Q1 2025 Newsletter: Navigating through tough times
- Disha Veera
- Apr 9
- 7 min read
We are at a point in time where politicians refute climate change, where diversity is considered unjust, and where economic competitiveness takes precedence over long-term survival threats. Sustainability is faced with yet another trial for relevance. While the future will show its relevance anyway, we continue to bring to you our quarterly update on the most important events that happened last quarter. Q1 2025 saw global regulatory changes. Even as few regulations weakened, we saw (and still are seeing) companies issue first-time reports under the CSRD. The move for deregulation has prompted many bodies such as the SBTi and the NZBA to rationalize its standards/rules to better suit the needs of the evolving markets. The newsletter ends with an interesting research report on why climate action makes economic sense – to keep the flame of pragmatism and hope burning. Happy Reading!
GLOBAL UPDATES
Trump Administration’s actions on so-called ‘Green Scam’
Within a month of starting his second term, President Donald Trump signed a range of executive orders and rescissions (reversals of prior executive orders) to undo climate and social efforts. Some of these included:
i. Withdrawing from the Paris Agreement (for the second time)
ii. Halting over US$ 300 billion in funding to green infrastructure projects
iii. Declaring a national emergency to accelerate fossil fuel energy projects
iv. Resuming distribution of fresh permits for export of Liquified Natural Gas (LNG)
v. Eliminating federal tax credit (subsidy) for EV purchases
vi. Suspending new leases and permits for offshore wind
vii. Revoking policies deterring natural resource exploitation in the State of Alaska
viii. Withdrawing the US from the WHO
ix. Ceasing all federal level-DEI activities
x. Rejecting the 17 UN Sustainable Development Goals
In extension to this Republican effect, the US SEC voted to end its defense of the rules requiring disclosure of climate-related risks and greenhouse gas emissions. The landmark disclosure bill, passed in March last year, was halted after many lawsuits were filled challenging the statutory authority of the SEC to adopt the Rule, the need for the Rule, and the evaluation of its costs and benefits.
Los Angeles fires become one of the costliest fires on record!
Image Source: CS Monitor From January 7 to 31, 2025, a series of 14 destructive wildfires affected the Los Angeles (LA) metropolitan area and San Diego County in California, United States. The fires were caused by drought conditions, low humidity, a sudden buildup of dry vegetation, and the hurricane-force of Santa Ana winds. Global warming and burning of fossil fuels is claimed to have led to these conditions at the root-level.
These LA wildfires killed 30+ people, forced more than 200,000 to evacuate, and destroyed more than 18,000 homes and structures. The wildfires burned over 57,000 acres of land in total. The insurance companies have suffered too. The California FAIR plan, the state-sponsored insurer of last resort, reported a US$ 5 billion in loss from the wildfire. State Farm General Insurance Co., California’s largest property insurer, estimates its claims at US$ 7.6 billion, one of its largest.
Image Source: BBC The Brazilian city of Belém in Brazil is set to host COP 30, the annual climate summit this year. However, it has come under the radar after a new four-lane highway was built after cutting through tens of thousands of acres of protected Amazon rainforest, just for the summit.
Government officials touted it as a ‘sustainable highway’ with wildlife crossings for animals to pass over, bike lanes and solar lighting. However, it has been largely criticised by the locals and the environmentalists, as defeating the purpose of the Summit.
Nuclear energy finds rising acceptance
Amazon, Google, and Meta joined the “Large Energy Users Pledge,” committing to triple global nuclear energy capacity by 2050 to support rising electricity demand and clean energy goals. Led by the World Nuclear Association, the pledge aligns with tech giants’ efforts to power AI-driven data centers while maintaining their sustainability commitments.
The three companies recognise the increasing role of nuclear energy as a clean fuel to prepare for the increasing energy demand. Among some of their existing initiatives, Meta received over 50 submissions for its nuclear energy RFPs, Amazon invested over US$ 1 billion in nuclear projects, and Google signed an advanced nuclear deal with Kairos Power for 500 MW of clean energy.
REGULATORY UPDATES
EU’s Omnibus Package and ‘Stop the Clock’ Proposal
In a move to improve the EU’s economic competitiveness, the EU Commission has proposed a ‘Simplification Omnibus Package’ designed to simplify the EU Green deal regulations, primarily, the Corporate Sustainability Reporting Directive (CSRD), Corporate Sustainability Due Diligence Directive (CSDDD), and the Carbon Border Adjustment Mechanism (CBAM).
Besides pushing for delays, the proposal seeks to reduce data points in disclosures, reduce the number of companies covered, limit supply chain disclosures and provide exemption of certain companies (mainly SMEs) from the scope. The EU claims these proposals will save annual administrative costs of around EUR€ 6.3 billion while still meeting the goals of the Green Deal. However, this has garnered its share of criticism for mirroring Donald Trump’s anti-ESG and deregulation push.
In yet another big move, the EU Parliament has approved the ‘Stop The Clock’ proposal to temporarily pause application of CSRD and CSDDD. This pushes the first cycle of reporting/ application to 2028. This delay is aimed to allow the Parliament more time to systematically make amendments to these and other green regulations. However, the companies covered under first wave of CSRD would be required to make disclosures until then, with an estimate of 2000 companies filing the report starting this year itself.
Proposal for amendments to Companies Act, 2013, India
Image Source: Business Standard The Standing Committee on Finance led by the BJP government recently tabled some ESG-based recommendations in the Lok Sabha as part of its ‘Demand for Grants’ for FY 2025-26. This included creation of a dedicated ESG oversight body within the Ministry of Corporate Affairs (MCA) to strengthen monitoring and enforcement of ESG regulations.
It has further recommended amendments to the Companies Act, 2013 to make ESG objectives a fiduciary responsibility for corporate directors, ensuring that boards integrate sustainability into their business strategies. It has also recommended statutory penalties for greenwashing, amid rising concerns over false claims.
SBTi issues Corporate Net Zero Standard 2.0
The Science Based Targets Initiative (SBTi) released the draft Corporate Net Zero Standard 2.0 for public consultation. Some of the key changes proposed include:
Mandatory submission of a transition plan
Differentiated requirements based on size and location
Inclusion of nuclear energy in scope 2 target measures.
Mandatory Scope 3 targets only for Category A (larger) companies
Rationalised reporting on scope 3 emissions
Mandatory limited assurance of GHG inventory for larger companies
Greater recognition to permanent carbon removals to eliminate ongoing emissions that are yet to be abated in a 1.5 °C aligned scenario
INVESTOR UPDATES
Net Zero Banking Alliance (NZBA) contemplates change of rules amid exits
Image Source: Financial Times NZBA, the world’s leading climate coalition for the banking sector is considering changes to its rules, amidst withdrawal of some of the biggest banks and the underwhelming performance of the real economy on climate action. The Glasgow Financial Alliance for Net Zero (GFANZ), the umbrella organisation under which the NZBA operates, too announced its plans to restructure and shift focus to address barriers in mobilizing transition capital.
NZBA saw six of the largest US banks, including Goldman Sachs, Wells Fargo, Citigroup, Bank of America, Morgan Stanley and JPMorgan Chase, exiting the coalition over rising political pressures. While most of the banks have still retained their targets, the need for internal reforms was felt within NZBA. It is expected that the coalition will drop the need to align lending portfolios to a stringent 1.5°C scenario. It is speculated that NZBA may instead consider easing it to align to a below 2°C scenario. The proposed changes are also expected to attract more Indian and Chinese banks which have found the current rules restrictive.
Debt-for-nature swaps in dilemma
Debt-for-nature swaps are arrangements used by countries to refinance a portion of their debt on better terms and allocate savings to environmental projects. The deals typically involve credit enhancement from a multilateral development bank — or development finance institution — to help lower the cost of borrowing and give a country access to an investor base that would normally be out of reach.
The first such swap was arranged by Credit Suisse for Belize in 2021. Since then, Barbados, Ecuador, Gabon, El Salvador and Bahamas have completed similar swaps, with Bank of America Corp., JPMorgan Chase & Co. and Standard Chartered Plc among banks moving into the market. However, these deals are increasingly being associated with low credit rating countries and many credit rating agencies are also treating these swaps as an ‘event of default’. In fact, Colombia, a middle-income country, recently decided to drop a debt-for-nature swap deal amid fears of rating downgrade, despite the swap being initiated to finance environmental transition (seen as a risk management effort) and not to prevent a default.
Standard Chartered issues its first-ever Social Bond
Image Source: Business Standard Standard Chartered recently issued its first-ever social bond, raising EUR€1 billion (US$ 1.1 billion) to support sustainable development in low-income countries across Asia, Africa, and the Middle East. The EUR1 billion 8-year Non-Call 7 year offering will primarily facilitate lending to small and medium sized enterprises (SMEs), ensuring access to finance, helping create jobs and empowering and nurturing women-owned SMEs. Proceeds will also finance access to essential services including healthcare and education, and will facilitate investment into affordable basic infrastructure and food security, in line with the social activities set out in the Bank’s Sustainability Bond Framework. The bond contributes to Standard Chartered’s existing US$ 5.5 billion social asset pool, addressing urgent financial needs in emerging markets.
The social bonds market has seen an uptick after the COVID pandemic with over 800 companies having issued these specialized bonds up till now. While this number is much lower than the number of green bonds issuances, there seems to be continuing interest in this space.
RESEARCH READING OF THE QUARTER
BCG Research Report: Landing the Economic Case for Climate Action with Decision Makers
Key Takeaways:
The world is on track to increase global warming by 3°C by 2100, which according to the research report will reduce cumulative economic output by 15% to 34%.
Alternatively, investing only 1% to 2% of global GDP by 2100 would limit warming to below 2°C and enable the world to adapt to most—but not all—of the consequences.
The net cost of inaction—the cost of climate change less the cost of climate action—is 11% to 27% of cumulative GDP. The average of that range could fund numerous global priorities, including addressing global health challenges or investing in defence.
We would love to hear your thoughts or feedback at info@esgityadvisors.com!
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