Q4 2024, just like most of this year, was filled with climate events and policy changes. While climate targets were marred by successive rise in temperatures, ghastly hurricanes in the US reignited conversations on climate adaptation. Both the EU and the US saw somewhat mellowing regulatory changes – one with delays and the other with change in administration. India too delayed implementation of value chain reporting, but made progress on EPR and Ecomark regulations. Sectors such as nuclear and bio-energy witnessed booming cash inflows, while some large private wealth managers faced backlash. Continue reading!
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Onto the updates now:
GLOBAL UPDATES
Policy Changes
In his first term, Donald Trump gutted federal climate initiatives while attempting to roll back 125 environmental protections critical to safeguarding people and the planet. While many of these attempts were overturned or halted in the courts, a second Trump presidency may be more successful in undermining laws and regulations designed to protect the climate, air, water and vulnerable communities.
Among other policy reforms, the three most important regulations under scrutiny would be America’s participation in the Paris Agreement, implementation of the Inflation Reduction Act (which is central to implementing clean energy) and roll out of US SEC Climate Disclosures bill. The new government’s bias towards fossil fuel companies may limit clean energy subsidies, soften the methane fee and cut-off support for electronic vehicles and allied industry.
The UK in its recent budget confirmed releasing the Carbon Border Adjustment Mechanism (CBAM), which is set to begin from 01st January, 2027. It shall impose a carbon levy on UK-based importers, a sum equivalent to the difference in the carbon price that would have been paid if the goods were locally produced versus the carbon price paid in the source country. Not only does the levy share a name with the EU CBAM, it also covers very similar products such as aluminium, cement, fertilizers, and iron and steel sectors. It will impose a levy on any company importing GBP 50,000 or more CBAM-covered goods over 12 months.
The UK also has declared subsidies worth GBP 22 billion to carbon capture and storage (CCS) projects. While this supports CCS in line with the government’s independent advisor’s recommendations, it has faced criticism from many climate groups. There are concerns that the oil and gas companies that are driving many of these projects could use the technology to lock in fossil fuel dependency and in turn avoid reducing emissions at source.
The European Parliament gave its final approval to delay the EU Deforestation Rules (EUDR) by one year. The law was initially set to take force in December 2024 shall now apply from December 2025 and will require traders placing soy, beef, coffee, palm oil, and other products onto the EU market to provide proof that their supply chain does not contribute to deforestation. The law would also ban EU farmers from exporting products cultivated on deforested or degraded woodlands. While environmentalists condemned the move, companies expressed relief over the additional time to comply with the law.
EU consumption represents around 10% of global deforestation, more than two-thirds of which comes from palm oil and soya production. The EU deforestation regulation aims to fight climate change and biodiversity loss by preventing deforestation related to EU consumption of products from cattle, cocoa, coffee, palm-oil, soya, wood, rubber, charcoal and printed paper.
The EU Council in December adopted the Packaging and Packaging Waste Regulation (PPWR)which among other things includes, the following requirements for packaging:
targets for 2030 and 2040 for a minimum percentage of recycled material (up to 65% for single-use plastic bottles in 2040)
minimize the weight and volume of packaging and avoid unnecessary packaging
to minimise substances of concern, including restricting the placing on the market of packaging containing per- and polyfluoroalkyl substances (PFAS) if they exceed certain thresholds
It also includes restrictions on single-use plastic packaging, much like India’s ‘Single use Plastic Bill’ passed in 2022.
Despite not having a clear set date, The PPWR is anticipated to be implemented during early 2025, which could be dragged to 2026 depending on the new parliament’s approval.
Climate Updates
Hurricane Helene and Milton, hurricanes of categories 4 and 5 respectively, caused a state of emergency to be declared in Florida. The hurricanes were responsible for damage costs of more than US $50 billion, making it one of the costliest one-off disasters in history. Making it even more painful is that most of the damage — 95% or more in Helene’s case — was not insured, putting victims in a deeper financial hole.
Scientists at the World Weather Attribution group stated that the burning of fossil fuels has made storms as severe as Hurricane Helene about 2.5 times more likely than they were in the pre-industrial age. Excess heat around the hurricanes path likely makes it more dangerous and explosive.
In the aftermath, the Insurance Industry took a big hit, with many increasing premiums or stopping sale of policies in certain high-risk areas. Property reinsurance in and around the state also saw a steep decline, with rates running extremely high.
The thresholds of 1.5°C and 2°C above the pre-industrial average global temperature have been temporarily exceeded several times in recent months, however last estimates point at an average 1.2°C increase so far.
The UNEP Emissions Gap Report 2024 looks at how much nations must promise to cut off greenhouse gases and deliver, in the next round of Nationally Determined Contributions (NDCs), due for submission in early 2025 ahead of COP30. Cuts of 42% are needed by 2030 and 57% by 2035 to get on track for 1.5°C.
The 2024 UNEP Emissions Gap Report highlights the stark choices we face: limit global warming to 1.5°C, struggle to adapt to 2°C, or face catastrophic consequences at 2.6°C and beyond. These consequences could include an increase of sea levels up to 56cm which would affect about 10.4 million people, and it has the ability to expose roughly 62 million people to severe drought annually due to the rising temperatures.
Important Events
COP29, the annual UN climate change conference, held in Baku, Azerbaijan concluded with developed countries pledging ‘core’ climate financing of at least US$ 300 billion annually by 2035, and an ‘additional layer’ of up to US$ 1.3 trillion primarily through private financing.
A pivotal milestone was the establishment of a global carbon credits trading system, which had previously faced challenges due to concerns over methodology and carbon removal practices. This decision will pave the way for more trading under a new market overseen by the United Nations.
On the other hand, the 2024 United Nations Biodiversity Conference of the Parties (COP16), which preceded the COP 29, could not reach a consensus on establishing a dedicated biodiversity fund. The proposal involved forming a fund to ensure equitable sharing of benefits from genetic resources (digital sequency information) and recognizing the crucial role of Indigenous and local communities in biodiversity conservation. The conference also deliberated on innovative financing mechanisms to support biodiversity protection.
INDIA UPDATES
The Securities Exchange Board of India (SEBI) introduced two major updates for the Business Responsibility and Sustainability Report (BRSR) as follows:
Ease of Doing Business Reforms for BRSR which included deferring value chain reporting to FY 25-26 and limiting the coverage of value chain partners to 2% of revenue or purchases by value.
Industry Standards on Reporting of BRSR Core, provided guidance on specific disclosures and elaborated on spend-based approach to estimate GHG emissions.
Recent months saw the introduction of various ESG guidelines for products and its allied packaging.
Ecomark Rules: In September 2024, we saw the introduction of the Ecomark Rules, that laid down a voluntary certification system to provide a specific mark to products that have been assessed for their environmental impact and meet specific criteria.
Prevention of Greenwashing Guidelines: Launched in October 2024 provided guidance on environmental claims made by companies
Extended Producer Responsibility Rules (EPR) for Packaging: Introduced in December 2024, these draft rules extended recycling targets to packaging waste from paper, glass and metal.
The use of sustainability-linked bonds (SLBs) is gaining momentum with realty developers as SLBs allow access to cheaper capital, with investors accepting lower returns for strong ESG Performance.
Listed real estate firm Mindspace Business Parks REIT became the first REIT to announce a fundraise of INR 650 crore through sustainability-linked bonds from the International Finance Corporation (IFC). ADIA-backed Lake Shore also raised over INR 1200 crores from HSBC Commercial Banking through sustainability-linked loans for its retail property Viviana Mall, in Thane.
India has a large livestock population and is an agricultural powerhouse, which gives it a lot of potential for biogas production. The country has the capacity to produce over 62 million metric tonnes of bio-CNG, which could meet more than 9% of India's current energy demand.
Riding on this opportunity, Reliance Industries Ltd (RIL) has decided to invest INR 65,000 crore in Andhra Pradesh to set up 500 compressed biogas plants (CBG) over the next five years. The plants, each involving an investment of 130 crore, will be set up on wasteland in the state and are expected to generate employment for 250,000 people.
The Andhra Government too has introduced incentives for biofuel projects under the states recently notified integrated clean energy policy. These include capital subsidy of 20% on fixed capital investment on CBG plants for 5 years as well as full reimbursement of state goods and services tax and electric duty for 5 years.
India remained in the top 10 on a list of 63 countries assessed for efforts to combat climate change, despite dropping two spots compared to a year ago, thanks to its low per-capita emissions and rapid deployment of renewables.
The Climate Change Performance Index (CCPI 2025) tracks the progress of the world's largest emitters in terms of emissions, renewables, and climate policy. India ranks 10th in this year's CCPI, remaining among the highest performers. The report noted that the growth-oriented approach to climate action is expected to continue or intensify, driven by rising energy demand from industry and the growing population.
Delhi misses yet another target on air quality and road dust management
Delhi continues to grapple with worsening air quality, particularly during its annual pollution season by reaching an all-time AQI high of 500, highlighting its failure to meet key targets in road dust control, vehicular emissions, and waste management. While stubble burning remains a focus, other significant factors contributing to pollution have been neglected.
A national government review conducted on September 23, ahead of the pollution season, flagged Delhi's inadequate road dust control measures. The review revealed that of the 8,002 km of roads requiring daily mechanised sweeping, only 2,795 km were being covered.
Other elements of road dust management, including greening and paving roadsides, also lagged. By July 31, 199 km of central verges remained un-green, and 278 km of roadsides were unpaved. These delays hinder efforts to curb road dust, which contributes 40% of PM10 and 20% of PM2.5 levels in the region.
INVESTOR UPDATES
BII looks to back Emerging Climate Models in India
With an existing Indian portfolio of US$ 2.3 bn, the UK government's development finance institution, British International Investment (BII), plans to invest about US$ 1 billion in Indian climate-related projects between 2022-2026.
It’s focus has shifted to emerging concepts such as energy storage, biofuels, energy as a service and cooling solutions, as against renewable energy generation which is now more commoditised and developed. With longer time horizons and a reasonable ability to take risks, the sovereign fund is also open to investing in electricity transmission sector and InvITs (Infrastructure Investment Trusts).
Early-stage climate-tech venture capital firm Green Frontier Capital has launched its first SEBI-approved Category 2 AIF, the Green Frontier Capital India Climate Opportunities Fund, with a target corpus of INR 1,500 crore.
It is expected to support emerging solutions in biological intelligence and other fields that reshape sustainability, food systems, and life sciences. Another major focus of the fund would be decarbonisation and targeting technologies that reduce emission across critical industries.
The U.S. Securities and Exchange Commission has fined WisdomTree Asset Management firm $4 million as a civic penalty for greenwashing and failing to comply with an investment strategy it advertised as incorporating ESG factors.
The prospectuses issued for the three ESG-marketed funds from March 2020 to November 2022 stated the funds would not invest in companies involved in certain “controversial” products and activities, such as fossil fuels and tobacco. However, the SEC found that the funds invested in companies in those sectors, including natural gas extraction, coal mining, and transportation companies, as well as those that participated in the retail distribution of tobacco products.
The regulator has become increasingly conscious of funds using misleading ESG claims to lure investors. This comes in the backdrop of its fine of US$ 25 million on Deutsche Bank in 2023.
Texas Attorney General Ken Paxton announced the launch of a lawsuit against investment giants BlackRock, Vanguard, and State Street, joined by 10 other states, accusing the asset managers of using their positions in climate-focused investment initiatives to manipulate coal markets and drive up the cost of energy.
The suit notes that BlackRock, Vanguard and State Street collectively held substantial shares in major coal companies, including more than 30% stakes in Peabody Energy and Arch Resources, which together account for approximately 30% of the coal produced in the U.S.
In another big move, the Indiana Public Retirement System (INPRS) voted to replace BlackRock as a manager in its portfolio, due to the investment giant’s alleged use of ESG investment policies and its engagement using “an ESG focused agenda.”
In a press release from Indiana State Treasurer Daniel Elliott, who also serves as a member of the INPRS Board of Trustees, mentioned the board’s decision to remove BlackRock, describing the firm as an “ESG violator.”
TPG plans to introduce an innovative climate financing platform
TPG is planning to set up a first of its kind green financing platform in India under the aegis of TPG Rise Climate. It plans to form an NBFC with an equity infusion of US$ 1 billion, supported with debt of US$ 2-3 billion. The platform will be a board-run, professionally managed set-up, focusing on entire gamut of green financing (project finance to working capital) and even including vendor ecosystem in the spectrum.
SECTOR UPDATES
Cleantech: Cleantech faces an investment downturn in 2024
Investment in Cleantech has grown exponentially in recent years, driven by supportive policies, technological innovation and rising concerns over environmental degradation. Global investment in clean energy grew 17% to $1.77 trillion in 2023, a record level of annual investment, according to Bloomberg NEF.
However, in 2024, the cleantech industry witnessed a downturn in funding when contrasted with previous years. Despite this overall global decline, certain sectors such as carbon capture, storage, reuse, and hydrogen & nuclear technologies managed to secure growth. Pacific Fusion, for instance, broke records with a $900 million Series A round, indicating a growing confidence in nuclear fusion energy as a viable clean energy source.
Aviation: Sustainable Aviation Fuel (SAF) gaining momentum
Sustainable Aviation Fuel (SAF) has been slow to pick up due to its increased costs compared to standard jet fuel. However, as tax breaks and minimum requirements for SAF kick in, airlines are increasingly purchasing and implementing sustainable fuels.
In the US, a bill was introduced to extend the SAF tax credits under the Inflation Reduction Act until 2037, and the Department of Energy offered $3 billion in loans to two major SAF projects. Starting on Jan 1st, 2025, Europe’s ReFuelEU Aviation rule will require fuel providers at all EU airports to ensure that 2% of fuel is SAF, rising to 6% in 2030 and 70% in 2050. This has forced some EU airlines to apply environmental surcharges to their ticket prices.
The new rules are driving new agreements across major airlines and SAF providers. A notable agreement from SouthWest and Valero for 35 million gallons of SAF will provide SouthWest with 35% of its fuel from Chicago’s O’Hare airport for 2025.
Automobile: Subsidy partly restored for Cargo Electric 3 wheelers in India
The Indian central government has decided to restore the subsidy for cargo electric three wheelers (e-3Ws) for the remaining part of financial year 2025, but with a reduced rate.
The subsidy, which was earlier set at Rs 50,000 per vehicle, has now been halved to Rs 25,000. Subsidies under the PM Electric Drive Revolution in Innovative Vehicle Enhancement (PM E-DRIVE) are being given to promote local manufacturing of electric vehicles. Industry had requested to extend support for electric three-wheelers from next year’s budget.
By reallocating the FY26 budget to support vehicles sold after November 8, 2024, the ministry aims to strike a balance between maintaining momentum in EV adoption and adhering to fiscal limits.
NEWS THAT CAUGHT OUR ATTENTION
Starting 2025, every company in Italy must buy insurance to protect its assets from floods, landslides and other natural hazards that have become more common, thanks to global warming.
Italy’s climate losses have increased by 2.9% a year from 2009 to 2023, according to the European Environment Agency. Companies affected by such events face a 7% higher probability of going bust, and those that survive typically suffer a 5% average decline in revenue within three years, according to a 2024 study published by the country’s central bank.
The new law will require companies to buy coverage and insurers to write policies or face fines. The plan is backed by a € 5 billion (US$ 5.3 billion) reinsurance fund, set up by a state-controlled financial institution.
A report posted by the World Economic Forum states that since 2000, climate-related disasters have caused over $3.6 trillion in economic damages, and without urgent action, global GDP could take a cumulative hit of 16% to 22% by the end of the century.
Climate change presents a dual threat to businesses: physical risks from extreme weather, and transition risks from the necessary global shift to a low-carbon economy. The physical risks of climate change could cost companies up to 25% of EBITDA by 2050 and the Transitional risks of climate change could cost certain high-emitting sectors up to 50% of EBITDA by 2030. Companies that invest in reducing their climate risks stand to recuperate as much as $19 for every dollar they invest today.
The report released by BCG along with WEF’s Alliance of CEO Climate Leaders gives clear steps CEOs can take to ensure they mitigate climate risks and exploit opportunities.
FUN READ
And it's a wrap!
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