In its first months, the Trump Administration pulled the U.S. out of the Paris Agreement, froze funding for green projects, fired staff from agencies doing climate work and targeted agencies’ climate-related programs.

Meanwhile, China issued its first sovereign green bonds to raise $ 1.14 billion to finance projects such as clean transportation, sustainable water and wastewater management, marine ecosystem protection and restoration, pollution prevention and control, and resource utilization and recycling.

Back in North America, six American and five Canadian banks left the Net Zero Banking Alliance in January. National Bank was part of the group.

Five weeks after leaving the Alliance, Quebec National Bank announced its intention “to reach $20 billion in renewable energy lending commitments by 2030, as part of its net-zero emission push.”

What should Canadian climate project promoters and activists make of these mixed signals?

Is climate finance disappearing, or is it morphing?

Will Canada’s choice of Prime Minister make a difference in climate financing?

Climate finance falling out of fashion

Finance Montreal CEO Jacques Deforge said climate finance is not as popular as it was a few years ago.

Hugo Cordeau, PhD student in environmental economics, policy, and decarbonization at the University of Toronto, agreed, adding he blames inflexible rhetoric for declining climate investments.

“Dogmatism is blocking both the right and the left,” he said. The former is sensitive to the oil lobby and the weight of the fossil fuel economy in the economy, he said, then added that the latter imposes so much regulation in the name of fairness that nothing moves forward.

Despite that, climate continues to influence the economy, said Deforges.

“We’ve lost $25 billion in economic growth due to climate change since 2015,” wrote environmental lobby Ecojustice in an open letter to Mark Carney signed by 56 organizations and individuals.

“Sustainable finance and climate finance need to figure out how to connect with pressing issues like tariffs and the cost of living,” said Deforges.

A recent Abacus poll showed that Canadians’ climate concerns dropped 14 points.

“Citizens are more concerned about their immediate needs, which influences the flow of money,” said Maya Saryyeva, interim executive director of the Institute for Sustainable Finance.

For now, governments and foundations are prioritizing projects meeting multiple targets at once, she said. 

“This trend could benefit the whole climate ecosystem. We must sharpen our language, discuss the outcomes, and have clear targets. It is attractive to private investors, too,” said Saryyeva.

Adjusting the storytelling

 “Climate finance won’t disappear, but people will be quieter about it than a year ago. They’re doing it using different words,” said Wayne Miranda, the director of social finance and impact investing at Definity Insurance Foundation.

It will be challenging for the next Canadian government to support climate initiatives, said Sucheta Rajagopal, president of the Catherine Donnelly Foundation investment committee.

The Foundation’s mission includes housing, civic engagement for social change and the environment.

Rajagopal is also an investment advisor and portfolio manager for Research Capital Corporation. Her conversations with various stakeholders indicate that no matter which party gets elected, there won’t be any big green funding announcements.

“We might see new climate funding positioned as infrastructure, a theme popular across the political spectrum,” she said.

Using words like cleantech, climate, and energy transition is a barrier for financing in provinces like Alberta, said an investor who asked not to be named, to stay neutral amidst the political context. Instead, using words like environmental, soil, water, and air is more likely to get funding.

They said that because of polarization and short-term concerns, framing climate-related projects as concrete, tangible needs has more success.

Therefore, Miranda said, a project does not have to be about preventing biodiversity loss or air pollution. 

“It could be (framed as) preventing homes and communities from damage,” he suggested.

“Words like community are not contentious on either side of the political spectrum,” he added, noting that investments that build community resilience and create jobs in the next economy fit better with the conservative narrative if needed.

“Adaptation projects strengthen economic resilience. Preventing businesses from shutting down because of extreme events, keeping people at work, and ensuring goods are delivered is a narrative any political party and investor will rally around,” said Stéphan Morency, vice-president of investing at Fondaction.

The investors’ posture

“Projects were always getting funded based on their financial merits,” said Julie Segal, Environmental Defence’s senior program manager of climate finance. Few investors were explicitly prioritizing climate over traditional financial metrics.

She added that those doing so are impact investors like foundations and will likely continue, regardless of political vagaries.

Investors concerned about climate change will stay the course, said Rajagopal.

“They know that the public disengagement happening in the States is not necessarily reflective of what is happening globally,” she said.

However, many financial institutions and asset managers have pretended to be involved in climate finance over the last decade, said François Boutin-Dufresne, co-founder and managing partner at Nordis Capital, a Quebec asset management firm centred on thematic sustainable investment.

“In these institutions, investment employees tell the climate department: ‘As long as what you do doesn’t affect how I allocate my capital, we’ll get along fine.’ In the new political context, these institutions have stopped pretending,” said Boutin-Dufresne.

As well, Canadian pension funds and finance generally don’t want to hear about impact finance, said Morency.

“I tell them: ‘Fine, we’re going to set up a fund to increase Canadian resilience in the current context. What themes do you see in that?’ They answer climate, energy efficiency, Indigenous finance, and affordable housing. It’s called an impact fund! But we know better than telling them, ” he added with a smile.

“The hostile context calls for the additionality argument rather than ESG,” said Boutin-Dufresne. 

“Let’s show investors how their investment makes a concrete, positive difference in the real world.”

Nordis is launching a fund to invest in the Quebec-California carbon market auctions.

Companies in these two jurisdictions that do not meet their sector GES target buy carbon credits from companies below their target. The state of Washington is contemplating joining in.

Last year, the government of Quebec collected $1.55 billion from these auctions, which financed 93 per cent of its climate initiatives.

 “A $300 million fund investing in carbon auctions would be the equivalent of removing 1,000 cars from Quebec’s roads. The carbon price is planned to increase yearly; the fund’s performance will, too,” added Boutin-Dufresne.

The government role

“The government must play a more assertive role to accelerate climate finance,” said Maxime Perreault, a finance decarbonization expert and coordinator of “Sortons la Caisse du carbone.” This civic initiative contributed to Quebec’s biggest pension plan, divesting from the fossil industry.  

Policies shape what is appealing and worth pursuing for investors, attracting capital to some areas and making it less encouraging in others.

Procurement policies for infrastructure construction are a good example.

“Take green concrete and steel; markets are almost non-existent because of the additional cost for these materials. If the government includes them in its public infrastructure, prioritizing suppliers producing lower GHG emissions, it will also facilitate investment by institutions and private companies,” said Perreault.

Another market-building example is the deployment of electric vehicle charging stations, Cordeau said.

“The Quebec government has developed a vision, policies, and programs,” said Cordeau.

It mandated Quebec Hydro to install charging stations in remote regions that were not profitable enough for the private sector. It created a broad territorial network supporting the conversion to electric cars and transportation electrification.

Governments can also regulate and tax. 

“Forbidding natural gas for new buildings and implementing eco-fiscal policy influences the flow of climate finance. It makes transition initiatives lucrative for investors,” said Morency.

However, adaptation finance remains the government’s responsibility, said Boutin-Dufresne. 

“There is no business case yet for relocating Indigenous communities built on permafrost or moving roads too close to a waterway,” he said.

Foundations to the rescue

Rajagopal said foundations know they must play a larger part in raising public awareness about climate and helping communities advocate.

However, for foundations, climate is either a mission or investment issue, said Miranda.

“The first group feels a sense of purpose to ensure the work happens. For the others, I highly suggest they look at the climate risk in the portfolio to keep fulfilling their mission,” he added.

More off-the-record conversations revealed a few knots preventing more climate financing from foundations’ endowments.

“Many foundations have traditional asset managers who don’t know how to include environmental and social concerns into their financial analysis and don’t want to learn how to,” said one.

“A little generational shift will help to stop the practice of investing 95 per cent of philanthropic money in things that oppose the five per cent of the money granted.”

Still, a group of Canadian foundations wrote a public letter urging the financial institution to “remain firmly committed to their net zero goals in accordance with global, science-aligned standards and best practices and translate these goals into robust action plans.” 

Climate projects that are “in” and “out”

Interviewees agree: decarbonization and energy efficiency are the bull’s eye.

“The fundamentals are still there. The Earth can’t absorb more carbon because Trump is in power. Environmentalists say that carbon injection harms humanity. Financiers say that carbon injection harms the economy. The result is the same,” said Morency.

So far, SOFIAC, a decarbonization and energy efficiency investor and developer, has deployed nearly $600 million to climate projects in Canada and France. “And there is potential to raise $1 billion in Canada alone for a second fund,” he added.

Technology is also critical, especially infrastructure. “We need a smart grid,” said Rajagopal.

If a smart grid uses renewables, the grid needs to know when the wind is blowing, when the sun is shining, and when to move to baseload and energy storage. She added that we will see more climate projects at the intersection of technology and infrastructure.

“What we don’t want is a Morgan Stanley-style climate technology investment dynamic saying: we’re heading towards a three-degree world, let’s invest in the air conditioning industry,” said Perreault.

“Cooling is a big contributor to global warming,” wrote Mark Radka, Chief of the Energy and Climate branch of the United Nations Environment Program.

Much of the existing cooling equipment uses hydrofluorocarbon refrigerants, which are potent greenhouse gases and use a lot of energy, making them a double burden on climate change, Radka added.

Interviewees agree that nature-based solutions (NBS) are the hardest to sell to investors. These include actions to protect, sustainably manage and restore natural and modified ecosystems.

Although these initiatives address critical challenges like climate change, disaster risk reduction, food and water security, biodiversity loss and human health, “The proof-of-concept is not sufficient yet to link the natural service provided to the solution and raise private investments,” said Morency.

However, some investors might be attracted to nature-based solutions for personal reasons.

“Family offices sensitive to climate change might be interested in projects redeveloping banks to stop erosion,” said Boutin-Dufresne. “It could be because their family is rooted in the region. Or, for larger-scale projects, they see it as an economic resilience initiative.”

He added that nature-based solutions are meaningful projects. Promoters should target investors who are interested in seeing the initiative deployed and looking for alternative investment products.

Will the result of the election influence climate finance?

Interviewees did not agree on this one.

Some bet on Mark Carney’s past.

“Carney is the climate finance champion. His decision to remove carbon pricing for consumers was good because it was too polarizing. The political right is using the gas tax to invalidate the carbon market. Just like it uses unisex toilets to invalidate EDI,”  said Morency.

“I think the result of the federal election will significantly influence climate finance,” said Miranda. “Carney’s understanding of how finance and investment exist globally. I don’t think he will forget that overnight or over 30 days.

“Still, he has to demonstrate that he will likely remain committed to climate. How he plays the political game of carbon pricing.” 

Others see a page turning.

“If elected, Carney will occupy a role unlike any he has held. He will be Prime Minister of Canada in a context where the environment is not at the top of Canadians’ list of concerns,” said Julien Beaulieu, lawyer, economist and researcher for le Centre québécois du droit de l’environnement.

“The government has a leadership role; it can move the climate issue forward or set it back. However, we sense a conservative trend in this issue, regardless of the party,” said Perreault.

Public policies do make a difference.

“It matters where the government will invest its resources when elected. If we removed Export Development Canada’s preferential financing for fossil fuels, private players would be much more hesitant to invest in them,” added Perreault.

“The next government, whoever it is, needs to do a lot more to ensure that the full benefits of clean energy are being demonstrated in our economy,” said Segal.

She added that putting an industrial price on pollution is incredibly important to reduce our emissions, make our economy competitive, and be a good partner for the EU.

“And removing the $18G subsidies to the oil and gas sector because they have a huge effect on the profitability of those companies and their attractiveness as investments,” she said.

The complex case of the green taxonomy

A green taxonomy is a dictionary that defines green projects and transition projects. The government of Canada has been promising one for years. It could happen in 2025.

Interviewees mentioned that the U.S. political context, the ambient conservative shift, and the Canadian election could influence Canada’s taxonomy.

Beaulieu said the challenge is the politicization of transition investments.

“Natural gas is still in the running. A credible taxonomy must be developed independently. Otherwise, anyone who uses this taxonomy will be accused of greenwashing,” he added.

“If we’re going to remain below 2 °c, we need a taxonomy that has integrity against greenwashing and impact washing. One that will enable us to stay at 1.5 °c and what will not,” said Miranda.

“What’s the good of having a pipeline if a flood drowns it or a fire burns it down?”

Over the last two years, climate experts have written to the federal government saying it is better to have no taxonomy than one that gives a green light to greenwashing for oil and gas projects, added Segal.

Advice for climate project promoters… whatever the April 28 result is

“Everyone is frozen for now. In a few months, we’ll have a clearer picture and a better idea of ​​which door to knock on. The worst thing would be to give up now. We have to give the players time to get back into their positions, let the dust settle,” said Perreault.

Miranda sees an opportunity to identify who is committed to climate change and who is window-washing.

“Use your partners as allies to open doors with other investors, he said. “Ask them to email to amplify your story, saying why they invested in your project, why they think your idea is important right now and why you are the right team,” he added.

Morency distinguished two types of climate projects.

“The first are based on a logic of maintaining the capitalist regime; they are technological solutions linked to energy. The leaders of these projects must adjust their language and talk about competitiveness and resilience, but the opportunity is there,” he said.

The other group is working on the socio-ecological transition. 

“These projects bring democratic models to experience the economy differently. For example, they rely on the social economy to increase the community’s resilience. I advise them to do the opposite of the first group: develop alternative models and don’t try to speak the language of economics. Instead, invest in democratic bodies and demand regulations that allow for change in the system,” said Morency.

No matter what, don’t lose hope, stressed Rajagopal. 

“To survive or to keep progressing, there’s the narrative. Maybe caution is needed, or you should be opportunistic about certain storytelling. But do not feel like a sellout because you are reframing your narrative.”

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