Q1 2026 – In times of Global Energy Crisis

Much of the headlines this quarter, including that of our newsletter, were dedicated to the global energy crisis that has emerged due to the US-Iran war. In this issue, we shall take you through the effects of the war and how the world economies are continuing in their pursuit of climate action. And guess what? We have many ‘firsts’ to report - the first US state to implement climate disclosure laws, the first standards for permanent carbon removal and the first loan linked to climate adaptation and social KPIs.

Like always, we have included the source links at relevant places for you to dive deeper into any of the topics that interest you! Don’t forget to drop us your feedback in the comments section or at info@esgityadvisors.com.

Here we go -

EFFECTS OF THE US-IRAN WAR:

1. Rising Fuel Costs:

   
   

   

   
   

   Even for those who don’t generally track oil prices, this is the most visible effect of the war across the globe. Nearly a fifth of the world’s oil supply transits through the Strait of Hormuz, and its blockage has sent the oil prices skyrocketing to as much as US$ 120/barrel in mid-March (up from around US$ 70). In response, the International Energy Agency has asked its 32 members to discharge 400 million barrels from emergency oil reserves, its largest-ever release.

   
   

   The effects of this oil crunch were felt differently in different countries. In India, more than 330 million households rely on canisters of liquefied petroleum gas (LPG) for cooking and 90% of the country’s supply comes from the Middle East. Over the past two weeks, delivery times have stretched to 25 days from 5 in some parts of the country.

   
   

   The Philippines, which imports 98% of its oil from the gulf, became the first country to declare an energy emergency after local diesel and petrol prices more than doubled in the country since the war broke out on 28^th February.

   
   

2. Preference to Alternate Energy Sources & Shift in Consumer Demand:

   
   

   

   
   

   Corporate leaders are emphasising that energy dependence is now a core business risk, with companies increasingly turning to renewables, long-term power purchase agreements, and on-site generation to secure stable, lower-cost energy; as supply chain disruptions intensify, many firms view this moment as a structural shift, accelerating investments in clean energy not just for sustainability goals but for resilience and long-term competitiveness.

   
   

   Consumers are responding to one of the largest disruptions in global oil markets by embracing low-carbon technologies that promise to lower gas and power bills. For many, the conflicts in Iran and Ukraine have driven home a harsh reality: the only path to energy security is going electric.

   
   

   As an example, the delays, rising prices and fears of gas shortages sparked a run on induction stoves in India. Online sellers on Amazon saw daily sales increase by 30 times, while those on Flipkart rose fourfold, according to media reports.

   
   

   China’s leading battery makers gained over US$ 70 billion in market value as the Iran conflict accelerated investor bets on clean energy and energy security, with shares of CATL, BYD, and Sungrow outperforming major oil companies despite rising oil prices. The surge reflects growing concerns over fossil fuel dependency and geopolitical risks, with countries like China and other Asian economies expected to increase investment in renewables and battery storage.

COUNTRY CLIMATE TARGETS

Even as the war and its effects prevail, signatories to the Paris-Agreement published their national targets and kept up the momentum in climate action.

3. European Union (EU):

   
   

   

   
   

   EU countries approve the new climate target to slash greenhouse gas emissions by 90% by 2040 (compared to 1990), pressing ahead with the bloc's ambitious climate agenda despite political resistance. The agreement allows up to 5% of reductions to come from international carbon credits from 2036, requiring at least 85% domestic cuts.

   
   

   The EU remains on track to achieve its 2030 target of cutting net greenhouse gas emissions by 55%, having already reduced emissions 37% (compared 1990 levels). However, the bloc has postponed implementation of its new emissions trading system (ETS 2) covering buildings and road transport by one year to 01 January, 2028 to give its member states more preparation time.

4. China:

   

   China set a new goal to cut carbon emissions per unit of gross domestic product by 17% by the end of the decade (2030). This matches its previous objective to deliver an 18% reduction in the five years through 2025 — which annual reports suggest was narrowly missed.

   
   

   The target was widely criticised to be a conservative one, frustrating hopes for a tighter policy from the world’s top polluter. However, the Government made its stance clear that they “will actively yet prudently work toward peaking carbon emissions and achieving carbon neutrality,” and will balance ““economic and social development, the green and low-carbon transition, and national energy security”.

5. India:

   
   

   

   
   

   Building on its previous NDC targets, India’s latest NDC goals commit the following: 

   a. Target 47% reduction in emissions intensity of GDP by 2035 compared to 2005 levels. This is in extension to the existing target of achieving a 45% reduction by 2030.

   b. Achieve 60% of cumulative installed electricity capacity from non-fossil sources by 2035, succeeding an existing target of 50% by 2030.

   c. Create 3.5-4 billion tonnes of CO₂ equivalent carbon sink through forest and tree cover by 2035 from 2005 level, while the existing target requires 2.5-3 billion tonnes of CO₂ equivalent by 2030.

   
   

   The country is on track to meet these targets on (or even before) the timelines.

REGULATORY UPDATES

6. UK, China release climate disclosure standards to align with IFRS Foundation’s ISSB standards

   
   

   

   
   

   The UK government released finalized UK Sustainability Reporting Standards (UK SRS), aligned with the IFRS Foundation’s ISSB standards to standardize corporate sustainability and climate disclosures. The voluntary standards include UK SRS S1 and S2, mirroring IFRS S1 and S2, with greater flexibility on the timelines. The standards remove fixed timelines for Scope 3 emissions reporting and delay transition from climate-first reporting to full stack sustainability reporting. The standards though voluntary now are likely to become mandatory for top listed companies based on consultations with the regulators.

   
   

   China too released a new climate disclosure standard aligned with the IFRS ISSB framework, initially voluntary but designed to become mandatory over time. The standard mirrors IFRS S2’s core structure but with few differences. Unlike the IFRS standards which consider only financial materiality, the Chinese standards focus on double materiality, taking into consideration the impact of business and its value chain on the environment and other stakeholders.

7. EU sets world’s first voluntary standard for permanent carbon removals:

   
   

   

   Image Source: Climeworks

   The European Commission adopted the first methodologies under the Carbon Removals and Carbon Farming (CRCF) Regulation, to establish the world’s first voluntary standard for certifying permanent carbon removals.

   
   

   The methodologies set out clear, legally grounded and voluntary rules for permanent carbon removals, defining what counts as a tonne of removal, how permanence must be ensured, and how the key risks such as leakages and liabilities are addressed.

   
   

   The regulations, once effective, will allow projects to apply for official EU certification, transitioning the sector from voluntary commitments to certified, auditable, and high-quality removal units. The certification is also expected to drive investments in carbon removal technologies such as Direct Air Carbon Capture and Storage (DACCS), BioCCS, and biochar.

8. California passes the implementation rules for climate disclosures despite legal battles

   
   

   

   Image Source: Ropes & Gray LLP

   After three years of changing guidance, public workshops, and legal challenges (which still hang over the rules), the California Air Resources Board (CARB) unanimously passed the implementing rule for SB 253 (emissions reporting) and SB 261 (climate risk reporting) for 2026. 

   
   

   In what was a very lengthy hearing, CARB focused on confirming three main aspects of the rule for 2026:

·   The reporting fee to recover the costs of administering the rules.

·   Applicability and exemptions.

·   Establishing the first-year reporting deadline for SB 253 (10^th August - emissions reporting).

INDIA UPDATES

9. India launches it Carbon Credit Portal

   
   

   

   
   

   The government of India announced the launch of the Indian Carbon Market Portal, a new central platform for the implementation and administration of the Carbon Credit Trading Scheme (CCTS), handling registration, monitoring, reporting, and verification (MRV) of carbon emissions across all participating industries.

   
   

   The portal shall facilitate trading of carbon certificates for 490 large industrial units across 7 energy-intensive sectors covered under the compliance market and also enabling other companies, not necessarily covered within the compliance market, to opt for voluntary offset mechanisms. The portal will begin operations within the next four months.

   
   

   Notably, the launch of the carbon market will enable Indian companies to demonstrate compliance with external carbon pricing schemes such as the EU’s Carbon Border Adjustment Mechanism (CBAM).

 CABM unaffected by EU-India FTA:

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    The Carbon Border Adjustment Mechanism, which began imposing fees on EU imports of steel, cement and other high-carbon goods this year, was sharply criticised by India as hampering trade of Indian goods to the EU (particularly steel). However, despite this matter being brought on the table during Free Trade Agreement (FTA) negotiations, the EU has refused to offer any form of rebate or exemption to Indian exporters. The EU has, however, committed that it would not grant other countries more favourable treatment than India, essentially declining any sort of discrimination between countries when it comes to the implementation of CBAM.

    
    

    That said, the FTA incorporates the principle of ‘Common But Differentiated Responsibilities (CBDR)’, acknowledging the differing economic development levels of both parties. This principle ensures that while both sides cooperate on sustainability and climate goals, India, as a developing nation, is granted greater flexibility, longer transition periods for tariff reductions, and technical assistance compared to the EU on other matters. 

11. Reliance enters into the largest-ever agreement on sale of green ammonia:

    
    

    

    Image Source: Hydrogen Tech World

    Reliance Industries signed a US$ 3 billion, 15-year green ammonia supply agreement with Samsung C&T,  an affiliate ‌of South Korea's Samsung Group. The deal, which is one of the largest long-term ​green ammonia offtake agreements globally, comes as countries including Japan and South Korea seek low-carbon fuels such as ​hydrogen and ammonia to cut emissions from industry ​and power generation. The partnership, starting around 2029, supports Reliance’s plans to invest US$ 10 billion in ⁠renewable energy, ​hydrogen and battery storage ​as it seeks to expand beyond its traditional oil-to-chemicals business.

INVESTOR UPDATES

12. Energy security emerges as a key area of investment:

    
    

    

    
    

    With the Ukraine-Russia war and now the US-Iran war exposing the global vulnerability to energy dependence, investors, especially in the EU, view this is a major gap ripe for disruption.

    
    

    Just last month, two major funds have closed in Europe to invest in energy security. Paris-based infrastructure investor RGreen Invest closed a € 900 million fund targeting European energy sovereignty, while French VC firm Partech also held a final close for its first impact fund this month on € 300 million. The fund is looking to invest in multiple sustainability themes, including energy security, through technologies such as battery optimization and the circular economy.

13. NZAM relaunches after one-year pause

    
    

    

    Image Source: GreenUnivers

    The Net Zero Asset Managers (NZAM) initiative relaunched with more than 250 asset managers after a one-year pause triggered by political and legal scrutiny in the US. The updated commitment removes explicit references to achieving net-zero portfolios by 2050 and instead emphasizes that signatories independently set their own climate targets and strategies while addressing climate-related financial risks. Major firms such as UBS, Amundi, and BNP Paribas Asset Management remain involved, while participation from US firms declined significantly, with only 12 rejoining compared to 44 before the pause. Several large US managers, including BlackRock, Vanguard, and JPMorgan Asset Management, are absent from the list.

14. SEBI mandates independent certification for issue of Green Debt Securities:

    
    

    

    
    

    The Securities and Exchange Board of India (SEBI) issued a circular mandating independent third-party review/ certification to ascertain whether the issuance of green debt securities is in accordance with the definition specified under the regulation. This is a deviation from the earlier requirement where such an evaluation was permitted on a ‘comply or explain’ basis. The move brings the green debt framework in line with norms already prescribed for other ESG debt securities, including social bonds, sustainability bonds and sustainability-linked bonds.

    SEBI has also issued conditions on the qualifications of the reviewer/ certifier:

    a. The reviewer shall be independent of the issuer, its directors, senior management and key managerial personnel;

    b. The reviewer shall be remunerated in a way that prevents any conflicts of interest; and

    c. The reviewer shall have expertise in assessing ESG debt securities.

15. First-ever loan tied to adaptation and social supply chain goals

    
    

    

    
    

    Standard Chartered recently closed a US$ 435 million sustainability-linked loan with COFCO International, with terms tied to performance on climate adaptation and supply chain goals. The facility links financing terms to KPIs, including certified sustainable sourcing and stronger labour safeguards in key agricultural supply chains, marking one of the first loans to integrate adaptation and social resilience outcomes.

    
    

    The closing of the loan followed a recent announcement from Standard Chartered that it surpassed its goal to reach US$ 1 billion in annual income from sustainable finance in 2025.

    
    

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