What's Happening in Sustainability & ESG (Week Recap 21.01 - 27.01) 🌎

This week’s read time: 9 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:

• The EU’s Competitiveness Compass draft was leaked, outlining a significant effort to simplify regulations under the upcoming Omnibus Directive 🇪🇺

• France and Germany urge the European Commission to delay and amend key EU sustainability regulations 🇪🇺

• US Paris Agreement withdrawal sparks responses: states, organizations, and businesses step up 🇺🇸

• In 2024, global sustainable fund inflows dropped by half to $36 billion, the lowest since 2018 📈

• and other news 🌍

TOGETHER WITH REUTERS EVENTS

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Gain valuable insights from our expert panel:

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• Jenn-Hui Tann, Chief Sustainability Officer, Fidelity Investments

• Moderator: Hannah Pathak, Chief Executive Officer, Forum for the Future

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THIS WEEK’S TOP NEWS

Regulatory Oversight & Industry Insights

🇪🇺 The EU’s Competitiveness Compass draft was leaked, outlining a significant effort to simplify regulations under the upcoming Omnibus Directive, focusing on proportionate timelines, tighter alignment of data, and targeting the most harmful activities. It also proposes creating a new “small mid-cap” category for companies larger than SMEs but smaller than large firms, potentially benefiting 31,000 businesses with tailored regulatory relief (firms with 250–1,000 employees and revenues under €1.5 billion). The changes aim to prevent excessive trickle-down reporting requirements for smaller supply chain companies while aligning financial metrics with investor needs to encourage sustainable investments. The draft indicates likely updates to the CSRD, CSDDD, and EU Taxonomy. While the simplifications may streamline compliance and reduce burdens for smaller companies, critics warn that they could weaken accountability, reduce supply chain transparency, and shift focus from broader climate and societal goals to investor-driven metrics. With the official release on January 29, the sustainability community is debating whether these changes represent meaningful progress or a potential setback for environmental and social responsibility.

France has also urged the European Commission to delay and amend key EU sustainability regulations, including the CSRD and CSDDD, to ease bureaucratic burdens, particularly for SMEs. Proposals include indefinitely postponing the CSDDD, raising its scope to companies with over 5,000 employees and €1.5 billion in revenue, delaying CSRD reporting for smaller firms, simplifying sector-specific reporting, and reducing required indicators to focus on climate objectives. Germany has echoed these calls, with Finance Minister Jörg Kukies noting the excessive burden of around 1,000 data points per company under the current framework. While these measures aim to boost EU competitiveness and create a predictable regulatory environment, businesses warn they could disrupt prior investments and create policy uncertainty.

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MORE INTERESTING NEWS

Latest developments, reports, insights, and trends

🇺🇸 The recent withdrawal of the US from the Paris Climate Agreement under President Trump has sent shockwaves through global climate efforts, triggering significant responses from states, businesses, and international stakeholders. Trump’s decision to exit the accord for the second time, halt $11 billion in pledged climate funding for developing nations, and suspend domestic green energy initiatives has deepened regulatory uncertainty, slowed global climate funding, and widened the gap between US and European green policies. Critics argue that this move undermines US leadership in emissions reductions and complicates international collaboration.

Even US oil and gas producers express concern over President Trump’s decision to withdraw from the Paris Climate Agreement, despite supporting his push for domestic energy development. The withdrawal creates regulatory uncertainty and limits US influence in global climate talks, which major oil companies like Exxon and Chevron view as critical for guiding the energy transition. These firms, committed to technologies like green hydrogen and carbon capture, believe staying in the pact would help navigate long-term investments and ensure regulatory stability.

However, many players are stepping up to fill the void. Michael Bloomberg’s Bloomberg Philanthropies pledged to cover the US contribution to the UNFCCC’s budget and work with states, cities, and businesses to meet climate goals. Similarly, the US Climate Alliance, comprising 24 US state governors, reaffirmed its commitment to the Paris Agreement, outlining ambitious goals to cut emissions by up to 66% by 2035 through initiatives like carbon markets and clean energy investments.

🇺🇸 President Donald Trump’s administration also launched an aggressive campaign against Diversity, Equity, and Inclusion (DEI) initiatives, rolling back decades of progress in workplace equity. Within days of taking office, Trump issued executive orders dismantling federal DEI programs, pressuring private companies to follow suit, and encouraging federal employees to report hidden diversity efforts. These measures included the repeal of a 1965 executive order prohibiting employment discrimination by federal contractors, a cornerstone of civil rights progress. Critics argue that these actions undermine fundamental civil rights and economic competitiveness, with organizations like the National Action Network mobilizing boycotts against companies abandoning DEI commitments.

While Trump’s actions have drawn widespread criticism, some corporations remain steadfast in their DEI efforts. JPMorgan Chase CEO Jamie Dimon, for instance, publicly defended the firm’s diversity initiatives, emphasizing their importance in fostering inclusion and supporting underrepresented communities. Meanwhile, Costco shareholders overwhelmingly rejected a proposal to evaluate risks tied to DEI policies, with over 98% voting against the measure. Despite this, companies like Target scaled back DEI initiatives, including its $2 billion REACH program supporting Black-owned businesses, aligning with similar moves by Amazon, Walmart, and Meta. Target’s decision, which included rebranding its “Supplier Diversity” team as “Supplier Engagement,” has sparked criticism for potentially alienating its younger, diverse consumer base, though supporters cite political and public pressures.

WHAT ARE COMPANIES DOING?

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

📑 The Science Based Targets initiative (SBTi) announced that over 10,000 businesses have committed to science-based emissions reduction targets, marking a 29% increase from 7,425 companies last year. Founded in 2015, the SBTi aims to standardize corporate environmental target setting, provide technical assistance, and validate companies’ climate goals. Despite challenges, including a leadership change and controversy over integrating carbon credits into its standards, the SBTi has seen significant growth, with more than 7,000 companies now having validated targets—up two-thirds from 2023.

🌳 Microsoft expanded its partnership with Brazil-based CO₂ removal provider re.green, committing to remove a total of 6.5 million metric tonnes of CO₂ through ecological restoration projects in the Amazon and Atlantic forests. The initiative will restore 33,000 hectares of degraded land, enhancing biodiversity, carbon sequestration, and ecological connectivity while benefiting local communities. Since launching in May 2024, the collaboration has restored 11,000 hectares, planting over 4.4 million native seedlings from 80 species and creating over 230 jobs in activities like seed collection and wildfire prevention.

🟢 Stockholm Exergi, a Swedish energy company, secured SEK 20 billion (USD $1.8 billion) in support from the Swedish Energy Agency for its bio-CCS project, a technology that captures 800,000 tonnes of biogenic CO₂ annually before it reaches the atmosphere. This funding, awarded through a reverse auction, is essential for building Europe’s largest bio-CCS facility at Stockholm’s Värtan bio-cogeneration plant. The facility combines bioenergy from forestry residues with carbon capture and storage technology, permanently storing liquid CO₂ in sedimentary bedrock beneath the North Sea. The project has already secured significant carbon removal agreements with Microsoft, Frontier, Alphabet, Meta, JPMorgan Chase, and H&M, among others.

📑 EcoVadis launched the CSRD Questionnaire, a tool to help companies collect supplier data to comply with the EU’s CSRD. EcoVadis’ solution addresses challenges in gathering and analyzing supplier data, particularly for suppliers unfamiliar with the directive or facing resource constraints. The questionnaire, aligned with ESRS, integrates with EcoVadis’ broader sustainability solutions to produce audit-ready CSRD reports.

EVERYTHING FINANCE

Sustainable finance, funding rounds, acquisitions & private equity deals

🏦 BNP Paribas is rethinking sustainable finance to focus on profitable deals and on redefining what it considers sustainable, a senior executive said, as it became the latest bank to distance itself from the ESG label. The bank will focus on four themes: adaptation, transition, conservation, and societal resilience, aiming for investments that offer both financial growth and environmental or societal benefits. US-led backlash, fueled by Donald Trump’s return to the White House, has prompted some banks to distance themselves from ESG, while others, like BNP, emphasize balancing sustainability with returns. A BNP survey found over half of equity investors are interested in thematic investments, particularly in renewable energy, water, and health.

In the meantime, British bank Standard Chartered expects to generate nearly $1 billion in income by 2025 from its sustainability-focused business, advancing its pledge to mobilize $300 billion in green financing by 2030. Speaking at the World Economic Forum, CEO Bill Winters reaffirmed the bank’s commitment to the net-zero agenda despite anti-ESG sentiment in the US and President Trump’s climate-skeptic policies. Winters emphasized the profitability of sustainability initiatives, noting the bank’s ongoing support for the Net-Zero Banking Alliance. While recent exits from the alliance by US and Canadian banks highlight mounting political pressures, Winters stressed the long-term necessity of transitioning away from fossil fuels.

📈 In 2024, global sustainable fund inflows dropped by half to $36 billion, the lowest since 2018, as anti-ESG sentiment, poor performance, and regulatory challenges diminished their appeal, according to Morningstar Sustainalytics. US sustainable funds faced $19.6 billion in outflows, marking nine consecutive quarters of declines, while European funds saw slower inflows and 351 closures, surpassing 235 launches. Stricter EU greenwashing regulations prompted many asset managers to shutter, rename, or drop ESG mandates, with Morningstar forecasting up to 50% of ESG funds to rebrand by mid-2025. High interest rates, underperforming green stocks, and President Trump’s pro-fossil fuel policies exacerbated the downturn, leaving sustainable funds trailing behind the booming conventional market.

🤝🏻 Allianz Global Investors (AllianzGI) and the European Investment Bank (EIB) announced the final close of their Emerging Markets Climate Action Fund (EMCAF) at €450 million, with a €20 million contribution from Germany’s KfW. Launched at COP26 in 2021, the fund aims to finance climate mitigation, adaptation, and electricity access projects in emerging and developing countries, targeting investments in renewable energy, energy efficiency, sustainable transport, forestry, and water management. EMCAF is expected to invest in 15 funds supporting around 150 projects and mobilize up to €7.5 billion in climate finance.

📈 KKR announced its acquisition of UK-based asset leasing company Dawsongroup as part of its Global Climate strategy, aimed at supporting businesses in transitioning their fleets to net zero. Dawsongroup, founded in 1935, specializes in sustainable asset rental services for the European logistics sector, offering solutions like alternative fuel advice, process streamlining, and energy-saving strategies. KKR plans to accelerate the electrification of Dawsongroup’s fleet, expand its market reach, and implement an employee ownership program.

🛩️ Boeing invested in Norsk e-Fuel, a synthetic aviation fuel producer, to support one of Europe’s first industrial-scale Power-to-Liquids facilities aimed at producing sustainable aviation fuel (SAF). Norsk e-Fuel uses fossil-free energy to create green hydrogen and combines it with recycled CO₂ to produce electro-SAF, which can reduce aviation GHG emissions by over 90% compared to conventional jet fuel.

📊 Orennia, a Calgary-based energy transition data and analytics company, announced the close of its Series C growth financing round led by BlackRock and Temasek’s Decarbonization Partners. Launched in 2021, Orennia provides its AI-powered platform, Ion_AI, to help developers and investors make informed capital allocation decisions in sectors like renewables, clean fuels, storage, and carbon capture.

🟢 H2SITE, a Spain-based hydrogen technology startup, raised €36 million in a Series B funding round to scale its hydrogen production to multi-tons per day by 2026. The company specializes in solving hydrogen transport challenges with proprietary membrane reactor technology that separates hydrogen from gas streams and easily transportable molecules like ammonia or methanol.

📊 Gravity, a carbon accounting and energy management platform, raised $13 million in a Series A funding round to enhance product R&D, expand its solutions, and grow its team in the US and EU. Founded in 2022, Gravity automates carbon data collection and creates audit-ready sustainability reports, integrating seamlessly with energy tracking and ESG reporting systems to simplify compliance and connect reporting to cost and risk mitigation.

🟢 Bedrock Energy, a geothermal technology company, raised $12 million in a Series A funding round. Founded in 2022, the Texas-based company develops innovative geothermal HVAC systems that provide carbon-free, cost-efficient heating and cooling for buildings. Bedrock’s technology uses autonomous drilling and advanced subsurface modeling to speed up installation and enable deployment in dense urban areas.

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