When the Bank Calls the Shots: How Paris-Aligned Finance Exploits Newfoundland’s Governance Gap

In Newfoundland, megaprojects don’t live or die on the will of voters alone. Increasingly, their fate is decided in boardrooms thousands of miles away — not in St. John’s or Ottawa, but in London, New York, and Zurich (Ali Chaisson's favorite business trip).

Through alliances like the Glasgow Financial Alliance for Net Zero (GFANZ), global finance has become the enforcement arm of the Paris Agreement¹. It does this quietly, by tying access to loans, insurance, and investment capital directly to compliance with climate targets² ⁷.

In the global policy arena, this is framed as “shifting financial flows” under Article 2.1(c) of the Paris Agreement¹ — a commitment not just to cut emissions, but to actively redirect capital toward climate-aligned activities⁷. The academic literature notes that private finance has been mobilized at unprecedented speed since COP26, with trillions in declared net-zero commitments⁷. These commitments are not symbolic; they are written into lending criteria, underwriting standards, and investment mandates⁷, meaning that capital access now depends on climate compatibility long before legislation catches up⁷.

In theory, that’s a way to accelerate decarbonization⁷. In practice, for a province with Newfoundland’s governance history, it’s a shortcut to bypass local consent⁶ ⁷.

The Local Paradox Meets the Global Ledger

In their 2022 study, The Local Paradox in Grand Policy Schemes⁶, Van Assche, Greenwood, and Gruezmacher laid out a blunt reality: grand strategies can’t succeed without strong, autonomous, legitimate local governance.

Newfoundland doesn’t have that. Our municipal and regional structures are fragmented, under-resourced, and often bypassed entirely in favor of provincial decision-making⁶. The climate finance research makes clear that such governance gaps create asymmetric vulnerability⁷: jurisdictions with weaker institutions cannot negotiate the terms of capital entry⁷, leaving them price-takers rather than price-setters⁷. In practice, this means Newfoundland is less able to scrutinize the risk allocation, contractual conditions, or community benefit agreements tied to Paris-aligned investment⁷. The absence of strong local capacity⁶ doesn’t just speed the deal — it shapes its terms in favor of the financier⁷. We have no “arena” where local knowledge, strategy, and authority come together to vet — let alone stop — a top-down plan before it hits the ground⁶.

That’s the “local paradox” in action⁶: the very capacity needed to negotiate with outside agendas is missing, which makes those agendas easier to impose.

GFANZ: The Paris Agreement’s Unofficial Enforcement Wing

GFANZ isn’t a treaty body. It’s a network of over 550 banks, insurers, and asset managers who agree to Paris-aligned targets — net zero by 2050, interim cuts by 2030 — and then make those targets a condition for doing business¹ ³.

If your project doesn’t meet their climate criteria, the money dries up⁴ ⁷. No parliamentary debate. No municipal vote. Just a line in a lender’s policy manual⁷. According to climate finance scholars, this “private rule-making” is not accidental⁷. It reflects a deliberate strategy where financial actors become de facto regulators⁷, using portfolio alignment and exclusion policies to enforce climate goals⁷. Because these policies operate across borders⁷, they can override local political discretion⁷, effectively embedding global norms into every major capital project without a single domestic law being passed⁷.

This is policy by proxy: governments don’t need to legislate; the banks do the enforcing⁵ ⁷.

Why Newfoundland is an Easy Target

In provinces with strong local governance, Paris-aligned financial pressure still has to pass through layers of democratic oversight⁶. In Newfoundland, it doesn’t.

Municipalities rarely have the technical or legal capacity to develop independent financing strategies⁶.
The province holds most of the cards — and those cards are often played behind closed doors⁶.
When the financing for a project like the Port au Port wind-to-hydrogen proposal is already Paris-compliant¹ ⁷, local opposition is fighting a deal that’s been effectively pre-approved at the global banking level⁷.

In other words, the decision-making sequence has been inverted⁷. Instead of a project being evaluated locally and then seeking financing, the financing framework itself defines what projects are permissible⁷ — and local consultation becomes an afterthought⁷. The academic literature warns that once financial pipelines are structured this way, reversing or altering a project midstream becomes almost impossible without incurring heavy economic or reputational penalties⁷.

When Climate Emergencies Set the Terms

Wildfire bans in Newfoundland show how quickly sweeping rules can be imposed when a threat is framed as urgent. In 2025, provincial authorities enacted province-wide restrictions in the name of fire safety — with little role for municipal councils and no extended consultation. For many communities, the new limits arrived as a directive, not a discussion.

In climate finance, the same logic plays out at a higher level. Hazard events like wildfires become both evidence of climate risk and justification for fast-tracking Paris-aligned projects. The risk is coded into investment models, which then narrow the pool of fundable projects to those that fit a predefined “net-zero” pathway. For Newfoundland, that means a wildfire season can do more than close trails or ban outdoor fires — it can also tilt the financing landscape so that future energy and infrastructure proposals are Paris-compliant before they ever reach the public.

This dynamic feeds the same governance gap that Paris-aligned finance already exploits. Once hazard-driven investment rules are in place, local consent becomes secondary. The climate emergency is treated as settled fact, the financing terms are locked, and communities are left to debate projects that have been pre-approved — not by their councils, but by lenders responding to a global risk ledger.

When the Purse Strings Replace the Ballot Box

GFANZ’s structure allows it to filter which projects move forward and which die in committee — without ever asking the communities affected² ⁷.

For Newfoundland, this is more than an abstract concern. Our history of weak local governance⁶ means we’ve never built the machinery to push back against externally conditioned deals⁶ ⁷. In that vacuum, Paris-aligned finance isn’t just shaping our energy transition; it’s setting the terms of our economic future⁷.

The Feedback Loop No One Talks About

Every time a project advances under these conditions, it reinforces the governance gap⁶:

Locals are excluded from meaningful input⁶.
The province becomes more dependent on external finance⁷.
Outside agendas become the default definition of “development”⁶.

The second-order effect is what finance researchers call “path dependency”⁷: once a jurisdiction adapts its planning and infrastructure to align with investor criteria, future projects tend to follow the same model⁷. Over time, this builds a self-reinforcing ecosystem where global financial standards — not local policy priorities — determine the scope and shape of development⁷.

It’s exactly the cycle Van Assche warned about⁶: without local capacity, top-down schemes don’t just fail — they retrain the system to fail in the same direction, making each new bypass easier than the last⁶.

From Hazard Response to Investment Pipeline

Each declared climate emergency, whether sparked by wildfire, flooding, or extreme storms, doesn’t just trigger a local response — it updates the province’s standing in global risk models. These models, used by Paris-aligned financiers, treat hazard frequency as a signal to direct capital toward “resilient” and “low-carbon” infrastructure.

In theory, that sounds like proactive planning. In practice, it hardwires outside priorities into the province’s development path. If a wildfire season pushes Newfoundland higher on the climate risk index, the next wave of investment proposals will arrive already designed to tick GFANZ’s compliance boxes. By the time they land in local inboxes, the projects aren’t just suggested — they’re financially predestined.

That’s how hazard events, far from being isolated emergencies, become recurring leverage points for locking Newfoundland into a Paris-aligned investment pipeline. Once this pattern takes hold, every crisis is an opportunity — but not necessarily for the communities that live through it.

The Cost of Letting the Bank Govern

If GFANZ were just an advisory body, its influence would be a footnote. But by tying climate policy to the purse strings of the global financial system¹ ⁷, it can achieve what legislation often can’t — rapid, sweeping compliance with Paris goals¹ ⁷.

In regions like Newfoundland, where the governance scaffolding is already fragile⁶, that doesn’t just speed up decarbonization⁷. It accelerates the transfer of decision-making power from communities to creditors⁷.

Once that shift happens, the next Port au Port won’t be decided in the council chambers, the House of Assembly, or even in Ottawa. It’ll be decided in a loan approval meeting half a world away⁷.

When climate risk and capital flows speak louder than ballots, local governance becomes a spectator sport. In Newfoundland, that shift is already underway — whether through Paris-aligned financing frameworks or the quiet repurposing of wildfire emergencies into global investment triggers. The story is the same: decisions that shape our future are being made far from the communities they affect, and each crisis makes it easier for the next one to bypass us entirely.

See Also:

References

[1] United Nations. Paris Agreement, Article 2.1(c). 2015. https://unfccc.int/sites/default/files/english_paris_agreement.pdf

[2] UNFCCC Race to Zero. Criteria and Interpretation Guide. 2022. https://www.climatechampions.net/media/qshidlrl/race-to-zero-criteria-interpretation-guide-eprg.pdf

[3] Glasgow Financial Alliance for Net Zero (GFANZ). About GFANZ. 2021. https://www.gfanzero.com/about/

[4] GFANZ publishes draft guidance on "transition-informed" indexes. October 2024. https://www.responsible-investor.com/gfanz-publishes-draft-guidance-on-transition-informed-indexes/

[5] Net Zero Banking Alliance (NZBA). Commitment Statement. 2021. https://www.unepfi.org/net-zero-banking/signatory-statement/

[6] Van Assche, K., Greenwood, R., & Gruezmacher, M. The Local Paradox in Grand Policy Schemes: Lessons from Newfoundland and Labrador. Scandinavian Journal of Management, 38 (2022), 101212. https://www.sciencedirect.com/science/article/abs/pii/S0956522122000197?via%3Dihub (local download)

[7] Xinli Guo . Optimal Transfer Mechanism for Municipal Soft Budget Constraints in Newfoundland - 2025. https://arxiv.org/abs/2508.02171 (local download)