Act first, ask later? The hidden risk building in North American markets

# “Act first and ask permission later” is perhaps the watchword of US business. In today’s market, that instinct may be quietly driving risk higher for managers of US and Canadian assets.

Geopolitical uncertainty aside, a challenging economic backdrop has resulted in governments across North America sending a familiar signal: loosen the rules and boost economic activity.

When controversies hit North American companies today, they’re far more likely to stem from governance failures than from environmental accidents or operational breakdowns. RepRisk data shows that governance-related issues account for just over a quarter of all recorded incidents in North America – around eight percentage points more than in the EU. Even when regulation pulls back, scrutiny doesn’t. Weak controls, vague disclosures, or poorly governed sustainability strategies attract attention in an environment with active regulators, litigation pathways, and a vigilant civil society.

# North America risk profile

Fig 1: A quarter of risk incidents in North America are governance related

# Low incident counts, high exposure 

At first glance, environmental risk itself can look relatively muted in North America. Environmental risk incidents make up a smaller share of issues (13%) here than in any other global region. But zoom in on biodiversity risk, and a very different picture emerges. 

Biodiversity loss and ecosystem collapse are now widely recognized as one of the most severe long-term threats to global growth. In the US alone, an estimated USD 2.1 trillion in annual economic activity depends directly on nature. RepRisk data shows that the United States accounts for roughly one in every ten reported biodiversity-related incidents worldwide – the largest share of any country. 

This isn’t because US companies are uniquely careless. It’s because of scale and scrutiny. The intensity of US industrial activity across mining, agriculture, and fossil fuel extraction increases biodiversity risk exposure. At the same time, strong enforcement mechanisms, transparency requirements, a culture of litigation, and environmental activism mean issues are more likely to be detected, documented, and challenged. 

# When sustainability claims become liabilities  

As biodiversity becomes a mainstream business concern, companies face growing pressure from investors, partners, and customers to demonstrate environmental stewardship. This dynamic can tempt companies to resort to overstated, vague, or misleading claims – a pathway to greenwashing. Even when not intentionally deceptive, misaligned claims and actions expose companies to class actions, regulator inquiries, and reputational damage – all with material implications. 

Recent trends show a widening gap between Canada and the United States, even as both markets ultimately arrive at similar risk outcomes. In the US, greenwashing incidents have increased over the past year. In Canada, they’ve declined slightly after a temporary spike. The divergence likely reflects different regulatory approaches rather than different levels of underlying risk.  

# Greenwashing risk: USA and Canada

Fig 2: Greenwashing risk is converging despite differing regulatory regimes

Canada has moved toward a clearer anti-greenwashing framework. Amendments to the Competition Act in 2024 expanded prohibitions on misleading environmental representations, and subsequent guidance from the Competition Bureau sent a strong signal about enforcement expectations. Despite a proposed amendment in Bill C-15 removing the “internationally recognized methodology” standard for substantiating environmental claims, the direction of travel remains toward stronger corporate accountability. The US regulatory landscape is more fragmented. In the absence of a single federal disclosure regime for environmental, social, and governance issues, enforcement is spread across the Federal Trade Commission, state-level authorities, and an active private litigation environment that frequently involves class actions. This patchwork broadens the range of potential exposures and raises the stakes for even relatively minor inconsistencies. In effect, deregulation at the federal level doesn’t eliminate risk – it redistributes it. 

# No place to hide for banks and asset managers

No sector feels this shift more acutely than banking and asset management. Across North America, financial services lead in greenwashing exposure. In 2025, the number of companies flagged for greenwashing-related issues increased by 19%, reflecting intense scrutiny of products marketed as sustainable – from “green” bonds, to biodiversity-linked instruments, and thematic investment funds.

Beyond finance, the pattern of sector exposure differs between Canada and the United States. In Canada, Mining and Oil & Gas companies are most frequently associated with greenwashing allegations, reflecting the centrality of extractive industries to the national economy and the sensitivity of claims related to land use and natural resources. In the United States, where consumer-facing sustainability messaging comes under intense scrutiny, Retail and Food & Beverage companies feature more prominently.

# Greenwashing risk: top 10 sectors by exposure, USA vs Canada

Fig 3: Patterns of exposure to greenwashing risk reflect sectors' local economic importance

Whether pushed by regulators, courts, investors, or pure materiality, North American firms are arriving at the same conclusion: risk management matters more than ever. 

In Canada, stronger accountability remains likely, even if certain provisions are softened. In the United States, regulatory volatility may continue, but risk will persist through state-level action, litigation, trade-based obligations and, for firms with global operations, international standards. 

The drivers may differ, but the end effect is the same. In a tough economic environment, robust risk management goes beyond protecting against loss, it’s increasingly a source of strategic and competitive advantage. 

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