Climate-reporting firms saw boosted European investment after U.S. tariff shock: ISF research

Canadian companies with strong climate-related disclosures saw portfolio holdings by non-U.S. foreign institutional investors rise by 24.6% compared to non-disclosing firms following the market disruption caused by U.S. President Trump’s sweeping “Liberation Day” tariff announcement last year. Almost all of the difference was accounted for by investors in climate-conscious European jurisdictions.

These intriguing initial findings are presented in a new discussion paper from the Institute for Sustainable Finance (ISF).

With trade and political tensions high and tough USMCA negotiations looming, it is a priority for Canada to reduce its economic dependence on the United States and attract new global capital. ISF researchers examined whether climate reporting could help Canadian firms appeal to investors outside the U.S. To test this, researchers analyzed 206 S&P TSX Composite Index-listed Canadian companies over 10 quarters, from Q4 2023 to Q1 2026 to see how global portfolio flows were affected by the tariff announcement on April 2, 2025, which triggered significant market uncertainty and global capital reallocation.

The study found that Canadian firms that reported on their climate exposures in alignment with the Task Force on Climate-Related Financial Disclosures (TCFD) saw their holdings by non-U.S. foreign institutional investors increase by 24.6% over otherwise comparable firms that didn’t. Nearly all of this shift is accounted for by investors in Europe, where disclosure regulations are in place and investors place a high priority on sustainability.

Approximately 68% of firms studied aligned with TCFD. Because the Canadian market represents a relatively small sample size the results are suggestive rather than conclusive. However, researchers conducted additional robustness tests for alternative hypotheses that supported the validity of the findings.

“With the U.S. trade relationship fraying, it is vital for Canada to attract other global sources of capital,” said ISF Director of Research, Yrjö Koskinen. “There is growing evidence that European investors are highly attuned to climate-related risks, and they’re ready to invest in firms that take those seriously.”

“We are really encouraged by these findings,” said ISF Research Associate Prateek Sood. “The next step in the research would be to expand the study to capture the full global movement of capital to TCFD-aligned firms from Liberation Day. We suspect that companies that are reporting on climate around the world were similarly attractive to investors following that major disruption in the market.”

Many of the world’s largest pools of capital operate in jurisdictions where climate-related disclosure regulations are already in place or rapidly emerging. By contrast, Canada’s sustainability reporting landscape remains fragmented and largely voluntary.

The ISF study findings provide another piece of evidence supporting voluntary reporting by Canadian firms seeking improved access to capital. And they help inform the current debate around costs and benefits of mandatory climate disclosure regulations for Canada.

Read and download the full report, “From U.S. Dependence to Global Capital: The Role of Climate Disclosure.”

ISF’s findings will be presented by ISF Director Maya Saryyeva during the Sustainable Finance Summit, June 5 in Montreal.