US Investors: Climate Change Won’t Pause for Politics—Neither Should You

In the first days of the new U.S. administration, the reality of climate change hit home—hard.

Fires in Los Angeles scorched over 40,000 acres, while a deep freeze crippled Florida and Texas. Meanwhile, we all watched Washington respond with a bonfire of climate regulations, most notably the U.S. withdrawal from the Paris Climate Agreement.

But the truth remains: the thermometer ignores politics. While there are debates about the best approach to climate action, whether through immediate emission reductions or a phased transition that includes adaptation, the consequences of climate change are real. Political headwinds may be strong, but the fundamentals of climate finance are irreversible. Investors can and should ditch partisan excuses and act decisively. As risks and opportunities grow, new technologies like AI are reshaping how we analyze, predict, and act—leaving no excuse for inaction.

The Headwinds are Real – Be Ready to Adapt

The new administration has taken a wrecking ball to federal climate policies. Executive orders have frozen offshore wind development, pumped new life into dying fossil fuel industries, and scuttled vehicle electrification targets. In short, regulatory headwinds have arrived.

Alas, the political backlash against climate initiatives has led some investors to exit high-profile climate alliances. In the last two months, JPMorgan Chase, Morgan Stanley, and Citigroup have withdrawn from the Net Zero Banking Alliance (NZBA), while Vanguard has pulled out of the Net Zero Asset Managers initiative (NZAM). The good thing is that many of the financial institutions that exited these initiatives have maintained their commitments to net zero.

This suggests that while collaboration may be weakening, many firms still recognize the long-term financial imperative of integrating climate risks and opportunities. Additionally, these alliances were too rigid in design and did not allow sufficient flexibility to operate in a dynamic economic and political environment. A potential silver lining is that this period of turbulence may force the sector to evolve, becoming more robust and adaptable to changing conditions.

There is no doubt that these policy reversals and exits from net zero initiatives will negatively impact how we take forward climate finance.

Firstly, the removal of incentives for clean technologies is likely going to reduce confidence levels in climate finance and lead to a decline in long-term green project funding. This dampening effect may be especially pronounced in renewable energy and infrastructure projects that require stable policy support to attract capital. Renewable energy options that are further from reaching large-scale commercial viability (such as sustainable aviation fuels), will struggle to get appropriate funding.

Finally, weaker shareholder rights and the weakening of collaborative engagement platforms—such as those provided by initiatives like Climate Action 100+ and the Net Zero Asset Managers initiative—will hinder efforts to influence corporate climate strategies. This will reduce opportunities for shared learning, cross-sector collaboration, and climate action, making it more difficult to align companies with long-term climate goals.

However, it is important to recognize that not all proponents of increased domestic fossil fuel production are climate skeptics. Some argue that an immediate expansion of domestic energy sources could provide the financial and economic stability needed to support a smoother transition to a more sustainable future.

Their perspective is that short-term reliance on traditional energy can help fund the necessary investments in adaptation and new technologies. While this remains a highly debated topic, what remains clear is that climate change consequences —whether man-made or not— are already affecting businesses and economies. Even if there might not be consensus on the role of immediate emission reduction in addressing climate risks, there should be no debate on the need for businesses and investors to adapt to climate change.

So how can investors respond? Sticking their head in the sand is not an option. Waiting for favorable policies is a recipe for portfolio disaster. Instead, investors can cut through the noise and act strategically. They should rely less on headline commitments and focus on taking aggressive climate action, even if it has to be done with discretion.

Ignore Politics – Focus on the Risks and Opportunities

The U.S. administration may be rolling back climate policies, but physical climate risks are accelerating. Fires, floods, and hurricanes are driving billions in financial losses. The LA fires alone will cost insurers $30 billion.¹ Over the last 45 years, climate-related disasters have cost the U.S. more than $2.9 trillion.² Critics argue that the costs of emission reduction policies could outweigh the immediate economic damage caused by climate events. However, scientific consensus indicates that failure to address both mitigation and adaptation will only increase financial losses in the long term.

Moreover, transitional risks are not going away. While federal policy has shifted, many states—including California, and New York —continue to pursue ambitious climate targets. In addition, the U.S. Climate Alliance, representing over half the national economy, is committed to cutting emissions by at least 50% by 2030.³ Meanwhile, at least 3,000 U.S. companies that conduct business globally are expected to have to comply with climate reporting requirements under international frameworks like the EU’s Corporate Sustainability Reporting Directive (CSRD).⁴

The issuance of green and climate-linked bonds in North America is projected to remain steady at around $124 billion.⁶ Electric vehicle sales jumped 21% last year.⁷ Even Republican-led states are seeing record growth in clean energy infrastructure. In 2023, Texas surpassed California in solar energy production.⁸ Why? Because renewables are cheaper, faster to deploy, and more profitable.

Figure 1. U.S. Clean Investments (2018-2023)

U.S. investors allocate an average of 20%-30% of their portfolio to foreign assets and their strongest opportunities aren’t just in the U.S.—they’re worldwide.⁹ Even if domestic industrial policies favour traditional energy solutions, global markets are accelerating investments in clean and sustainable technologies. Global climate investment needs in emerging markets, excluding China, are estimated to be worth over $1 trillion annually, calling for investments in renewable energy deployment, green infrastructure, and carbon mitigation solutions.¹⁰

Adaptation is another critical area where private capital will be needed. U.S. states like California and New York are committing billions to adaptation projects, from upgrading water systems to fortifying coastal defenses, investments needed to have basic infrastructure for communities. As climate impacts intensify, the need for resilient infrastructure, advanced materials, and innovative climate solutions will expand, presenting major investment opportunities beyond public funding.

For example, according to the Global Commission on Adaptation, investing $1.8 trillion globally in adaptation measures such as resilient infrastructure and agricultural innovation by 2030 could generate $7.1 trillion in total net benefits.¹¹ Additionally, private-sector investment in flood protection and resilient energy grids has shown returns exceeding 4:1 in high-risk regions.¹²

So, investors should not let political distractions in Washington derail their focus on long-term climate risk management and investment returns. The focus should be on the fundamentals, on fiduciary duty—building resilience into portfolios, engaging strategically, and managing climate risks and opportunities. This is how investors will thrive in a climate-impacted world, not in a fantasy where climate change does not exist.

Dig Deep – Harness AI to Power Data-Driven Climate Finance

Forget the myth that decarbonization guarantees a “win-win.” It doesn’t. Investors need to treat it as an investment thesis, not a PR exercise. With the administration hitting the brakes on climate regulation, it’s time to double down on fact-based, data-driven strategies. Investors who do the proper due diligence, data digging, and forward-looking analysis will reap its advantages.

Projected emissions and adaptation measures should also be a key consideration, both to accelerate decarbonization efforts and to enhance companies’ climate preparedness. Given that climate data in the U.S. will remain scarce—especially with the SEC’s climate disclosure ruling unlikely to take effect anytime soon—investors must rely on advanced, high-quality data estimates rather than using “poor data” as an excuse for inaction. Transparency is also crucial, particularly for Scope 3 emissions, where a lack of clarity can erode trust unless investors understand where the data comes from.

Finally, leveraging robust datasets like the EU Taxonomy can provide a science-based foundation for climate analysis, helping investors assess companies’ trajectories with greater confidence.

Now, the exciting part is that having the right data is crucial—but AI takes climate finance to another level.

The U.S. administration has recently eased regulatory barriers on AI development, revising key policies to stimulate AI infrastructure and innovation. While this shift transfers a greater responsibility for managing AI’s societal risks to the private sector, it also will drive higher investment and developments in emerging technologies by providing a more flexible framework for both domestic and global ventures.

Whether the new administration likes it or not, this deregulation will spark technology innovation that accelerates climate solutions. AI’s potential to revolutionize climate finance is immensely improving resource efficiency, emissions monitoring, and supply chain resilience. Capturing these innovations in portfolios will provide value add. For instance, in agriculture, AI is optimizing productivity by reducing water and fertilizer use, which can significantly lower costs and enhance yields—a critical advantage as climate risks continue to strain global food supply chains.

At Clarity AI, we’ve observed investors evolving from a transactional mindset—working with data providers as suppliers—to embracing tech providers as strategic partners who enhance human capabilities. This shift is accelerating their ability to manage climate-related risks and opportunities more effectively.

However, leadership remains the biggest barrier to scaling AI. A 2025 McKinsey report revealed that many executives fail to drive adoption fast enough.¹³ To remain competitive, investors have the opportunity to take charge, steering their organizations to embrace AI-driven innovation and thus revolutionize how to identify and act on climate change risks and opportunities. Just as Barnes & Noble faltered by failing to adapt to the internet era, investors who do not quickly and truly integrate AI into their investment process will find their climate-impacted future returns at risk.

Ignore Climate at Your Peril— Act to Stay Ahead

Climate change is not a distant issue. It’s here, and it’s accelerating. It’s also unforgiving. If investors fail to act they will face the consequences: stranded assets, higher costs, missed investment opportunities, and diminished portfolio value. But those investors that take bold, strategic action—by focusing on climate fundamentals and embracing technology— will stand to gain significant opportunities.

What does all this mean for investors?

Ignore the Politics, Follow the Fundamentals: Don’t let short-term regulatory shifts derail long-term investment strategies.

Reassess Climate Risks & Opportunities in Your Portfolio: Identify exposure to physical and transition risks, and seek mitigation and adaptation opportunities, ensuring that your investments account for long-term climate impact.

Use AI and Data to Stay Ahead: Apply advanced and dynamic analytics to assess climate risks and investment opportunities with greater precision—before markets react.

The thermometer doesn’t care about political affiliations. It’s measuring reality. Trump, or no Trump, investors that ignore it will get burned.