Will Mark Carney the PM be as climate friendly as Mark Carney the banker?

Canadian climate organisations and some politicians are hoping that, as the newly-elected prime minister, Mark Carney’s past recognition of the risks of climate change on the economy will result in a climate-aligned financial policy. But whether his government can navigate tensions with the US and allow Carney to be as climate-friendly as when he was a central banker remains to be seen.

Carney, leader of the Liberal party, was elected as prime minister in April and is well known in the financial world for running both the Bank of Canada and Bank of England. He also helped found the Glasgow Financial Alliance for Net Zero and was the UN special envoy for climate action and finance.

His main focus as prime minister will likely be an ongoing trade dispute with the US and threats from President Donald Trump to make Canada the 51st state.

But with Canada being one of the world’s highest emitters per capita, even higher than the US, climate experts say Carney needs to focus his efforts on curbing emissions at home. And while during his campaign Carney spoke about wanting Canada to become an energy powerhouse combining conventional energy with clean and affordable energy, what that means for financial regulation is unclear.

“Carney the central banker said banks should [consider climate change risk] because it’s a good thing to do, but they’re not required to do it because governments haven’t made those rules … will Mark Carney the prime minister say you have to do this?” said Keith Stewart, senior energy strategist at Greenpeace Canada.

Carney the banker vs prime minister

Over the years Carney has talked about how climate change creates significant risk for the economy. And like all countries, Canada faces a lot of climate change risk. A Canadian insurance association has warned of growing risks from more extreme weather events, with severe weather causing CA$1.7bn in insured losses in 2024 alone.

“Mark Carney has demonstrated in his role as a central banker an ability to help economies out of a crisis but as prime minister he needs to keep Canada from falling into one, and that means preparing our economy and financial sector for climate change,” said Julie Segal, head of the climate finance policy programme at Environmental Defence Canada.

Carney has led several voluntary organisations but with many companies leaving those groups it’s clear that regulation is needed, she said.

“Canada is currently lagging behind other countries when it comes to setting our financial sector with climate action. That should be a priority to fix,” she said.

In January, Canadian banks followed their US counterparts by pulling out of the Net Zero Banking Alliance, a group founded in part by Carney. Recently, the Royal Bank of Canada, the country’s largest bank, said it was abandoning its sustainable finance targets due to recent changes in Canada’s competition act.

Meanwhile the Canadian Securities Administrators said it would pause its work on developing a new mandatory climate-related disclosure rule in order to support the Canadian market in adapting to Trump’s trade policies and make it more “competitive, efficient, and resilient”.

Although Carney has the knowledge and background to know the financial risk that climate change poses to Canada, there are other pressures he is facing, said senator Rosa Galvez.

“Mr Carney has all the knowledge in his hands, and he has promised to provide more with carrots and less with sticks. He wants to incentivise,” she said.

There are several ways that could be done. One way is to provide reconciliation with Indigenous People and give them the means to step in with land restoration, monitoring, service and renewables, Galvez said.

Galvez introduced a bill a few years ago that would require banks to steer investments away from emissions-intensive sectors like oil and gas. The bill, the climate-aligned finance act, has moved slowly and is unlikely to become law anytime soon. But Galvez keeps pushing for a better future for Canada.

“Canada’s economic future depends on its ability to compete in global markets with low-carbon, high-quality products. Weakening our standards or aligning with jurisdictions that are rolling back climate rules is not a winning strategy. It undermines our sovereignty, our values and our economic resilience,” said Galvez.

How Carney can lead on financial climate regulation

If Carney does want to commit to leading Canada towards a sustainable future, one of the key ways he can do that is to align the country with international best practices when it comes to financial regulation, said Segal.

“It’s a normative target to reduce emissions, as Canada is looking to build trade relationships with the EU and it’s in our country’s best interest to advance strong policies.”

While climate might be part of Carney’s overall policy agenda, Stuart said it doesn’t go far enough. Issues like finishing the green taxonomy and requiring climate risk disclosures are well and good, “but we actually want regulation” and for the financial sector to have to align its investments with climate goals.

One proposal is to change the capital requirements for fossil fuel investments and to require banks to have higher capital reserves for loans made to oil companies. This would make fossil fuel lending more expensive than lending to renewable projects, said Stuart.

It’s a challenge, as Canada is a major producer and extractor of oil and gas. With 90% of its fossil fuels going to the US, it is also starting to rethink its relationship with its neighbours, given Trump’s unreliability.

“We’re hoping that Carney the prime minister will take a firmer hand than Carney the banker because it’s a different role,” said Stuart. “When you actually get to make legislation that’s different from when you’re working within the rules set out by legislation made by someone else.”

Written by