting and financing industries that undermine it.

Watsa has also said that “everything we do as a company rests on the strength of our insurance assets. Without them, there is no Fairfax.” The value of those assets depends on their ability to generate underwriting profits over long periods. Climate change directly weakens that equation. Insured wildfire losses in Canada have risen more than 1,000% in a little more than a decade, reflecting not a temporary spike in claims but a structural shift in the loss profile facing insurers. Fairfax itself reported approximately US$1.1 billion in catastrophe losses in 2024.

Why climate risk may be getting misclassified

One is left wondering whether climate risk simply does not arrive in the categories Fairfax is accustomed to managing. Fairfax can handle specific shocks that show up as short‑term volatility in a particular stock or line of business. Climate risk is different. It is systemic, cumulative and physical – the kind of risk that compounds quietly, until it doesn’t.

Watsa has repeatedly demonstrated an ability to navigate stress. Fairfax has anticipated multiple market shocks and had to navigate an attack by a U.S. hedge fund. That experience likely reinforced an institutional instinct that external pressure, whether from markets, media or activists, will not determine the company’s direction. Fairfax’s success in resisting noise became part of its identity.

That same instinct may have led Fairfax to misclassify climate risk as politics, as fashion or as ESG rhetoric rather than as signal. 

Fairfax’s decentralized structure does not prevent clear direction from the top. Watsa is described as values-driven rather than prescriptive but decisive when principles are involved. That combination could support a serious response to climate risk if leadership chose to name it as such.

There is also a moral tension that feels unusually relevant because Watsa has made values central to Fairfax’s identity. He speaks often about honesty, integrity, humility, loyalty and the Golden Rule. He capped his own salary, donates hundreds of millions of dollars annually, and has said that success carries an obligation to give back and that “to whom much is given, much is expected.” Insurance, at its core, exists to help people recover when things go wrong. 

Profiting from activities that intensify those harms is in direct competition with that purpose.

Even so, reading The Fairfax Way left me cautiously optimistic. If Fairfax is truly a contrarian institution focused on multi-generational success, then addressing climate risk is not optional; it is necessary. Trust, in a world of accelerating physical damage, means not funding the forces that undermine collective resilience.

The book presents the Fairfax approach as a shared agreement about how to live and operate, followed by the courage to act accordingly. Our collective response to climate change is based on the same thing.

Kiera Taylor is a senior policy analyst at Investors for Paris Compliance.

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In December, U.S. Senator Ted Cruz introduced legislation that would block voting on environmental, social and governance (ESG) and diversity, equity and inclusion (DEI) matters for the federal pension fund. The bill would prohibit BlackRock and State Street from exercising their voting rights as shareholders on matters related to the Thrift Savings Plan – the $1-trillion retirement plan for U.S. federal employees.

This legislation strengthens Republican efforts to limit asset manager participation in ESG and climate coalitions, occurring alongside lawsuits alleging antitrust violations related to sustainability initiatives. Shareholders should be deeply concerned.

Despite the government’s rhetoric, climate risks are not abstract concerns. The financial losses from climate-related disasters are already staggering and directly affect corporate balance sheets, insurance costs, supply chain stability and asset values. When wildfires destroy infrastructures, when extreme weather events force business closures, these become material financial risks that any prudent investor must consider.

Yet this legislation would forbid asset managers from voting directors off boards when they underperform as a result of failing to manage these risks. Nor would they be able to vote against CEO pay packages that incentivize short-term thinking over long-term climate resilience. Voting for or against mergers and acquisitions based on the climate-related risks or opportunities they present would also be off the table.

The doublespeak has been striking. The bill’s proponents frame it as protecting shareholder interests and ensuring fiduciary duty, yet it proposes the wholesale elimination of voting rights on a broad category of financially material issues. Shareholders – including the federal employees whose retirement savings are at stake – are being told that their interests are best served by having fewer voting rights and reduced ability to hold management accountable. The underlying assumption appears to be that asset managers considering climate risks, social factors, or practices such as ESG and DEI are inherently acting against shareholder interests, an assertion that ignores decades of research demonstrating the financial materiality of these factors and the value of active ownership in protecting long-term returns. The evidence is clear.

Yet the implications of Senator Cruz’s bill extend far beyond this single piece of legislation. Once governments establish the precedent that they can selectively prohibit voting on certain categories of proposals, what is the next target? The legislation effectively creates a two-tiered system of shareholder rights: some topics are deemed acceptable for investor engagement, while others, despite their potential financial materiality, are placed beyond the reach of fiduciary oversight. This is not market-based decision-making; it is state intervention determining which corporate governance matters shareholders may address through their ownership rights.

Cruz’s proposal is part of a broader pattern. Important changes are reshaping the U.S. corporate governance landscape, with particularly significant implications for the 2026 proxy season, which is upon us. The Securities and Exchange Commission (SEC), citing lack of resources, has dramatically limited no-action letter requests, now focusing only on resolutions not being a “proper subject” for shareholders under state law.

Paradoxically, despite these claimed resource limitations, President Donald Trump has issued an executive order directing the SEC – along with the Federal Trade Commission and the Department of Labor – to undertake a comprehensive review of regulations governing proxy advisers, particularly those involving DEI and ESG considerations. The executive order specifically targets Institutional Shareholder Services and Glass Lewis, which together control more than 90% of the proxy adviser market, asserting that these firms prioritize politically motivated agendas over investor returns.

Furthermore, Texas has implemented legislation that restricts both derivative actions and shareholder proposals, effectively narrowing the pathways through which investors can hold corporations accountable. Perhaps most telling is ExxonMobil’s move last year to sue shareholders who filed a climate-related proposal – a stark indication that the corporation–shareholder relationship has shifted from the realm of business and markets into legal warfare.

We should be concerned not just about ESG or DEI specifically, but about the precedent being established for all shareholder rights. If companies can sue shareholders into silence, what incentive remains for investors to exercise stewardship and active ownership? And if the SEC withdraws from its role in maintaining a fair and orderly process for shareholder proposals, who will protect investors’ fundamental rights? These are not hypothetical concerns; they are materializing in real time and at, what I would consider, light speed in the United States.

The right to vote as a shareholder is at risk of becoming a hollow privilege, restricted to only those matters deemed politically acceptable to the government of the day. The irony is that those claiming to protect free markets and shareholder interests are systematically dismantling the very mechanisms that allow markets to function and shareholders to exercise their ownership rights. Whether this erosion can be reversed will depend on whether investors recognize what is at stake before it is too late.

Julie Bernard is a research fellow with the Institute for Sustainable Finance at Smith School of Business, Queen’s University, and an assistant professor of sustainable finance at the School of Environment, Enterprise and Development at the University of Waterloo.

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The four plaintiffs allege that the CPPIB has breached its duties by mismanaging climate-related financial risks. Their case argues that the pension manager is dramatically underestimating its exposure to the financial risks of a warming planet. In its 2025 annual report, the investment board estimates only a 4% loss in a “hot-house world” scenario where temperatures rise by 3°C. But scientists warn that such a trajectory would bring devastating impacts to global economies, financial systems and human livelihoods. No portfolio could withstand the impacts of that much warming. Yet CPPIB has continued to commit billions to the cause of the crisis: fossil fuel expansion.

“Our case is alleging that CPP Investments is mismanaging our pension fund by failing to adequately respond to climate change,” explains Rav Singh, one of the young applicants. “CPP is supposed to be one of our most reliable sources of retirement income. We should all be concerned that our CPP benefits may not be as dependable as we’d like to think.”

This case is among the first of its kind, where beneficiaries are asking the courts to hold their pension manager accountable for mismanaging climate risks. The applicants are not seeking money; they are asking the court to direct CPPIB to identify, assess and manage climate risks appropriately and transparently, in line with its mandate to invest without “undue risk of loss” and act in the best interests of contributors and beneficiaries.

CPPIB has acknowledged that climate change is “an existential threat . . . the single biggest investment risk that we face.” In March 2025, CPPIB published an interview with climate scientist Johan Rockström, who warned, “We cannot continue allowing ourselves to destroy the stability of the climate system, and quite frankly the stability of the planet, by subsidizing unsustainable investments.”

Despite recognizing the threat, CPPIB’s climate approach tells another story. Its risk modelling assumes CPP resilience at more than 3°C of warming. According to the Intergovernmental Panel on Climate Change, 3°C of global warming could expose 3.25 billion people to lethal heat and humidity, decimate fresh water supplies and global food production, cause the extinction of plants and animals, lead to the collapse of marine ecosystems, and trigger catastrophic sea-level rise. It is imprudent to suggest that CPPIB can fulfill its mandate – or that Canadians can enjoy retirement security – under such catastrophic climate outcomes.

Meanwhile, last year CPPIB abandoned its net-zero commitment, reversing its 2022 statement that stewarding the portfolio to net-zero emissions was in “the best interests of the contributors and beneficiaries of the Canada Pension Plan.” The net-zero reversal was approved by a board on which nearly one-third of CPPIB directors held roles with fossil fuel companies, raising questions about potential conflicts of interest.

In the months following that reversal, CPPIB doubled down on fossil fuels: investing $4.1 billion in Sempra Infrastructure, which builds new gas pipelines and export terminals, and $1.4 billion in AlphaGen, owner of 23 fossil fuel power plants. These are not “transition” investments – they are bets on the continued expansion of fossil fuels.

When journalists asked CPPIB to explain how this climate litigation could be “an action against 22 million Canadians’ retirement security,” as articulated in its approach to climate risk, the fund didn’t respond. As applicant Aliya Hirji said, “I don’t want to be suing my pension. But I want to retire on a stable pension into a livable future. If taking CPP Investments to court is what’s needed to achieve that, so be it.”

The reality is that many of CPPIB’s peers are already showing what responsible, climate-aligned investing looks like. ABP, Europe’s largest pension fund, affirms that “Building good pensions together in a liveable world [is] our mission . . . A liveable world demands a sustainable economy.” La Caisse, which manages the Quebec Pension Plan, has exited coal and oil entirely and tied staff compensation to climate goals – actions it says have improved the fund’s financial position. And Ontario’s University Pension Plan directly links its fiduciary duty to climate responsibility, stating that “Climate change stands out among the significant material risks to our portfolio, demanding immediate action in line with our fiduciary responsibility.”

CPPIB is one of the world’s largest and most sophisticated investors. It has the tools, talent and resources to manage climate risk responsibly – but it must choose to actually do so. Protecting the CPP means protecting the climate that Canadians will retire into. Climate stability and pension sustainability are not opposing goals. They are inseparable.

Cheryl Randall is the campaign specialist and Patrick DeRochie is the senior manager for Shift Action for Pension Wealth and Planet Health, a charitable project that tracks the fossil fuel investments and climate policies of Canadian pension funds, and mobilizes beneficiaries to engage their pension managers on the climate crisis.

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Green mutual funds and exchange-traded funds, or ETFs, have proven they’re better at withstanding shocks in our era of economic uncertainty, and investors have taken notice. A January 2025 study by researchers at Universidad de Medellín found that green ETFs are especially attractive to institutional and long-term investors because they “demonstrate resilience and potential for outperformance during market downturns.”

Dare Ogunbona, chief executive officer at Green Advisors Limited, attributes this out-performance over the past year to investors’ keen interest in “future-facing” sectors such as cleantech, electrification and battery supply chains. These industries have demonstrated clearer project pipelines, more corporate capital expenditure and better economics along supply chains. The green stocks that did better are “mostly utility‑scale solar, wind and storage leaders with solid power purchase agreements, dividend growth and policy tailwinds,” he says. 

Better disclosure and strategy drive stronger index positioning, which draws capital, lowers funding costs and boosts valuation.

– Ray Tayyabi, vice president for ESG research, MSCI

The going has been so good that, in November, analysts at Jefferies Financial Group declared these the “glory days” for green investors. Aniket Shah, the firm’s global head of sustainability and transition strategy, told Bloomberg that investors have been too distracted by Trump’s anti-green rhetoric in the United States to recognize the “wonderful moment” that the green economy is enjoying around the world. 

Sustainability attracts capital

In our annual Responsible Funds ranking, Corporate Knights identifies the 10 top-scoring funds across four equity categories: Canadian, global, international and U.S. The sustainability rating is based on the methodology deployed in the Global 100 most sustainable corporations in the world ranking, which prioritizes several key metrics: sustainable revenue, sustainable investment and sustainable revenue growth, as well as mechanisms that link senior executive pay to sustainability targets. 

Green index funds are a major market category for passive investors. For example, about US$17 trillion in assets are benchmarked to MSCI indexes, of which $1.13 trillion tracks sustainability and climate benchmarks. “That’s about the same as infrastructure as an asset class globally,” says Rameez Ray Tayyabi, an executive director at MSCI. 

Sustainability and climate indexes have grown at 20% compound annual growth rate over the past three years, according to Tayyabi, and climate-indexed indexes have been the main driver of that growth. Investors are no longer focused on screening things out but on who is better- or worse-positioned for the energy transition, he says.

Firms with lower exposure to business risks from the energy transition appear in more green-themed funds and are weighted higher, which in turn leads to new passive inflows, Tayyabi explains: “Better disclosure and strategy drive stronger index positioning, which draws capital, lowers funding costs and boosts valuation.”

The dominance of decarbonization

Although U.S. President Donald Trump has cancelled more than $7.5 billion in grants for clean-energy projects and threatened another $12 billion, investments in clean energy continue to attract funds, especially with AI-driven demand for electricity and lower prices for renewables.

Even in the United States, Trump’s policy shift did not affect the demand for renewable energy, which is driven by market fundamentals: energy from renewables frequently costs less and is more stable than energy from fossil sources; states and cities are driving demand; and most corporate power purchasers, who signed record volumes of long-term clean power contracts in 2024, are still striving to meet climate targets.

Major investing firms are reading the writing on the wall and flocking to renewables. In February, for example, asset manager TPG acquired the U.S. solar developer Altus Power for $2.2 billion. In October, Ares Management bought a 49% stake in a diversified portfolio of renewable-energy assets in the United States operated by EDP Renováveis, in a deal that valued the total portfolio at $2.9 billion.

In a further indication of the dominance of decarbonization across portfolios, Brookfield announced in October that it had raised a record US$20 billion for its Global Transition Fund II, considered the largest private energy-transition fund in the world. Backed by an additional $3.5 billion in co-investments, the fund has effectively $23.5 billion to put to work and has already deployed $5 billion in the U.S. renewable developer Geronimo Power, France-based energy and storage developer Neoen, and Indian group Evren, which builds wind, solar and storage projects.

The global outlook for clean energy

“Clean energy has had a good year after a very dismal past five years,” Tim Nash, the founder of Good Investing, says in an email. But while energy demand has increased this past year, Nash says, he points out that declining interest rates have played a key role in the growth of investments. Globally, investment in clean energy for 2025 is about US$2.2 trillion, according to the International Energy Agency’s World Energy Investment 2025, the 10th edition of the report.

This rebound has shown that green ETFs have the potential for continued growth, but Nash points out that not just green ETFs have performed well this year: “The entire market has had a great year,” he says. “[And] not all green stocks have outperformed.”

However, Nash notes that market trends change quickly and so investors should not bother making predictions. The best approach, he says, is for investors to have a good plan and work with a financial planner to develop a suitable diversified portfolio that aligns with their values. “When markets go up we stick to the plan, and when markets go down we stick to the plan,” he says.

The factors driving the health of cleantech and green funds are expected to continue. Even if the unbridled growth of AI turns out to be a bubble, the broader electrification trend will continue to create demand for cost-competitive renewable energy, especially as big markets like Brazil and India double down on advanced power sources. 

But investors need to also brace up because over the long term, Nash believes, they will see more government regulation on social and environmental issues as well as an increase in consumer demand for socially and environmentally responsible products – both factors that have the potential to influence the sector.

For this, Nash says that investors interested in investing in renewable energy need “to be intentional,” especially considering that “it is a more volatile sector than the rest of the market.” 

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

The Corporate Knights 2026 Responsible Funds ranking

Rank	Fund name	% market weight covered*	Weighted rating**	Final score	Holdings date
CANADIAN EQUITY (149 eligible funds)
1	Desjardins Sustainable Canadian Equity Income Fd I	95.8%	22.0%	99.3%	9/30/2025
2	Mackenzie Betterworld Canadian Equity Fd Ser A	94.6%	20.1%	96.6%	3/31/2025
3	Invesco S&P/TSX Composite ESG Index ETF (ESGC)	99.1%	20.1%	95.9%	9/30/2025
4	RBC Vision QUBE FFF LV Canadian Equ Fd A	98.1%	19.3%	93.9%	6/30/2025
5	CIBC Sustainable Canadian Equity Fund Series A	97%	19%	93.2%	6/30/2025
6	Desjardins Sustainable Canadian Equity Fund A	97.7%	18.9%	92.5%	9/30/2025
7	Invesco S&P/TSX Composite ESG Tilt Idx ETF (ICTE)	99.3%	18.9%	91.8%	9/30/2025
8	Invesco S&P/TSX 60 ESG Tilt Index ETF (IXTE)	99.3%	17.9%	89.1%	9/30/2025
9	iShares Jantzi Social Index ETF (XEN)	100%	16.1%	84.4%	9/30/2025
10	NBI Sustainable Canadian Equity ETF (NSCE)	97.8%	15.5%	82.4%	9/30/2025
GLOBAL EQUITY (226 eligible funds)
1	Mackenzie Corporate Knights Glo 100 Ind ETF (MCKG)	98.7%	60%	100%	3/31/2025
2	CI Global Climate Leaders Fund Series A	93.6%	34.1%	98.6%	3/31/2025
3	CI MSCI World ESG Impact Index ETF (CESG)	100%	32.7%	98.2%	9/30/2025
4	BMO Global Climate Transition Fund Series A	93.6%	25.9%	97.7%	3/31/2025
5	AGF Global Sustainable Growth Equity Fund/ETF (AGSG)	95.9%	25.8%	97.3%	3/31/2025
6	NBI Global Climate Ambition Fund Advisor Series	97.2%	22%	96.4%	9/30/2025
7	Franklin Unconstrained Global Equity Fund A Hdg	92.4%	21.5%	96%	8/31/2025
8	BMO MSCI ACWI Paris Aligned Clim Eq Idx ETF (ZGRN)	99.5%	21.2%	95.5%	9/30/2025
9	Mackenzie Global Women's Leadership ETF (MWMN)	100%	20.7%	94.2%	7/31/2025
10	VPI Sustainability Leaders Pool Series A	96.2%	20.1%	93.3%	9/30/2025
INTERNATIONAL EQUITY (142 eligible funds)
1	Franklin ClearBridge Intl Gth Fd Ser A	96.2%	19.2%	99.2%	8/31/2025
2	NEI International Equity RS Fund Series A	95.7%	18.4%	97.1%	8/31/2025
3	BMO MSCI EAFE Selection Equity Index ETF (ESGE)	98.5%	15%	83.6%	9/30/2025
4	Invesco S&P Intl Developed ESG Tilt Idx ETF (IITE)	98.9%	14.7%	82.2%	9/30/2025
5	DesjardinsRIDvex-USAex-CdM-F-Net-ZEmmPthwETF(DRFD)	99.5%	14.2%	78.7%	9/30/2025
6	Wealthsimple Dev Mkts ex NA Soc Rsp Ind ETF (WSRD)	98.5%	13.7%	75.1%	9/30/2025
7	Desjardins RIDev ex-USAexCdaNet-ZEmsPthwETF(DRMD)	98.6%	13.7%	74.4%	9/30/2025
8	Invesco S&P Intl Developed ESG Index ETF (IICE)	99%	13.6%	73%	9/30/2025
9	iShares ESG Aware MSCI EAFE Index ETF (XSEA)	99.3%	13.6%	72.3%	9/30/2025
10	iShares ESG Advanced MSCI EAFE Index ETF (XDSR)	99.6%	12.7%	63.1%	9/30/2025
U.S. EQUITY (206 eligible funds)
1	BMO MSCI USA Selection Equity Index ETF (ESGY)	100%	21.2%	98.5%	9/30/2025
2	Invesco ESG NASDAQ 100 Index ETF (QQCE)	99.8%	21.2%	98%	9/30/2025
3	Invesco S&P 500 ESG Tilt Index ETF (ISTE)	100%	19%	89.7%	9/30/2025
4	iShares ESG Advanced MSCI USA Index ETF (XUSR)	99.7%	18.5%	88.2%	9/30/2025
5	Invesco S&P US Total Mkt ESG Tilt Idx ETF (IUTE)	99.4%	17.3%	84.8%	9/30/2025
6	iShares ESG Aware MSCI USA Index ETF (XSUS)	99.9%	17.2%	83.9%	9/30/2025
7	Invesco S&P 500 ESG Index ETF (ESG)	100%	17.1%	83.4%	9/30/2025
8	Desjardins Sustainable American Equity Fund/ETF (DSAE)	98.4%	17.1%	82.4%	9/30/2025
9	Franklin Sustainable U.S. Core Equity Fund Ser O	98.7%	16.5%	78.5%	6/30/2025
10	Franklin U.S. Opportunities Fund Series A	96.8%	16.5%	78%	8/31/2025
*Sum of a given fund’s underlying constituents’ weights that are rated by Corporate Knights.
**The weight of a constituent of a given fund multiplied by its rating by Corporate Knights, summed up for all of that fund’s underlying constituents.
***The score of a given fund (based on the percent-ranking calculation approach) derived by comparing its weighted rating against that of other funds in the same category.

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The GMT was designed inside the Organisation for Economic Co-operation and Development (OECD) over many years to ensure that large multinational enterprises (MNEs) pay at least a 15% effective tax rate wherever they operate. For years, governments have competed to attract investment by lowering corporate tax rates or offering incentives. The GMT is an effort to set a floor beneath that competition. The rules allow governments to collect “top-up” taxes if a company’s effective rate in a particular jurisdiction falls below 15%. They do this through three core tools: the “income inclusion rule,” the “undertaxed profits rule” and the “qualified domestic minimum top-up tax.”

It is “the first time we’ve seen a globally coordinated tax system of this scale,” says Cory Perry, a partner in Grant Thornton’s Washington National Tax Office. More than 50 countries have adopted similar rules, marking a shift from the long-standing model in which each country independently designed its corporate tax regime. The GMT is not just a technical adjustment to international tax rules; it marks a shift in how nations compete, how corporations plan and how value is measured across borders.

Canada has already moved from discussion to implementation. The Global Minimum Tax Act (GMTA), enacted in late 2024, applies to MNEs with at least €750 million in global consolidated revenue in two of the previous four fiscal years. For these organizations, the question is no longer whether the rules matter; it’s how they will adapt their reporting and internal systems to comply. The Canada Revenue Agency opened registration for the GMTA in October 2025, but the official “GloBE Information Return” form is still pending. The first reporting deadline is June 30, 2026.

Harry Chana, a cross-border tax services leader at BDO Canada, points to “confusion when it comes to regulations within the act that are relatively ambiguous” and which are generating unexpected impacts. For example, once a parent company’s global revenue passes the MNE threshold, the Canadian entity is automatically brought within scope.

Another misconception Chana highlights is the assumption that Canada’s relatively high corporate tax rates will shield companies from the new rules. “When you work through the actual rules and the complexities around how to calculate the 15%, in many cases it could apply to Canadian companies,” he says. Incentives and credits can lower a company’s effective rate below the threshold, making it subject to top-up calculations. For many businesses, this change will mean retooling accounting systems, building new data pipelines and preparing for higher administrative and compliance costs.

Some of Canada’s wealthiest families are putting up $405M for climate change efforts

The global picture

Wesley Boldewijn, a shareholder at Greenberg Traurig in Amsterdam who advises multinational clients across Europe, describes GMT implementation as uneven and complicated. “Every country is implementing the OECD framework in its own way, creating a patchwork of interpretations,” he says. “This means large companies may now face a more complex compliance environment that may result in higher taxes, double taxation and the challenge of applying multiple reporting standards within one organization. Some multinationals may end up paying more in fees to advisory firms to implement and monitor these new tax rules than they currently pay in top-up tax.”

Some companies are responding by restructuring their subsidiaries to consolidate taxable profit in jurisdictions where calculations are predictable. Others are weighing the value of tax incentives that could, under the GMT, have the opposite of their intended effect. The incentive landscape is already shifting: countries are moving away from direct tax breaks and toward refundable credits that preserve competitiveness while staying within the GMT’s guardrails.

According to Abdul Muheet Chowdhary of the South Centre, in the United Kingdom, “the GMT has virtually no benefits” for developing countries and may even increase reliance on subsidies in place of traditional tax incentives. Tommaso Faccio, head of the Secretariat of the Independent Commission for the Reform of International Corporate Taxation, sees the core issue as the rate itself. He argues that the floor should be 25% instead. Still, some lower- and middle-income countries have begun adopting the minimum, particularly where tax incentives have historically drained public revenue.

The politics behind the GMT

Recent G7 discussions signalled that U.S. companies may be treated differently under a “side-by-side” framework that acknowledges the United States’ own minimum tax regime. That raised questions abroad about whether the GMT still ensures a level playing field. The European Union has moved forward with broad implementation, while U.S. policymakers have voiced concerns, proposed carve-outs and in some cases sought to undermine adoption entirely.

Perry, with Grant Thornton, stresses that for many companies, the real challenge isn’t the tax itself. “What we’re seeing for many companies is that the impact is less about an increased tax burden and more about an increased compliance burden,” he says. Even companies that do not owe significant top-up taxes must reengineer parts of their planning systems, gather new data inputs and prepare to file returns in multiple jurisdictions. “In practice, it is often more of a resource strain than a cash tax strain,” Perry notes.

Certain sectors feel the effects more acutely. Infrastructure companies, for example – those operating in energy, transportation, utilities or water – rely on long-term investments, regulated returns and complex financing arrangements. These features interact with the GMT’s country-by-country effective tax rate calculations in ways that can produce unexpected results. Some organizations are already preparing for increased deferred tax adjustments and expanded disclosure requirements in financial statements.

The takeaway for multinational businesses is straightforward: start now. Map global structures, evaluate jurisdictional effective tax rates, test financing and revenue models, and plan for increased interaction with regulators and investors. The rules are still evolving, and transitional uncertainty will likely last years. But waiting will only make compliance harder.

Gordon Feller is a writer based in San Francisco.

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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.

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