Donald Trump's swearing-in as President of the United States has sent shockwaves through global trade, the clean tech industry and decarbonization efforts.
- In Canada, the repercussions were quickly felt. Upon taking office as Prime Minister, the newly-appointed leader of the Liberal Party of Canada, immediately scrapped the carbon tax for individuals1 and replaced the former Minister of Environment and Climate Change with a fresh face.2
- Meanwhile in Quebec, the Minister of the Environment announced that to avoid harming the province's economy, his government's Plan for a Green Economy—including its policies on electrification and fighting climate change—could be revised to account for the new US President's decisions.3
With Trump2.0 policies aggressively promoting large-scale fossil fuel extraction to counter China's clean tech dominance, Canadian politicians and industry leaders are starting to backtrack on decarbonization targets, justifying the move as a way to safeguard our industrial competitiveness and energy self-sufficiency.
Does this development cast doubt on the future of climate action? Could it undermine the federal and Quebec governments' climate goals?
Withdrawal from the Paris Agreement
On the first day of his second term, President Trump announced that the US would withdraw from the Paris Agreement on climate action, loudly pledging to "drill, baby, drill." Echoing arguments used when his first administration withdrew from the agreement for several months in 2017, he said that it does not reflect American values and that the US should not support countries that don't merit its financial assistance.4
Clearly illustrating the grip climate skeptics have on his administration, this move was followed by climate change information being buried deep within US government websites—or simply removed.5 In addition, US delegates were muzzled and barred from attending certain meetings of the Intergovernmental Panel on Climate Change ("IPCC"),6 and NASA abolished its Office of the Chief Scientist, putting a world-renowned climatologist out of work.7
The SEC backs away from climate disclosures
In April2024, the Securities and Exchange Commission ("SEC") suspended its new climate disclosure rules pending a ruling from the United States Court of Appeals for the Eighth Circuit. The pause came in response to legal challenges filed by a number of energy sector stakeholders, who argued that the rules were an overreach of the SEC's mandate and amounted to environmental regulation.
On February11, 2025, without consulting his fellow commissioners, the acting SEC chair unilaterally directed staff to request that the Court of Appeals delay scheduling arguments, stating that the SEC's brief did not reflect its current views. He went on to argue that the Court should be informed of recent changes in the SEC's composition and a new presidential memorandum that directs all agencies to postpone sending rules to the Office of the Federal Register until they have been reviewed and approved by a department or agency head designated by President Trump.
Then on March27, 2025, the SEC voted to end its defence of its climate disclosure rules for public companies. Following the vote, "SEC staff sent a letter to the court stating that the Commission withdraws its defence of the rules and that Commission counsel are no longer authorized to advance the arguments in the brief the Commission had filed."8
This effectively dashed any hopes of the American government implementing climate disclosure rules.
Shift in the regulatory landscape for activist shareholders
On February11, the SEC issued new Compliance and Disclosure Interpretations ("CD&I") regarding the interpretation of the rules governing beneficial ownership reporting for issuers listed on a US exchange.9 They included an expanded scope of activities that can be considered to influence the control of an issuer. Activist shareholders whose activities can be considered to have the effect of influencing the control of the issuer will now be required to file a Schedule13D beneficial ownership report. This comes with a significantly heavier disclosure burden than the Schedule13G report typically filed by shareholders who are not considered to influence the issuer's control. Under US securities legislation, anyone who has direct or indirect influence over an issuer's securities and holds more than five percent of the voting rights for the issuer's outstanding voting shares must file a beneficial ownership report with the SEC.
Under the new guidance, the intent behind a shareholder's engagement with an issuer's management and the context in which it occurs are relevant in determining whether the shareholder is holding the securities with the goal of "influencing" the issuer's control.
Generally, a shareholder who discusses with management its views on a particular topic and how its views may inform its voting decisions, without more, would not be disqualified from the simplified Schedule13G reporting. A shareholder who goes beyond such a discussion, however, and exerts pressure on management to implement specific measures or changes to a policy may be "influencing" control over the issuer.
For example, going forward, a shareholder who recommends that the issuer undertake specific actions on an environmental policy and, as a means of pressuring the issuer to adopt the recommendation, explicitly or implicitly conditions its support of one or more of the issuer's director nominees on the issuer's adoption of its recommendation could be considered to be influencing the issuer's control and required to use the much more rigorous Schedule13D report.
Activist shareholders using Schedule13G who engage with issuers need to carefully consider this new interpretation. This will help them assess whether tactics previously viewed as standard practice might now disqualify them from the simplified Schedule13G reporting.
The SEC's underlying aim in issuing these new CD&Is is to rein in certain activist shareholders who are pushing for corporate sustainability policies and climate ambitions.
Impact of these shifts in Canada and globally
The US withdrawal from the Paris Agreement, its step away from climate disclosure rules and the new limits on shareholder activism could have major repercussions for our economy's transition towards net-zero. It might also influence the pace and extent to which our federal and provincial governments adopt public policies to support the shift to a low carbon economy.
Adjusting Canada's Paris Agreement commitments
Last month, to meet its Paris Agreement commitments, the Government of Canada submitted its nationally determined contribution for 2035. However, this was calculated based on the existence of the now-abolished carbon tax for individuals.
Will Canada have to scale back its level of climate ambition under article4, paragraph11 of the Paris Agreement?10
- In its 2035 nationally determined contribution, Canada committed to reduce emissions by 45–50% below 2005levels by 2035.11
- The first Global Stocktake of the Paris Agreement was published in December2023 at the Conference of the Parties (COP28) in Dubai, United Arab Emirates. It showed that the measures taken by the parties to the United Nations Framework Convention on Climate Change were insufficient to meet the agreed goal of keeping global warming well below 2.0o C. It also highlighted the gap between the ambitious climate goals and the actual measures taken by developed nations before 2020. According to the IPCC, these nations, including Canada, needed to cut their emissions by 25–40% from 1990levels by 2020.12 To date, only two countries—Suriname and Bhutan—have reached Net Zero. Seven others, including Norway, Austria and Sweden, have committed to do so by 2050.13
Furthermore, any reassessment of Canada's nationally determined contribution will have to include a review of the targets the Minister of Environment and Climate Change must set under the Canadian Net-Zero Emissions Accountability Act.
Is the SEC's shift a perfect excuse for Canadian Securities Administrators?
On January1, the two first Canadian Sustainability Disclosure Standards, CSDS1, General Requirements for Disclosure of Sustainability-related Financial Information, and CSDS2, Climate-related Disclosures, came into effect for voluntary adoption. Drafted in record time by the Canadian Sustainability Standards Board ("CSSB") and finalized in December2024, these Canadian standards closely mirror IFRSS1 and IFRSS2, adopted by the International Sustainability Standards Board in June2023. The Canadian Securities Administrators ("CSA"), an umbrella organization of Canada's provincial and territorial securities regulators, whose objective is to improve, coordinate and harmonize regulation of the Canadian capital markets, has supported the CSSB's work since the latter's establishment in June2022. Indeed, the CSA is now developing a revised climate-related disclosure rule, which will incorporate the CSSB standards.
The CSA released a first draft of this rule in October2021 as Proposed National Instrument 51-107,Disclosure of Climate-related Matters("51-107").14 However, it noted that certain adjustments could be made to 51-107 to incorporate and improve upon the CSSB standards for Canada's capital markets. In a December2024 press release,15 the CSA said it "will continue to work towards a balanced approach that supports the assessment of material climate-related risks, responds to requests for consistent, comparable and decision-useful climate-related disclosures, and contributes to efficient capital markets, including considering the needs and capabilities of issuers of different sizes."
In the same press release, the CSA added that it will continue to monitor international developments related to climate-related disclosure. Given the interconnectedness of our markets, it will "be carefully considering developments in the United States."
Given the recent changes south of the border, will Regulation51‑107 ever see the light of day? If it does, how watered down will its disclosure requirements be in comparison to the CSSB standards?
A glimmer of hope
With Canadians heading to the polls in late April2025, several initiatives announced in recent fiscal updates could return to the government's agenda, depending on which party wins.
These include a requirement for large federally incorporated private companies to file non-financial climate-related disclosures. Additionally, private companies may be mandated to adopt a Canadian taxonomy of activities the financial sector could classify as "green" and "transition" to help align private sector capital with the net-zero principle and Canada's Paris Agreement targets, while also accelerating the flow of funds into sustainable initiatives.
Moreover, with the potential closure of American markets to specific Canadian products due to the Trump administration's trade war, Canadian manufacturers are likely to look to expand into new markets like Europe.16 With the recent implementation of the European Union's Carbon Border Adjustment Mechanism for certain goods whose production is at most significant risk of carbon leakage, such as iron and steel, aluminum and fertilizers, it will be crucial for these businesses to ensure that their products have a carbon intensity comparable to that of similar European products. Otherwise, they may be subject to import tariffs in Europe.
Added value
Companies that gather and analyze sustainability information unlock value in a variety of ways. For example, disclosure requirements:
- help assess external factors and can help direct capital towards initiatives that reduce greenhouse gas emissions, ultimately resulting in a more competitive business in the medium to long term;
- boost a company's understanding of key strategic risks, particularly the physical risks tied to climate change; and
- help to inspire and motivate employees, which in turn strengthens relationships with external stakeholders.
Claiming that sustainability and emissions transparency reports create a competitive disadvantage might soothe populist and revisionist sentiments, but it is not a winning business strategy for future success. We need to move past the false dilemma that pits ambitious sustainability goals and regulations—especially those related to climate and biodiversity—against maintaining competitiveness. The two are not mutually exclusive.
To navigate a rapidly changing regulatory landscape, you need legal expertise.Whether you're a business looking to align your strategies with new market realities or an investor concerned about the implications of American and Canadian reforms, our specialized lawyers are ready to guide you. Contact us today to explore emerging risks and opportunities and ensure that your operations remain compliant and sustainable.
Footnotes
1. https://gazette.gc.ca/rp-pr/p2/2025/2025-03-15-x2/html/sor-dors107-eng.html
2. https://www.pm.gc.ca/en/cabinet/honourable-terry-duguid
3. https://www.ledroit.com/actualites/politique/2025/01/21/arrivee-de-trump-quebec-pourrait-ajuster-son-plan-climat-7GRRU5XUWRERNEV4WKX6CFIJHQ/
4. https://www.whitehouse.gov/presidential-actions/2025/01/putting-america-first-in-international-environmental-agreements/
5. https://climate.law.columbia.edu/content/mentions-climate-change-removed-federal-agencies-websites
6. https://www.scientificamerican.com/article/trump-orders-u-s-scientists-to-skip-key-ipcc-climate-report-meeting/
7. https://www.france24.com/en/live-news/20250312-nasa-fires-chief-scientist-more-trump-cuts-to-come
8. https://www.sec.gov/newsroom/press-releases/2025-58?utm_medium=email&utm_source=govdelivery
9. https://www.sec.gov/rules-regulations/staff-guidance/compliance-disclosure-interpretations/exchange-act-sections-13d-13g-regulation-13d-g-beneficial-ownership-reporting#103.12
10. https://unfccc.int/sites/default/files/english_paris_agreement.pdf
11. https://www.canada.ca/en/services/environment/weather/climatechange/climate-plan/2035-emissions-reduction-target.html
12. https://www.canada.ca/en/services/environment/weather/climatechange/climate-plan/2035-emissions-reduction-target.html(see Section 1 paragraph 17)
13. https://rosagalvez.ca/media/zlnpkimm/galvez-c12-countries-with-nz-commitments-legislation-en.pdf
14. https://lautorite.qc.ca/en/professionals/regulations-and-obligations/securities/5-ongoing-requirements-for-issuers-and-insiders-51-101-a-58-201/51-107-disclosure-of-climate-related-matters
15. https://www.securities-administrators.ca/news/csa-issues-market-update-on-climate-related-disclosure-project/
16. https://taxation-customs.ec.europa.eu/carbon-border-adjustment-mechanism_en
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