TORONTO — Donald Trump’s return to the White House may not be a death knell for sustainable finance, Canadian investors say, despite the U.S. president’s attempts to quash climate and social finance initiatives. 

Trump’s re-election has stoked growing backlash against environmental, social and governance (ESG) investment approaches, and prompted a mass exodus of Canadian and U.S. banks from global climate alliances. Behind the scenes, though, investors say they’re still pressing their portfolio companies to meet their ESG goals, and those focused on climate change in particular, according to a report from consulting firm Millani.

The Montreal-based firm, which surveyed 27 Canadian institutional investors with $4.3 trillion in combined assets under management, found that while most investors are still committed to their ESG strategies, many plan to pursue them more discreetly than they had in the past. 

“[The election is] not going to affect our strategy,” one asset manager said in the survey. “ESG survived one Trump administration and will again, but our communications around it are likely to be quieter this time.” 

The sentiment comes amid intensifying pressure on companies and investors to scrap business practices that aim to address climate change and social issues. U.S. Republican lawmakers are largely driving the anti-ESG agenda, arguing it violates firms’ fiduciary duty and launching lawsuits in some cases. 

Sustainable finance seemed to have reached a crisis point last month when Wall Street finance giants—including BlackRock, the world’s largest asset manager—quit the Glasgow Alliance for Net Zero (GFANZ), a global umbrella organization meant to divert money away from high-emissions assets to low-carbon ones. Canada’s six largest banks followed their lead. 

Jamie Bonham, head of stewardship at Toronto-based asset manager NEI Investments, said firms may be walking back climate and other ESG commitments to protect them from legal threats, but may not actually scrap their goals. 

“Nothing’s changed in terms of the materiality of the issues,” he said, noting that climate change, for example, is still a real risk to many companies’ bottom lines. “As far as I know, the science hasn’t changed, and the globe is moving towards this [net-zero] transition,” he said. “Those are all still the same facts that were there six months ago.” 

Bonham, who leads NEI’s work on influencing portfolio companies, said all the firms they’ve engaged on the topic told them they’re maintaining their climate commitments despite political pressure. Part of the reason, he said, is because investors are still pressuring companies to share information on factors like their carbon footprint and how they plan to lower it. “From the investor side, our attention is still there,” said Bonham. 

While a growing number of investors are pushing back against climate and other ESG practices—as seen in the number of anti-ESG proposals investors have filed in recent years—they tend to be a small minority and garner little support from fellow shareholders. 

Millani president and CEO Milla Craig said regulations outside the U.S. would ensure companies and investors can’t ignore issues like climate change altogether. New European Union rules have started requiring all firms, including foreign ones with revenue and operations in the EU, to follow strict reporting disclosures on their environmental and social impacts so investors can assess their exposure to risks and ultimately curb them. The Canadian Securities Administrators, an umbrella group of the country’s securities regulators, is working on its own climate disclosure rules. 

Many investors Millani surveyed said they may no longer need to be part of initiatives like GFANZ or Climate Action 100+, an investor-led net-zero group, to reach their climate objectives. These groups, said Craig, initially served as useful resources for firms when ESG practices like climate-risk disclosure weren’t yet mainstream. They also helped firms signal their climate ambitions to clients, investors and regulators. Now, she said, firms may opt for ESG and climate strategies that are more tailored to their specific business needs and risks—and less vulnerable to legal and political attacks. 

Investors also argued that some climate-alliance participants may have overstated their green commitments to earn membership. “They initially moved too fast to set the targets and potentially did not have a proper methodology behind their assumptions,” Millani’s report states. Meanwhile, efforts to crack down on greenwashing, like Canada’s Bill C-59, mean companies can no longer make untenable claims about their climate practices, the report explains.  

“Companies are being very cautious and pragmatic,” one respondent to Millani’s survey said. “Being more factual about their climate targets may be seen as a step back, but it is a good thing if it is actually happening.”

Both Craig and Bonham acknowledged that it’s possible firms will end up watering down their climate and other ESG commitments as political winds shift, and without the scrutiny of these global pledges holding them to account. 

Craig said Canada’s upcoming federal election may influence whether and to what extent firms scale back their ESG ambitions. A Conservative government, for instance, is expected to prioritize fossil-fuel expansion over the energy transition. Craig said most Canadian companies will wait for the outcome of the election before changing their own climate strategies. 

For now, Bonham said he’s taking companies at their word when they say they’re sticking to their sustainability targets. But, he said, he’ll be watching their moves closely. “It is going to be really imperative to ensure that action continues.”