What's Happening in Sustainability & ESG (03.02 - 09.02) 🌎

This week’s read time: 8 minutes

Welcome to this edition of Green Digest, where you will get updated about everything happening in the Sustainability & ESG space in less than 10 minutes. 🌎

We go through tons of articles and data from the most reliable sources, filter & simplify them, and serve them to you in bite-sized chunks every week. 🍀

In this edition, we’ll cover:

• EU climate policy remains under pressure 🇪🇺

• Only 38% of listed companies have emissions trajectories aligned with limiting warming to 2°C or less, with just 12% aligned to 1.5°C 📑

• The Trump administration plans to repeal the EPA finding that underpins federal GHG regulation 🇺🇸

• Global sustainable funds recorded $84 billion in net outflows in 2025 📉

• Terradot acquires Eion assets, signaling early consolidation in the CO₂ removal market 🟢

• and other news 🌍

PRESENTED BY TERRA REPORTING

Terra Reporting Joins the 10th Green Shipping Summit as Silver Sponsor

Terra Reporting will participate in the 10th Green Shipping Summit as a Silver Sponsor and exclusive ESG & Sustainability Reporting partner, taking place on 24–25 February 2026 in Athens.

On Day 1 of the summit, Terra Reporting will lead a session on data-driven ESG reporting in the maritime industry, exploring how organisations can build a single source of truth across complex operational environments.

Terra Reporting also has one complimentary pass available for the Green Shipping Summit. Maritime professionals interested in attending can enter the ticket ballot by completing the short form on our website. The selected participant will be contacted ahead of the event.

THIS WEEK’S TOP NEWS

Regulatory Oversight & Industry Insights

🇪🇺 EU climate policy remains under pressure, as industry backlash, regulatory uncertainty, and parallel reform tracks converged around carbon pricing, competitiveness, and trust in EU rulemaking.

Here are this week's and the past week’s top stories:

CBAM exemption proposal unsettles European industry

European manufacturers are openly lobbying to protect the Carbon Border Adjustment Mechanism (CBAM), warning that a proposed suspension clause could undermine investment certainty and derail decarbonization plans. The European Commission’s plan to give itself discretionary powers to temporarily exempt products under “unforeseen circumstances” triggered alarm across steel, cement, fertilizers, hydrogen, and electricity producers, who argue the vague wording opens the door to political pressure and retroactive changes. Industry groups warn that even the possibility of exemptions is already disrupting project economics, weakening CBAM’s role as a level-playing-field tool, and reducing incentives for low-carbon imports.

CBAM costs move from theory to balance sheets

CBAM’s first purchasing phase is revealing its real economic weight, with importers potentially facing an €8 billion bill in 2026 across steel, aluminum, ammonia, and cement. The impact is amplified by high default emissions values applied to imports without verified data, turning emissions monitoring, reporting, and verification (MRV). Steel dominates exposure, while cement and high-emissions exporters face disproportionate cost pressure.

Free ETS permits return to the spotlight as Brussels rethinks protection

The EU is also reassessing the future of free CO₂ permits under the Emissions Trading System. Internal Commission options range from scrapping free allowances entirely to making them conditional on low-carbon investments or largely maintaining the status quo. The review comes as CBAM is meant to replace free permits over time, raising concerns that weakening CBAM while extending free allocations could dilute both policies and slow the phase-out of fossil-intensive production.

The bloc also adopted the world’s first voluntary standard for permanent carbon removals

The European Commission adopted the world’s first voluntary certification methodologies for permanent carbon removals, setting EU-wide standards to certify and support investment in technologies that permanently remove CO₂. The rules cover DACCS, BioCCS, and biochar, defining permanence, risk management, and verification, with projects able to apply for certification once the delegated act enters into force in April, while additional methodologies for carbon farming and bio-based storage are expected later this year.

Regulatory trust frays as Brussels accelerates lawmaking

On top of all this, dozens of civil society groups, trade unions, industry bodies, and academics warned that the European Commission’s plan to fast-track lawmaking by weakening impact assessments and public consultations risks undermining democratic safeguards and regulatory trust. Critics argue that using geopolitical urgency to bypass established “Better Regulation” rules would lead to opaque decision-making, poorly assessed economic, social, and environmental impacts, and greater susceptibility to political and corporate influence, with industry and financial groups stressing that comprehensive impact assessments remain essential for predictability and legal certainty.

PRESENTED BY ECONOMIST IMPACT

Economist Impact’s 11th annual Sustainability Week | March 2nd - 4th 2026, London

Economist Impact’s 11th annual Sustainability Week brings together leaders to share case studies, insights, and ideas to drive action on sustainability. With more than 400 speakers, 2,500 in-person attendees, and 80 case studies, the 11th annual Sustainability Week tackles sustainability-related business challenges, finds solutions, and gets results. Meet the most influential industry leaders, policymakers, and innovators.

Learn more on the event website and register here. Green Digest readers can save 20% on registration using the discount code GD-SW20.

MORE INTERESTING NEWS

Latest developments, reports, insights, and trends

📑 MSCI found that only 38% of listed companies have emissions trajectories aligned with limiting warming to 2°C or less, with just 12% aligned to 1.5°C. The report shows that 62% of companies remain on trajectories above 2°C, while climate target-setting continued, with 60% of companies publishing climate commitments, 32% setting net-zero targets, and the share of companies with SBTi-approved targets rising to 19% in 2025, alongside higher disclosure of Scope 1–3 emissions.

📑 The GHG Protocol received more than 800 responses to its consultation on redesigning Scope 2 accounting, reflecting deep divisions over proposals to tighten rules on the use of renewable energy certificates (RECs). The proposed changes would limit Scope 2 emissions reductions to RECs generated on the same grid and within the same hour as electricity use, aiming to address long-standing greenwashing concerns, but drawing opposition from many companies that want to retain the existing market-based approach.

📑 The Science Based Targets initiative (SBTi) released an updated draft of its Automotive Sector Net-Zero Standard, refining how automakers and auto parts manufacturers set science-based targets, with a clearer focus on Scope 3 use-of-sold-products emissions, which account for 70–80% of automakers’ footprints. A public consultation on the new standard is open until March 22, 2026.

🇺🇸 The Trump administration is set to repeal the EPA’s 2009 endangerment finding, the scientific determination that GHG emissions endanger human health and form the legal basis for federal GHG regulation. The repeal, expected to be published this week, would remove the foundation for regulating GHG emissions from vehicles and would mark the administration’s most far-reaching climate policy rollback.

🇨🇦 Canada will repeal its Electric Vehicle Availability Standard, scrapping mandated zero-emission vehicle (ZEV) sales targets that would have required 100% ZEVs by 2035. Instead, the government plans to tighten GHG emissions standards by 2035 to drive an estimated 75% EV adoption, backed by new production investments, consumer purchase incentives of up to $5,000, and a national charging infrastructure strategy, aiming to reach 90% EV adoption by 2040.

PRESENTED BY SUSTAINABILITY MAGAZINE

Sustainability LIVE: The US Summit returns on 21-22 April, bringing together leaders who are driving real progress on sustainability across their organisations. With over 1,000 in-person attendees, the two-day event delivers the insights, connections, and practical takeaways needed to move from intention to impact. The agenda features 50+ speakers, 10 focused content themes, and four executive workshops designed to support action on climate, circularity, responsible growth, and culture change.

WHAT ARE COMPANIES DOING?

Corporate sustainability, new tools and services & companies in the news

⚡️ TotalEnergies signed two 15-year power purchase agreements (PPAs) with Google to supply 1 GW of solar power for Texas data centers, delivering about 28 TWh of renewable electricity and marking TotalEnergies’ largest US renewable deal to date, with projects set to begin construction in Q2 2026. TotalEnergies also signed two PPAs with Airbus to supply 3.3 TWh of renewable electricity from 200 MW of new assets to Airbus sites in Germany and the UK, covering around 50% of their power demand from 2027 under long-term agreements extending into the next decade.

🔋 Stellantis agreed to sell its 49% stake in Canada-based EV battery JV NextStar Energy to partner LG Energy Solution, as part of a broader €22.2 billion business reset reflecting weaker-than-expected EV demand. Launched in 2022, the 45 GWh facility has seen over C$5 billion invested and will now be fully owned by LG Energy Solution.

🚛 IKEA, Daimler Truck Italia, and LC3 Trasporti launched a fully electrified heavy road transport project in Italy, starting with two electric trucks and scaling to more than ten Mercedes-Benz eActros 600 vehicles by Q3 2026 for port and store deliveries. The initiative is expected to enable over 1.2 million kilometers of zero-emission transport annually.

EVERYTHING FINANCE

Sustainable finance, funding rounds, acquisitions & private equity deals

📉 Global sustainable funds recorded $84 billion in net outflows in 2025, marking the first annual redemptions since Morningstar began tracking the sector in 2018, and a sharp reversal from $38 billion of inflows in 2024. Outflows were driven mainly by Europe and the US, with Europe posting its first annual withdrawals and the US seeing its third consecutive year of redemptions.

🇺🇸 A Texas judge struck down the state’s 2021 “business blacklist law” that forced public funds to divest from financial firms accused of boycotting fossil fuel companies, ruling it unconstitutional. The court found the law impermissibly vague and a violation of due process, ending Texas’ requirement to blacklist firms like major global banks and asset managers, in a case brought by the American Sustainable Business Network challenging the state’s anti-ESG measures.

🇳🇱 The Dutch financial regulator AFM warned that it will step up scrutiny of sustainability claims by financial firms after finding that many claims remain unclear or insufficiently substantiated. Following a 2024–2025 review of its Sustainability Claims Guidelines, the AFM flagged issues around vague language, lack of specificity, and hard-to-find evidence, and said it will intensify supervision in 2026, including a new study, saying that sustainability remains a strategic priority.

📈 Deutsche Bank reported €98 billion in sustainable finance and ESG investment volumes in 2025, its strongest year in four years, citing renewed client demand. Cumulative volumes since 2020 reached €471 billion, keeping the bank on track toward its €900 billion 2030 target, with investment banking the largest contributor (€67 billion), followed by corporate banking (€20.2 billion) and private banking (€11.6 billion).

Acquisitions

🟢 Terradot is acquiring the assets of enhanced rock weathering startup Eion in an undisclosed deal, signaling early consolidation in the CO₂ removal market. The acquisition brings Terradot contracts, IP, staff, and over 100,000 tons of Eion’s removal deals, lifting the combined company to more than 400,000 tons under contract, as smaller players face funding pressure and larger investors push for scaled, capital-intensive platforms.

📊 Dcycle acquired Germany-based ESG-X to expand its ESG and sustainability data management capabilities across the DACH region. The deal adds ESG-X’s AI-driven materiality assessment and ESG mapping tools to Dcycle’s carbon accounting and ESG platform, strengthening CSRD-aligned reporting, double materiality analysis, and localized data infrastructure as the European ESG software market consolidates.

⚡️ Copenhagen Infrastructure Partners (CIP) agreed to acquire Ørsted’s European onshore renewables business for €1.44 billion, marking a major step in Ørsted’s divestment and refocus strategy. The deal transfers a portfolio of more than 800 MW of operating and in-construction assets plus a multi-GW pipeline across wind, solar, and storage in key European markets.

Startup funding rounds

⚡️ Home electrification startup Lunar Energy raised $232 million. The company combines home energy hardware with software that manages hundreds of thousands of devices, earning customers hundreds of dollars annually through VPP programs.

⚡️ Fusion startup Avalanche Energy raised $29 million to advance compact fusion devices as an alternative to large-scale reactors. The funding will support expansion of its commercial-scale fusion test facility in Virginia and development of its modular “Orbitron” machines, targeting applications from data centers and remote power to grid and mobile energy.

🟢 India-based carbon project developer Varaha raised $20 million in fresh funding to scale its nature-based carbon removal platform. The funding follows major offtake deals with Microsoft and Google and will support expansion across regenerative agriculture, agroforestry, biochar, and enhanced rock weathering.

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