After years as a decarbonization and climate finance expert watching the progress of the financial sector in meeting its climate commitments – more often how they stalled or backslid – it’s clear the sector’s voluntary net-zero pledges have limits. So does the ability of financial regulators to manage climate risk.

Recent publications from two leading academic institutions, the Columbia Center on Sustainable Investment (CCSI) and the London School of Economics (LSE) Global School of Sustainability, capture this well.

Both argue that without broader government economic policy aligning incentives with mitigating climate risk, the financial sector will never overcome short-term profit motives and won’t redirect capital from fossil fuels toward climate solutions at the scale or speed necessary.

This doesn’t mean the sector should abandon the work. It means the federal government should take action to encourage and enable our massive financial institutions – the engines of our economy – to meaningfully shift their capital by aligning public finance and industrial policy.

Two uncomfortable climate truths Ottawa must think carefully about subsidies for oil and gas emission reductions The banking meltdown is an omen for an even bigger risk: climate chaos

Two uncomfortable climate truths

Ottawa must think carefully about subsidies for oil and gas emission reductions

The banking meltdown is an omen for an even bigger risk: climate chaos

A May LSE paper summarizing feedback from more than 70 global asset managers and owners representing US$40–50 trillion in assets found that these institutions increasingly see themselves miscast by the general market-led narrative as the key drivers of decarbonization and the energy transition. They believe government policy is the real lever.

If these institutional investors are to profit from mitigating the climate crisis rather than worsening it, they argue that they require regulation and policy that evens the financial playing field.

The paper concludes that institutional investors’ ability to advocate for government policy changes is the biggest lever they have to drive real-world........

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