This blog is part of a quarterly series on the wide topic of Environmental, Social and Governance and covers items that have caught my attention.
• The European Parliament announced an agreement to approve the European Commission’s ‘stop-the-clock’ directive, delaying the implementation of key sustainability reporting and due diligence regulations, including the CSRD and CSDDD. The announcement marks a significant step in the Commission’s Omnibus I package, aimed at significantly reducing the sustainability reporting and regulatory burden on companies, and particularly on SMEs. (It was released by the Commission in February, proposing a wide-ranging series of changes to regulations including the CSRD, the CSDDD, the Taxonomy Regulation, and the Carbon Border Adjustment Mechanism (CBAM).)
Among the proposals included in the package were delays for the application of the CSRD for companies that have not yet started reporting by two years, and of the transposition and application of the CSDDD by a year.
• The IFRS Foundation’s International Sustainability Standards Board (ISSB) announced a series of proposed changes to its climate-related disclosure standard, aimed at easing some requirements for companies related to reporting on greenhouse gas (GHG) emissions. While the changes would affect a wide range of companies reporting on climate-related issues under the standard, the amendments would most significantly impact requirements for financial sector companies, with new reliefs introduced allowing entities to exclude Scope 3 emissions reporting associated with derivatives, facilitated emissions or insurance-associated emissions.
• The European Securities and Markets Authority (ESMA) issued its draft Regulatory Technical Standards under the EU’s ESG Rating Regulation, setting out its proposed rules for ESG ratings providers. The Regulation is intended to improve the reliability, transparency and comparability of ESG ratings and boost investor confidence in sustainable financial products. ESMA also launched a consultation on the proposed new rules, which will remain open until June 20, 2025.
• The Green Impact Exchange (GIX) announced that the U.S. Securities and Exchange Commission (SEC) has approved its Form 1 application for registration as a national securities exchange, enabling the GIX to launch as the first sustainability-focused stock market in the U.S. GIX aims to be the first national securities exchange in the U.S. dedicated to the emerging global green economy, listing companies that make binding commitments to set, implement, measure, and achieve sustainability goals, and to provide investors with transparency about their progress.
• The Science Based Targets initiative (SBTi), one of the key organisations focused on aligning corporate environmental sustainability action with the global goals of limiting climate change, announced the release of the initial draft of the Corporate Net-Zero Standard V2, the proposed update to its key standard to assess, certify and track companies’ decarbonisation commitments to achieve net zero emissions and to support science-based climate target setting.
Key updates proposed include explicit Scope 2 target setting to promote the adoption of zero-carbon energy, a requirement by large companies to set Scope 3 value chain emissions goals, while introducing more flexibility within Scope 3 targets setting, an increased focus on tracking and reporting on decarbonisation progress, and options for the introduction of interim carbon removal targets.
• ISS ESG, the sustainable investment-focused arm of ISS STOXX, launched its Sustainability Bond Rating, a new rating system aimed at providing investors with sustainability impact and risk assessment for corporate and sovereign green, social, sustainability, and sustainability-linked (GSSS+) bonds.
According to ISS ESG, the new rating considers the sustainability impact and risk of the bonds’ issuers, as well as where the proceeds of bonds are being channelled, enabling investors to better evaluate bonds, including their external framework certification or second-party opinions (SPOs). The rating will also help investors fulfil reporting requirements such as the EU Taxonomy classification of securities in a portfolio or fund.
• The latest edition of the MSCI Transition Finance Tracker was released. It reported:
o That as of March 2025, 60.1% of companies have published climate commitments, rising sharply from around 28% five years earlier, but remaining flat over 2024’s 60%
o A sharp increase in ambition within companies’ climate goals, with the proportion of listed companies with a Science Based Targets initiative (SBTi) validated target rising to 14.2% in 2025, up from only 9.3% in the prior year
o That industrials had the highest share of SBTi-validated targets, at 21.5% of companies, followed by consumer discretionary at 15.5% and information technology at 13.9%
o That companies have succeeded in decoupling growth from emissions, particularly in developed markets, where revenue of listed companies has increased by nearly 50% between 2015 and 2023, while those companies’ emissions declined by almost 25% over the same period.
According to data from MSCI’s Implied Temperature Rise, the report found that only 12% of companies are currently aligned with limiting average global temperature rise to 1.5°C, and an additional 27% are aligned with warming between 1.5°C and 2°C, while the median alignment of companies is with 2.7°C.
• According to a report by Morningstar Sustainalytics, global sustainable investment funds experienced record outflows in the first quarter of 2025, with withdrawals of approximately $8.6 billion, reversing a relatively strong quarter of over $18 billion of net inflows in Q4 2024.
The report highlighted several factors:
o The election of Donald Trump
o Legal risks for companies from the President’s anti-climate and anti-ESG agenda
o Asset managers becoming more cautious in promoting ESG credentials and sustainable investment products.
o An increasingly complex geopolitical environment has shifted investors’ attention to economic growth, competitiveness, and defence, at the expense of deprioritising sustainability concerns and climate goals.
o The evolving regulatory agenda and ESG fund landscape in Europe, as well as performance concerns, particularly in sectors such as clean energy
• The vast majority of public companies are either retaining or ramping up their climate commitments, with companies found to be more than twice as likely to be increasing their emissions reduction goals than decelerating them, according to a new study released by PwC, based on data from climate research provider and environmental disclosure platform CDP. The study also found that the practice of setting climate goals is progressing down the value chain as companies increase engagement efforts, with smaller companies representing a growing proportion of those introducing new targets.
The report found that the number of companies setting new Scope 1 and 2 emissions reduction targets has grown for each of the past 7 years, including growing by 14% in 2024 to 1,293 companies from 1,132 in 2023, and up from less than 500 companies in 2020. Notably, however, the total emissions covered by the new targets declined in 2024 to around 1.1 billion metric tons of CO2e from more than 2 billion tons in the prior year. PwC attributed the change to a major shift in smaller companies setting climate goals, with the average revenue for a company introducing new goals in 2024 declining to $1.3 billion from $3.8 billion in 2020.
• Business sustainability ratings and solutions provider EcoVadis announced the launch of Carbon Data Network, a new data exchange aimed at enabling companies to access reliable primary carbon data from their suppliers. It will allow companies to more easily and efficiently track their Scope 3 indirect emissions and make better decisions to reduce their carbon footprint.
The new network contains emissions data from more than 150,000 organisations and is powered by their Carbon Action Manager Scope 3 supply chain engagement solution and provides companies with access to a series of tools and resources to build their carbon capabilities and accelerate decarbonisation.
Naresh Aggarwal
