Ella, the chief sustainability officer of a multinational corporation, was hired to lead the organization toward ambitious net-zero emissions goals that the CEO is intent on delivering – despite political indications that it’s no longer a priority. Ella joined the company believing in its stated commitment to environmental responsibility. However, she discovers a troubling reality: key company stakeholders are prioritizing short-term profits over long-term sustainability, sabotaging both the CEO’s mandate and her work.

Ella is experiencing moral injury – a “first cousin” to trauma. Moral injury, as a concept, was first introduced in the 1990s by psychiatrist Jonathan Shay, who defined it as profound psychological distress resulting from actions that violate one’s moral or ethical code, particularly in high-stakes situations involving betrayal by authority figures.

In the “AfterShock era” [the polycrisis period following what Alvin Toffler described as “future shock“], characterized by rapid technological advancements and societal shifts, organizations are thrust into environments of intense change, volatility and ethical ambiguity. For employees like Ella, the emotional and psychological toll of this shift is profound. As decision-making becomes erratic and public commitments ring hollow, moral injury emerges as a silent but powerful force shaping both her experience and how she performs her work.

How moral injury restructures work

Moral injury isn’t a label anyone wakes up with, and it doesn’t just sit in Ella’s mind – it reshapes how she performs her role, how she interacts with others and whether she believes in the work at all.

She experiences decision paralysis and second-guesses herself constantly. The ethical contradictions in leadership create a fog of uncertainty, making even routine decisions feel fraught.

Innovation suffocates. Where she once pushed for new sustainability solutions, she now self-censors, knowing they’ll be blocked by leadership. The company doesn’t just lose her engagement – it loses her creativity. She becomes so demotivated that she becomes helpless and angry. She’s likely to move to whistleblowing mode, burn out or quit.

Mistrust becomes contagious. She stops believing leadership’s messaging, and soon, so do her colleagues. Moral injury spreads like an emotional contagion, affecting teams beyond her own.

The risk for organizations

Unchecked moral injury doesn’t just affect one employee; it changes the culture, decision-making, communication, trust and the ethical foundation of the entire company. Employees become risk-averse, unwilling to challenge the status quo. Talented people leave, often quietly, draining institutional knowledge. The work itself degrades – products, policies and strategies become hollow, shaped more by survivalism than purpose.

This is why moral injury is not just a human issue; it is an operational crisis.

What it means for leaders

The chances are that you recognize Ella either in yourself or in others that you’ve worked with. If you’re feeling overwhelmed with this realization, you’re not alone.

As a CEO, executive or senior leader, you might be experiencing helplessness: “This is too big to fix. We’ll never get there.” Frustration, too: “Even when we try, external forces make it impossible to get this right.” Or, “Let’s hire someone else to do this who understands our business.”

These reactions are natural, but they’re also signals. They point to the ethical weight of leadership in today’s world. If you’re feeling this way, it doesn’t mean you’re failing – it means you want to find a solution.

But here’s the hard truth: leaders who ignore this discomfort risk making moral injury worse, not just for employees, but for themselves.

The cost of doing nothing

In our AfterShock era, we need systems thinking where we go beyond all the crises.

Across these domains, individuals experience a profound sense of powerlessness, ethical compromise and inaction fatigue, eroding their sense of moral integrity. This makes addressing moral injury not just a matter of individual well-being but a critical component of long-term organizational survival and ethical leadership.

By genuinely aligning values and actions, organizations can transform the hidden sabotage of moral injury into a catalyst for growth, integrity and long-term success. These traits are not just beneficial but essential by 2030. The alternatives – burnout, presenteeism, attrition and diminished innovation – will persist, eroding trust, morale and organizational resilience.

Caroline Stokes is a leadership strategist, author and certified executive coach. She is based in Vancouver. 

The post The true cost of moral injury at work appeared first on Corporate Knights.

Concerns about BlackRock’s poor stewardship of climate risk were to blame for the break. PFZW says it is now pursuing an investment strategy that gives equal weight to financial performance, risk and sustainability.

The Dutch climate advocacy group Fossil Free Netherlands celebrated the move as a victory for its Break with BlackRock campaign, which it launched in January when the behemoth asset manager withdrew from the Net Zero Asset Managers alliance. More than 2,500 people wrote letters to their pension funds asking them to break ties with BlackRock, according to the non-profit’s website. “BlackRock is one of the world’s largest investors in the climate crisis,” the organizers wrote. “Climate risks are financial risks: when climate disasters strike, our pension money evaporates.”

BlackRock is the largest money manager in the world, reporting US$11.6 trillion in assets under management at the end of 2024, including $1 trillion of sustainable and transition assets. CEO Larry Fink was previously a strong advocate for investing strategies that consider environmental, social and governance factors, but the firm has dramatically scaled back its support for ESG-related proposals from activist shareholders since 2021, when it supported 47% of such proposals. Last year that support had fallen to 4%, and this year it’s at 2%. A spokesperson for BlackRock told Bloomberg that the asset manager continues to help clients meet their sustainable investment goals.

While U.S. investors are increasingly backing out of funds that consider ESG factors, many Dutch pension funds still view sustainability as a smart long-term investing strategy, Reuters reports. Another Dutch pension manager, PME, is also said to be reviewing its mandate with BlackRock.

Sustainability advocates were quick to identify the move by PFZW as a market signal for money managers that investors are raising their standards when it comes to accounting for climate risk and corporate social responsibility. “Pension funds are sending a clear message – asset managers must step up on climate stewardship, or risk losing major mandates,” writes Danny Takhar, business development manager for the sustainable investment platform Vericap in Vancouver.

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Others highlighted the link between ESG strategies and managing climate and transition risks. “Sustainability is risk management,” writes Sigrid Carstairs, a sustainability specialist at the Swedish renewable energy developer Eolus, in a commentary on the development. “This is not about looking good. It is not about marketing. It is about doing your job properly as a steward of capital.”

In February, the People’s Pension in the United Kingdom made a similar move, transferring US$35.3 billion in assets from State Street in the United States to be managed instead by other firms with ESG and net-zero alignment. “The People’s Pension’s broader mission is to balance strong financial performance with responsible investment principles,” Mark Condron, the fund’s chair of trustees, said at the time.

The gap between Europe and North America appears to be widening. A recent Financial Times survey asked institutional investors whether pulling back from ESG commitments damages their view of an asset manager. 70% of European respondents said it did, compared to 47% in North America. 

Mark Mann is a journalist and editor at Corporate Knights. He is based in Montreal. 

The post The transatlantic rift over sustainable investing just got deeper appeared first on Corporate Knights.

The pugilistic 80-year-old founder of Florida hedge fund Elliott Management has been described as a “financial terrorist” for his practice of buying sizeable stakes in public companies and then pressuring them to alter their strategies, sell assets or fire top leaders. He’s also been called a “vulture capitalist” because he’s made an art of scooping up defaulted debt from struggling countries and then demanding payment in full.

In the media, however, Singer is more genteel. On a recent podcast he described himself as an activist shareholder who simply works “to control or influence outcomes.”

As the United States is learning, however, control-seeking billionaires rarely serve the public interest. The Manhattan Institute – a hard-right lobbying group that attacks regulation, the green energy transition, public education, social services and DEI – held an awards dinner for Singer in May, noting that all its recent success in these areas “would not be possible without Paul Singer.” (Recent headline on the institute’s website: “ESG Is Coming for Your Candy Bars.”)

As a libertarian, Singer has long supported the Koch family’s notorious promotion of tax cuts and fossil fuels. He donates generously to Republican causes, including US$63 million in the 2024 election, and $5 million to Trump’s campaign specifically.

Besides “control,” note Singer’s use of the word “influence.” In 2008, he flew with Supreme Court Justice Samuel Alito to a US$1,000-a-day fishing lodge in Alaska, according to reporting by ProPublica. In the following years, Alito ruled on about 10 cases that Elliott Management brought to the Supreme Court as part of its high-stakes collection campaigns. Alito never disclosed Singer’s gift, nor did he recuse himself – even in a dispute with Argentina that netted Elliott US$2.4 billion.

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Singer has used his strong-arm tactics to halt the energy transition at fossil fuel companies. When Elliott muscled in on Canadian oil-sands giant Suncor in 2022, he demanded five board seats and a management review. Suncor promptly sold off $730 million in wind and solar assets that had been the company’s big bet on the future. The pressure also led Suncor to hire a new CEO, veteran Exxon executive Rich Kruger, who believes Suncor’s future lies in bitumen – the world’s dirtiest oil.

Rick Spence is a business writer, speaker and consultant in Toronto specializing in entrepreneurship, innovation and growth. He is also a senior editor at Corporate Knights.

The post Meet the ‘vulture capitalist’ working to prop up fossil fuels appeared first on Corporate Knights.

Only two regions – Canada and Australasia (Australia and New Zealand) – continued to raise new money for sustainable funds in the first three months of the year.

With Donald Trump’s anti-ESG policies looming over U.S. and global markets, investors pulled US$8.6 billion from sustainable mutual funds and exchange-traded funds (ETFs) in the first quarter, according to a report from Morningstar Sustainalytics. By contrast, the previous quarter saw inflow of US$18.1 billion. Investors in the United States led the charge, withdrawing more than US$6 billion in the first three months of 2025, the 10th consecutive quarter of outflow.

European investors, too, joined the general retreat. Redemptions – when investments are returned to the investor, usually as cash – in Europe were US$1.2 billion in the quarter, the first period of outflow since 2018. Asian sustainable funds also amassed net withdrawals in the same period.

Yet, Canada and Australasia had positive inflow of about US$300 million each. It’s too early to say whether this is a long-term trend, but both regions seem to be coming back from periods of significant withdrawal: CAD$2.5 billion for Canada last year and US$740 million for Australasia in 2023.

The divergent trend lines suggest that both regions are recovering from fallback by so-called ESG tourists, or fund companies with only a passing commitment to sustainable investment but who entered the category two or three years ago to test the market. What’s left is a thinning core of funds committed to long-term responsible investing.

Sucheta Rajagopal, a veteran responsible-investment adviser based in Toronto, says a number of mainstream fund companies and asset managers set up new sustainable funds in 2022, hoping to cash in on a global ESG boom triggered by the substantial support for renewable energy and cleantech under the Biden administration and in the European Union. “There was a lot of bandwagon-jumping,” she says. “There were a lot of firms and fund managers that didn’t really believe in [sustainable investing], but because it was the flavour of the moment, they launched these products . . . They were just grabbing onto it.”

Now, many of these funds are closing or rebranding. Creation of new funds has slowed dramatically since the heyday three years ago.

Surviving funds believe in ESG

The surviving funds are led by managers who “genuinely believe in ESG as a risk-management tool and in sustainability and climate change and that companies paying attention to those things are going to end up doing better,” Rajagopal says.

The Morningstar data “underscores the strength of Canada’s financial ecosystem, where non-bank fund companies like NEI, alongside independent and credit union advisers, create a more genuinely sustainability-focused environment,” John Bai, chief investment officer for NEI Investments, said in an email.

The Canadian sustainable funds industry is dominated by three major players: NEI Investments, Desjardins and National Bank. Collectively, they accounted for 58% of sustainable fund assets in Canada in 2024. NEI and Desjardins are financial cooperatives; National Bank, based in Montreal, is the smallest of the big chartered banks.

Advisers recommending funds from these companies have more leeway to provide a strong case for sustainability than their peers at the large Bay Street banks and Wall Street ETF companies. They can talk their clients through the ups and downs of sustainable investing while supporting their clients’ choice to invest in a socially and environmentally minded way. Most credit unions and caisse populaires widely market their sustainable fund offerings, and advisers receive better training on ESG options than advisers at banks.

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Hortense Bioy, head of sustainable investment research for Morningstar Sustainalytics, agrees that this is a strong factor driving the Canadian inflow data. In some jurisdictions, she says, this is achieved through the hard path of regulation rather than the soft path of adviser guidance. “We’re seeing the same trend in France, where investors are required by law to hold at least one ESG fund in their savings account,” she said in an email.

But Paul Calluzzo, professor of finance at Queen’s University in Kingston and a member of the university’s Institute for Sustainable Finance, says preferences on issues like ESG still play only a part in how investors choose funds, even for those who are more sustainability-minded. Financial performance based on risk and return plays a major role. “The number one factor that we look at in fund flows is performance,” he says.

Underperformance has contributed to the outflows in sustainability funds, especially those investing in renewable energy or cleantech. Many of these funds have underperformed their conventional peers since 2022, when interest rates caused shares in these sectors to plummet.

Investors shift to bond funds

In Canada, fixed-income funds attracted 87% of the Canadian inflow in the first quarter. Equity and other funds attracted the rest. It appears that the risks posed by a second Trump presidency have driven many sustainability-focused investors to lower-risk bond funds.

But Rajagopal says that sustainable investors have a strong preference for ESG bond funds that include green and impact bonds, especially those with a climate theme. “People are saying we want to finance these sorts of things that are more positive than equity investments, where a lot of publicly traded companies have limits on what they can really do about climate.”

The retreat in sustainable investing in the United States looks like it’s going to get worse before it gets better. In Europe, it may only just be starting. But for Canada, Australia and New Zealand, there are encouraging signs that the ESG sightseers are hitting the exits, leaving the sustainability locals to carry on.

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 ‘ESG tourists’ are leaving, but sustainable funds are still growing in Canada appeared first on Corporate Knights.

In Canada, a new report suggests the same forces are at work north of the border. However, unlike the uncertainty in the United States, the report concludes that ESG integration is “firmly entrenched” in Canadian investment management, even as investors adopt a lower-profile stance on their ESG activities. “Over the last 12 months, we’ve seen so many asset managers being attacked in the U.S., or their business being put at risk,” says Milla Craig, CEO of Montreal-based sustainability consulting firm Millani, which produced the report.

Canadian asset managers are not immune to these attacks, Craig says, especially if they have U.S. operations. In response, asset managers and owners are shifting attention from external communication of ESG themes to focusing on internal ESG strategy, according to Craig.

“This is very different from anything we have seen,” she says in an interview, referring to previous surveys conducted every six months since December 2022. Pushed by climate protests, many of these investors have adopted high-profile net-zero targets and other ESG commitments. Yet the protests have continued, alongside the rise of the anti-ESG political movement in the United States.

I don’t see investors backing off. There is infrastructure there today that wasn’t there seven years ago, and I think that’s a big difference in the market.

– Milla Craig, CEO, Millani

In response to these converging lines of criticism and opposition, investors are recalibrating, Craig says. They are maintaining their ESG policies but developing corporate strategies to shield them from attacks from both the left and the right.

“These organizations have been integrating ESG, but they’re now going to another depth to ensure they cannot be called out for not meeting their [ESG] commitments,” Craig says. All but two of 27 institutions surveyed in December 2024 remain committed to ESG integration, the report states. The respondents mainly included asset managers, alongside a smaller sample of asset owners such as foundations and pension funds.

A ‘striking shift’ toward ESG integration

As a tool, ESG integration is used by sustainability-focused asset managers offering green-labelled funds, for example. But it is also used by many conventional investors wishing to incorporate ESG factors into their portfolios as a way of identifying and managing related risks from things like litigation or the energy transition.

When it comes to climate, “investors are shifting from simply assessing if organizations have climate targets to analyzing and expressing a need for clear and credible transition plans, as well as the capital allocations needed to successfully execute such plans,” the report states.

When asked to rank the most important ESG topics, 67% of investors ranked climate first, biodiversity third at 44% and Indigenous reconciliation fourth at 30%. Internal ESG trailed in previous surveys, but in December 2024 it ranked second at 48%, a result the report calls “a striking shift.” Many investors are now spending time and resources to integrate tools like corporate climate scenario analysis – for assessing the potential impacts of climate change on a particular business – into their own investment management operations, it states.

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While banks and asset managers face a regulatory retreat in the United States – including the Securities and Exchange Commission’s decision to pause its legal defence of a recent corporate climate-disclosure rule – Millani found that Canadian investors support measures to bolster ESG disclosure in Canada and want the regulatory tools to help them develop a more sophisticated understanding of ESG factors shaping their portfolio companies.

This support extends to climate-related risk-management and disclosure rules on banks and insurance companies put in place by the Office of the Superintendent of Financial Institutions. It also includes recommendations by the Canadian Sustainability Standards Board for corporate climate disclosure aligned with international standards. Investors also support action by the federal government to establish official guidelines for what constitutes green and transition investments, according to the report.

Are they ‘greenhushing’ or simply retreating from accountability?

Millani’s contention that investors are standing firm behind ESG is at odds with a recent report from climate advocacy group Investors for Paris Compliance (I4PC), which looked at the climate performance of bank-owned asset managers, a large segment of the country’s investment industry. Released in January, the I4PC report shows that the asset-management arms of Canadian banks are lagging behind commercial lending arms on climate-risk disclosure, especially in reference to their financed emissions and how well these align with the banks’ net-zero targets.

The I4PC report also finds that most bank-owned asset managers are failing to set comprehensive transition strategies to align their portfolios with their parent banks’ net-zero commitments.

Craig acknowledges that asset managers are going into a period of “greenhushing,” and this carries some risk that they won’t be held accountable for failure to achieve climate or other ESG targets. But she doesn’t see evidence to date of a significant ESG pullback by Canadian asset managers. This is partly because asset owners like public pension funds have established ESG policies in the last decade that are pressuring asset managers to hold the line on ESG.

“From the study and my conversations, I don’t see investors backing off,” Craig says. “There is infrastructure there today that wasn’t there seven years ago, and I think that’s a big difference in the market.”

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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Energy security has become an overriding concern in the last two years as oil and gas prices have shot up, and sustainable finance has faced an increasingly hostile political environment in the United States. A consequence of this pushback came on New Year’s Eve, when global financial behemoths Bank of America and Citigroup left the Net-Zero Banking Alliance, one of the investment industry climate coalitions championed by the United Nations.

What does this mean for the year ahead? Will financial allocators support the energy transition of the future or capitulate to the demands of the present? Here are seven predictions for the world of sustainable finance in 2025, and its related tool kit of environmental, social and governance (ESG) investing.

In the United States, sustainable investors will face attacks on three fronts

Paul Atkins, Donald Trump’s choice to chair the Securities and Exchange Commission (SEC), is an ESG skeptic with a bent to streamlining securities regulation. While not considered a hard-right ideologue, he will reverse ESG-friendly regulations championed by the Biden SEC.

1. Shareholder rights. One of Atkins’s first targets will be Biden-era SEC guidance that makes it easier for investor activists to present shareholder proposals on environmental and social issues at corporate annual meetings. Expect Atkins to reverse the Biden policies and return to guidelines under Trump’s first administration that allow companies to reject ESG proposals if they don’t substantially affect operations.

Expect the Republican-controlled Congress to also weigh in, proposing legislation that would give corporations broad powers to reject shareholder proposals. That said, it’s not clear whether such a law could pass in the next two years, when the 2026 mid-term elections are expected to turn against the Republicans.

2. Climate disclosure. Atkins will also revoke a Biden-SEC regulation requiring publicly listed companies in the United States to disclose their Scope 1 and 2 (operational and energy) carbon dioxide emissions. The impact of this reversal will be muted, however, as climate disclosure rules take effect in California and in Europe, where about 3,000 U.S. companies operating in Europe will have to comply with climate disclosure rules under its Corporate Sustainability Reporting Directive (CSRD).

3. ESG fiduciary rights. And expect the Trump administration to reverse a Biden Department of Labor rule expressly permitting pension trustees to consider ESG issues in investment decisions. But the Trump rule will be contested in the courts, as sustainably invested pension funds make a legal case that ESG is fundamentally about improving financial assessment of financial risks and returns.

The takeaway: The Trump administration’s attack on shareholder rights will discourage investors from exercising their rights to file investor proposals on ESG issues. But on climate disclosure and fiduciary rights, this will create regulatory confusion more than a firm barrier to sustainable investing.

Shareholder proposals on ESG issues will drop in number and support

Shareholder collaboration on ESG issues will take a hit in 2025. Collaborations like the Climate Action 100+ shareholder network will lose clout, as policy changes and the chill from the Trump administration take hold. In 2024, large U.S. asset manager Franklin Templeton joined other managers Nuveen, Goldman Sachs Asset Management and AllianceBernstein in leaving the network, which coordinates shareholder pressure on corporations on climate issues.

According to Morningstar data, the number of ESG resolutions at U.S. companies rose sharply between 2021 and 2024, although overall support was 27% in 2024, down from 37% in 2021. The decline was largely due to lower levels of support from the three largest asset managers: BlackRock, Vanguard and State Street, together known as the Big Three. There has been some pushback from at least one asset owner – PGGM – which has dropped some managers that are not meeting the Dutch pension fund’s expectations for ESG engagement.

The takeaway: In 2025, look for fewer but better-focused ESG proposals that can command larger support from asset owners and managers.

Long-term ESG-focused investors will stay the course

 Despite these negative trends, 50% of long-term ESG-oriented investors – including asset managers, funds and owners employing sustainable finance strategies – said they plan to maintain their current level of ESG activity in 2025, while 29% said they plan to increase it moderately and 10% plan a significant expansion, according to a survey by the U.S. Sustainable Investment Forum (US SIF).

Many Republican-led states are dropping companies with ESG policies as eligible managers for their pensions funds. But large managers like the Big Three have substantial accounts with Democratic-led states and European clients that are under their own stakeholder and regulatory pressure to meet climate and ESG targets. US SIF reported that sustainable assets under management at the end of 2023 were US$6.5 trillion, representing 12% of total investment assets in the United States.

The takeaway: ESG strategies have become embedded in a large proportion of the long-term asset-owner and -management sectors. Expect continued growth of sustainable finance assets by these investors in 2025, especially by pension funds weighing the evolving risks of heat, floods and storms and economic transformations from climate change.

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Shorter-term mutual fund and ETF investors will cautiously re-enter the sustainable funds market

Unlike core ESG investors committed to long-term sustainable strategies, interest by small institutions and individuals with shorter investment horizons has waned in recent years. Inflows in sustainable mutual funds and exchange traded funds (ETFs), two products popular with these investors, hit US$160 billion in the fourth quarter of 2021, triggered by low interest rates and climate-friendly policies in the European Union. But these dropped precipitously starting in 2022, when central banks ramped up interest rates, the Ukraine war drove up energy prices, and Europe established more stringent anti-greenwash fund-disclosure rules.

By the second quarter of 2024, Morningstar estimates that net inflows had dropped to US$6.3 billion, with the United States registering net outflows. Not surprisingly, Morningstar estimates there were 246 new sustainable funds launched in the first three quarters of 2024, down from 444 in the same period in 2023.

But there are early signs this outflow is beginning to turn around. Global flows into sustainable mutual funds and ETFs hit US$10.4 billion in net new money in the third quarter of 2024, driven largely by reduced outflows from the United States. It appears investors are gaining comfort with the new European rules and longer-term prospects for green stocks, although there was a sell-off of clean energy immediately after the U.S. election.

The takeaway: Expect sustainable mutual fund and ETF inflows to bottom out in 2025 and investors to return to these products, as long-term interest rates improve conditions for green bonds and climate-friendly stocks and European investors become more familiar with ESG fund-disclosure rules.

Europe will simplify, not throw out, ESG disclosure rules

European Commission President Ursula von der Leyen has proposed an “omnibus” reform of corporate and finance disclosure rules aimed at simplifying the complex web of ESG reporting requirements imposed by the European Union. “The questions we are asking, the data points we are collecting – thousands of them – is too much,” she said at a meeting of EU heads of state last year.

The political balance at the European Parliament shifted to conservative parties in 2024 elections, sparking a fear of wholesale disclosure deregulation. But with thousands of companies investing in resources to meet the stringent rules this year, the European Commission would invite significant blowback and market confusion if it threw out the reporting regime.

The takeaway: Look for the European Commission to overhaul the information requirements in 2025, in a spirit of getting to the core of sustainability outcomes, not tossing out the whole framework in a U.S.-style attack on ESG.

Canada will become a leader on transition investing

Canada is expected to appoint an arm’s-length council in 2025 to oversee a new green and transition taxonomy, an official standard for banks, funds and asset managers on green and transition investments.

One of the big questions is whether gas projects like liquefied natural gas infrastructure will qualify for the “transition” label. Guidelines set by the federal government in 2024 rule out new gas production for the transition label. Existing natural gas production displacing coal could be transition-eligible but would have to be aligned with a global temperature rise of no more than 1.5°C. These are important marching orders for the arm’s-length council, which will likely follow the federal mandate to rule out projects with significant carbon lock-in.

The takeaway: The taxonomy will help Canada to become a leader in transition projects in areas such as green steel and cement and the gradual phaseout of fossil fuel power with clean energy. That is, if the taxonomy is even finalized under the precarious situation facing the current government.

Canada will impose mandatory full-scope carbon emission reporting – but it won’t come in 2025

In December, the Canadian Sustainability Standards Board (CSSB) adopted international accounting rules calling on Canadian corporations to report the full range of their carbon emissions. That is, not only Scopes 1 and 2 emissions from operations and energy, but also Scope 3 emissions from end uses.

However, the rules include a two-year delay for Scope 1 and 2 reporting and a further year for Scope 3 reporting. It’s now up to the Canadian Securities Administrators, the umbrella organization for securities commissions, to decide whether to follow through on the CSSB recommendation and make full carbon-emission disclosure mandatory.

The takeaway: Alberta will almost surely fight full disclosure, since the oil and gas industry is responsible for about 30% of Canada’s total emissions, particularly on Scope 3. But I’m going to go out on a limb here and predict that the other provinces will win this battle, backing the CSSB’s carefully crafted consensus to bring Canada into alignment with Europe and many other jurisdictions in 2027 and 2028.

The big picture

Stronger-than-expected anti-ESG attacks in the United States or Europe could put a very cold chill on green investing in 2025, but right now it looks like sustainable investing has built sufficient strength in the last decade to withstand the growing conservative backlash against it.

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 Seven sustainable finance predictions for 2025 appeared first on Corporate Knights.

Anticipating juicy growth in corporate earnings under the new administration, the U.S. stock market closed Friday up almost 5%, the biggest weekly percentage gain in a year. But clean energy stocks sank, as investors feared that Joe Biden’s pro-renewable program will give way to “drill, baby, drill” policies under Trump.

The decline in clean energy stocks despite an otherwise buoyant market confirms the uncertain reality facing sustainable finance. For the last two years, Republicans have waged a battle against environmental, social and governance investing, prompting many states to boycott ESG managers.

Before the vote, the very thought of a second Trump presidency inspired dread for many in the ESG community. But now a week after voting day, two schools of thought have emerged on how the Trump effect will play out.

While some industry leaders believe the sustainable finance community should lawyer up for a legal fight of mammoth proportions, others take a softer view. The latter group argues that the price advantage of clean energy, the resilience of ESG investments and pro-climate political considerations will prove stronger than the new administration’s policy attacks.

The pessimists: One billion tonnes more CO2

“The U.S. election is going to be a headwind for climate,” said Rebecca Mikula-Wright, CEO of the Investor Group on Climate Change, at the group’s annual summit in Melbourne, Australia, on November 7. Some other attendees agreed with the downbeat assessment.

“Donald Trump likes emissions,” said Greg Sharenow, managing director and portfolio manager at U.S-based asset manager PIMCO. “His positions are going to be distinctly supportive of additional emissions.”

If Trump makes good on all his climate and energy promises, it could delay the energy transition in the United States by 10 years or more, according to energy consulting firm Wood Mackenzie.

“A Trump administration means radical changes for tariffs on imports, climate policy and international affairs,” writes Simon Flowers, Wood Mackenzie’s chair and chief analyst. He says that Trump’s election along with probable Republican control of Congress makes it more likely there will be a delayed climate transition. “The U.S. will backtrack on net-zero.”

Trump will follow through on his promise to withdraw from the Paris Agreement on climate change, Flowers says in a post-election blog. The result will be felt as early as this week when the U.S. voice “will carry much less weight” at the United Nations COP29 climate summit.

In a report in May, Wood Mackenzie predicted that Trump policy changes would result in reducing low-carbon investments by US$1 trillion, resulting in one billion additional tonnes of carbon dioxide emissions by 2050. The Trump changes would hit the industry with a double whammy by removing tax credits and subsidies under the Inflation Reduction Act while raising costs through a general tariff on steel and equipment.

Trump is also likely to allow more permits for liquefied natural gas projects, new regulations favouring fossil fuels over renewables (blue rather than green hydrogen, for example) and rollbacks on methane caps and power-plant and vehicle-emission standards.

Natural gas demand will be 6% higher by 2030, the stock of electric vehicles will be 50% lower, and shutdowns of coal-fired power plants will be delayed under these changes, Wood Mackenzie says.

The optimists: Data centre demand, political pressure may dampen Trump effect

Some fund managers, asset owners and clean energy executives are taking a somewhat more positive view, saying that Trump’s policy actions will be blunted by political considerations and the sheer market demand for renewables.

“Policy is not the only driver of the energy transition, and the U.S. is not the only market for companies across the space,” writes Alex Monk, portfolio manager of global resource equities at Schroders. “While the shifting U.S. policy landscape is undoubtedly unhelpful, it should not distract from the strength of other forces encouraging investment in the space.”

The recent World Energy Outlook report from the International Energy Agency forecasts that renewable power capacity will rise from 4,250 gigawatts today to nearly 10,000 gigawatts in 2030, which together with nuclear power will generate more than half of the world’s electricity and create peak demand for fossil fuels by 2030. The report states that power demand is soaring for industrial consumption, electric mobility, cooling, and data centres and artificial intelligence.

Renewable power is well positioned to meet this demand because it has a huge cost advantage, says Connor Teskey, CEO of Brookfield Renewable Partners, one of the world’s largest clean energy companies.

Even if Trump cancels investment tax credits under the Inflation Reduction Act, Teskey says that power producers like Brookfield will be able to offset those credits with rate increases to utilities or corporate customers. “The key point there is because onshore wind and solar are so much cheaper than the alternatives, there is room to do that and still be the cheapest form of bulk electricity production,” he said in an investor call on November 8.

Political pressure from Republican members of the House will also likely reduce Trump’s ability to cut all tax credits and subsidies under the Bipartisan Infrastructure Law and the Inflation Reduction Act. Eighteen House Republicans have signed a letter asking for the tax credits to continue to protect wind, solar and battery projects already underway in their districts.

“President Trump will face a bipartisan wall of opposition if he attempts to rip away clean energy incentives now,” says Dan Lashof, director of the World Resources Institute.

Sustainable investment will be under attack. Can it survive?

Biden-administration regulations encouraging ESG investment and engagement are also in Trump’s crosshairs.

A Bloomberg Intelligence report issued after the election suggests that Trump will seek to limit the ability of shareholders to file proposals to companies on ESG matters. Recent more lenient rules from the Securities and Exchange Commission (SEC) have increased the number of ESG proposals by 47% since 2021.

It’s expected that Republican members of the House will reintroduce legislation allowing corporations to exclude ESG shareholder proposals from a vote at their annual meetings.

Before the election, Bryan McGannon, managing director and head of policy for the US Sustainable Investment Forum (US SIF), said that he is quite concerned about this potential legislation, because it would be more difficult to contest than regulation and would require Democratic majorities to repeal. “Shareholder rights is the thing [Republicans] will go after, and they have been trying to for ages,” he said.

The Bloomberg Intelligence report also says that Trump will revoke a Biden-administration rule permitting pension fund trustees to explicitly consider ESG issues in their investment decisions. A recent SEC rule requiring public companies to disclose their Scope 1 (facility) and 2 (energy) emissions will also be on the chopping block, the report says. “The bottom line is the Trump administration is anxious to undermine these ESG-related initiatives,” Bloomberg Intelligence analyst Rob Du Boff says.

However, the real impact of these two rollbacks may not be as bad as many fear.

A Trump regulation banning ESG consideration would most certainly be tested in the courts, McGannon said, and he believes it would not be upheld given the financial industry practice of using ESG for pecuniary issues of risk and return.

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And on carbon dioxide reporting, corporations are facing a growing trend worldwide to disclose CO2 emissions and risks, including in California, where CO2 reporting rules went into effect last year. U.S. companies operating in Europe will be subject to similar rules under the Corporate Sustainability Reporting Directive. McGannon said that large segments of corporate America will be subject to climate reporting regardless of what happens at the SEC.

Memo to ESG investors: Get a lawyer on speed dial

In a note to clients the day after the election, investment manager Jefferies Financial Group said there could be federal litigation based on the untested claim that financial institutions and climate activists have colluded to exert ESG pressure on businesses. “We’d encourage all ESG fund managers to have a lawyer on the team, or on speed dial,” the note said. “General counsels are in the ear of CEOs, frightened about legal retaliation to ESG initiatives.”

These attacks will have a chilling effect on ESG managers, said Jeff Gitterman, CEO of Gitterman Wealth Management, in an interview with Institutional Investor. “You are going to see ESG managers backing off more on how they market and publicly speak about what they are doing,” he said, adding that they will continue to incorporate ESG into investment decision-making, even if they don’t talk about it publicly.

US SIF CEO Maria Lettini is taking a guarded approach to the new administration and Congress. “Sustainable investing identifies unmanaged risks and unlocks investment opportunities in order to safeguard and increase long-term portfolio value,” she said in a post-election statement. “Investors require transparency through clear reporting requirements, the ability to engage the companies they own on financially material issues, and certainty that policymakers will support robust climate action. That remains true regardless of the political landscape. We commit to working with the next administration and other newly elected officials across the United States to advance a more just and sustainable American economy.”

The sustainable investment community looks to be taking a slow, cautious approach in dealing with the new administration. But it will also need to stand ready with lawyers and lobbyists when the policy battles begin.

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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