January 2025: EU's Competitiveness Compass, Net-Zero Alliance Exits, Davos, and More

Key highlights from January 2025 in the sustainability space.

1- EU presents “Compass” to regain competitiveness

On January 29, the European Commission published a “Competitiveness Compass”, a plan aiming to increase the European economy’s competitiveness by bridging the gap in productivity growth with other major economies. 

Accordingly, the European Commission’s 2025 Work Programme will focus on innovation, decarbonisation and security to boost competitiveness. Proposed initiatives include promoting industrial leadership in sectors such as AI, advanced materials and biotech, launching an EU Start-up and Scale-up Strategy, a Clean Industrial Deal, an Affordable Energy Action Plan and increased clean trade and investment partnerships. 

Five horizontal enablers will support these efforts: simplifying regulations, lowering barriers to the Single Market, financing competitiveness, promoting skills and quality jobs and better coordinating policies at both the EU and national level. 

2-US corporations exit Net-Zero Banking Alliance and Net-Zero Asset Managers Initiative

Amid heightened ESG backlash from conservative lawmakers and the looming second term of President Donald Trump, major US banks and investment managers have exited the Net-Zero Banking Alliance (NZBA) and the Net-Zero Asset Managers Initiative. (NZAM) The departures include those of JPMorgan, Goldman Sachs, Morgan Stanley, Wells Fargo, and BlackRock, and they have left the alliances without participation from major US players. While the departees have all stated that they remain committed to their climate-related goals, how these claims will be reflected in practice remains to be seen. 

The future of the UN-backed coalitions, which were established to align bank lending and investment activities with global efforts to fight climate change, is also uncertain. On January 13, NZAM announced that it is suspending its primary activities in the face of this changing political and regulatory environment. 

3- France supports deregulation with Omnibus Package

On January 21, at the European Economic and Financial Affairs Council, French Minister of Economics and Finance Eric Lombard expressed support for significant deregulation at the EU level with the upcoming Omnibus Simplification Package, which aims to streamline the EU Taxonomy, CSRD, and CSDDD.

According to this position, which is shared by Germany, the package would entertain a significant reduction of obligations and a modification of applicability thresholds, effectively undermining the Green Deal. This marks a significant shift of policy on the part of the French Government, which has historically acted as a leader in favour of the European Green Deal and has been a pioneer in terms of non-financial disclosures. The new regulation is set to be unveiled on the 26th of February. 

4- AASB and IESBA launch ethical sustainability reporting and assurance standards 

On January 27, The International Auditing and Assurance Standards Board (IAASB) and the International Ethics Standards Board for Accountants (IESBA) launched integrated standards aimed at strengthening sustainability reporting and assurance practices. IAASB and IESBA will offer resources such as webinars, guidance documents, and feedback mechanisms to ensure smooth implementation.

While the IAASB’s sustainability assurance standard ISSA 5000 provides requirements to support the consistent performance of quality limited or reasonable assurance engagements, the IESBA’s IESSA provides a framework for ethics and independence requirements for sustainability assurance engagements. 

The standards are expected to become effective from December 15, 2026, in the jurisdictions adopting the standards, while earlier adoption is encouraged. They are intended to apply to all sustainability assurance practitioners conducting sustainability assurance engagements, including those who use the work of an external expert in these.

5- Davos 2025: Key Developments

The 2025 World Economic Forum meeting in Davos, Switzerland, from January 20-24 saw significant discussions on accelerating climate and nature goals, emphasising safeguarding the planet as a critical priority. 

The session saw the announcement of the creation of the world’s largest protected tropical forest reserve, the Kivu-Kinshasa Green Corridor, but was also marked by the wildfires that were ravaging Los Angeles as the conference was ongoing. A key point of discussion in this regard was the risk of insurance deserts created by the withdrawal of coverage in the event of natural catastrophes in specific geographies, such as the situation in LA. This was addressed in a white paper on the topic of insuring against extreme heat. 

Another key focus was the interconnection of carbon, biodiversity, and water markets, encouraging integrated environmental strategies. For example, Singapore’s President Tharman Shanmugaratnam proposed linking biodiversity credits with carbon markets to promote more comprehensive environmental conservation efforts.

- Content prepared with the help of Defne Fresko Tasci.

December 2024: EU "Omnibus" Sustainability Reporting Law, Forced Labor Regulation and Voluntary Carbon Removal Certification Framework, and more

Key highlights from December 2024 in the sustainability space.

1- EU to Unveil “Omnibus” Sustainability Reporting Law

The European Commission is considering streamlining three major sustainability regulations—the EU Taxonomy, CSRD, and CSDDD—into a single “Omnibus Simplification Package.” Announced by Commission President Ursula von der Leyen in November 2024, the proposal appears on the Commission’s indicative agenda and may be published as early as February 2025.

The move responds to business concerns over regulatory complexity, which some cite as a barrier to investment. While von der Leyen supports the substance of existing laws, climate activists fear potential deregulation. The initiative also raises uncertainty for businesses preparing CSRD reports in 2025, particularly in countries that have yet to transpose the directive, as they may delay implementation pending the final Omnibus package.

2- EU Forced Labor Regulation Takes Effect

On December 13, the EU’s Forced Labour Regulation (FLR) officially entered into force, with enforcement beginning December 14, 2027. Unlike the CSRD and CSDDD, the FLR applies directly without requiring national implementation.

The regulation bans products made wholly or partly with forced labor from being sold or exported in the EU. It adopts the International Labor Organization’s definition, including forced child labor, and applies across all supply chain stages, regardless of location. Businesses must now prepare for compliance as enforcement approaches.

3- New York Passes Climate Law Fining Fossil Fuel Companies

On December 26, Governor Kathy Hochul signed the Climate Change Superfund Act, making New York the first U.S. state to impose financial penalties on fossil fuel companies for past greenhouse gas emissions.

The law targets companies responsible for over 1 billion tons of emissions from 2000 to 2018, requiring them to pay a total of $3 billion annually for 25 years into a Climate Superfund. The fund will finance climate damage repairs and infrastructure adaptation, shifting costs from taxpayers to polluters.

4- EU Carbon Removal Certification Framework Takes Effect

On December 26, the EU Carbon Removal Certification Framework (CRCF) entered into force, establishing a voluntary EU-level certification framework for permanent carbon removals, carbon farming and carbon storage in products. Finalized in November, the regulation aims to promote high-quality carbon removal while complementing the EU’s emission reduction goals and voluntary carbon markets alongside the EU Emissions Trading System (EU ETS).

To qualify for certification, carbon removal activities must meet four key criteria: (i) demonstrating net carbon removal benefits, (ii) exceeding legal requirements, (iii) ensuring long-term storage, and (iv) avoiding environmental harm. Certified activities will require third-party verification.

5- AI Data Centers Move Toward Sustainability

December saw a surge in efforts to make AI data centers more sustainable. Key initiatives include:

• Schneider Electric & NVIDIA collaborating on energy-efficient cooling systems

• AWS & Orbital Materials advancing decarbonization technology

• Google, Intersect Power & TPG Rise Climate developing scalable renewable energy solutions

Investor and government backing is also growing. As momentum builds, AI’s alignment with global sustainability goals strengthens.

- Content prepared with the help of Defne Fresko Tasci.

November 2024: COP29 highlights, new ISO ESG implementation principles, ISSB gains global momentum, and more

Key highlights from November 2024 in the sustainability space.

1-    COP29: Key Developments and Controversies

COP29, held in Baku, Azerbaijan, from November 11–22, 2024, began under scrutiny due to the host country’s petro-state status, echoing last year’s controversies in the UAE. Azerbaijan’s president sparked further criticism on November 12 with his remarks calling oil and gas a “Gift of God.” Midway through the conference, experts published an open letter to the UN denouncing COP’s effectiveness and calling for reform, fueling debates on the relevance of the process.

Despite this, the conference achieved significant milestones. Developed nations committed to providing $300 billion annually by 2035 to help developing countries combat climate change, though the pledged amount falls far short of the $1.3 trillion needed. Additionally, the finalization of Article 6 of the Paris Agreement established international standards for trading carbon credits, projected to save $250 billion annually while mobilizing investments for emissions reduction.

2-    ISO Launches New ESG Implementation Principles

At COP29 on November 15, the International Organization for Standardization (ISO) unveiled its ESG Implementation Principles, a framework aimed at standardizing ESG reporting and practices across organizations and jurisdictions. Developed in collaboration with over 1,900 experts from 128 countries, the principles set measurable Key Performance Indicators (KPIs) to evaluate organizations’ ESG maturity. They also prioritize interoperability by aligning with existing reporting standards to create a harmonized global approach to ESG compliance.

The initiative has garnered attention for its potential to address inconsistencies in ESG reporting, a challenge for multinational organizations navigating diverse regulatory environments. By fostering more transparent and comparable disclosures, the ISO Principles aim to bridge gaps between regional standards, enabling more effective implementation and oversight of ESG commitments across borders.

3-    Singapore Joins EU-China Common Ground Taxonomy

On November 14, 2024, the International Platform on Sustainable Finance (IPSF) expanded its Multi-Jurisdiction Common Ground Taxonomy (M-CGT) to include Singapore alongside the EU and China. Building on the existing EU-China Common Ground Taxonomy, the M-CGT integrates Singapore’s sustainable finance criteria, enhancing interoperability across these three major jurisdictions. This harmonization aims to streamline cross-border green financing and provide a reference framework for stakeholders to compare sustainability standards.

The M-CGT is structured for scalability, with the potential to incorporate additional jurisdictions in the future. By aligning taxonomies across regions, the initiative represents a step toward a more unified approach to sustainable finance, creating opportunities for global investments in green projects while accommodating regional specificities.

4-    ISSB Standards Gain Global Momentum

A progress report by the IFRS, released on November 12, 2024, reveals that over 1,000 companies and 30 jurisdictions, representing more than half of global greenhouse gas emissions, are now using or moving to adopt ISSB Standards. This includes recent commitments from 16 new jurisdictions, such as Kenya, El Salvador, and Australia, marking a significant increase from the 20 jurisdictions on board in May 2024.

The widespread adoption of ISSB Standards signals growing global alignment on sustainable finance regulations. By providing a consistent framework for climate-related financial disclosures, the ISSB is fostering greater transparency and comparability in sustainability reporting, building optimism for more cohesive and effective global climate action.

- Content prepared with the help of Defne Fresko Tasci.

October 2024: EU Deforestation Regulation Delay, COP16 Highlights, Nuclear Power for AI, and More

Key highlights from October 2024 in the sustainability space.

1- European Commission Proposes One-Year Implementation Delay for Deforestation Regulation

On October 2, the European Commission issued new guidance on implementing the EU Deforestation Regulation, and proposed a 12-month delay. This delay responds to feedback from international partners on their readiness to comply, particularly for countries producing goods like palm oil and soy. Concerns were raised that tools to trace links between these products and deforestation may not be ready in time. If approved, the regulation will apply to large companies starting December 30, 2025, and to micro and small enterprises from June 30, 2026, providing a phased approach for effective implementation. The European Council, aligning with the Commission’s position, has scheduled a plenary vote for November 14, with the goal of adopting the regulation and publishing it in the EU's Official Journal by year-end.

2- COP16 on Biodiversity Held in Colombia: Highlights and Challenges

The sixteenth Conference of the Parties (COP16) to the Convention on Biological Diversity took place in Cali, Colombia, from October 21 to November 1. This was the first Biodiversity COP since the signing of the Kunming-Montreal Global Biodiversity Framework in 2022, but it was overshadowed by disappointment. Only 34 of 195 framework signatories submitted actionable plans to meet its goals. The conference was also criticized for not leveraging sufficient resources to address the scale of biodiversity loss, especially as the discussions on resource mobilization were cut short due to delays. This lack of progress is particularly concerning in light of the World Wildlife Fund's October 9 Living Planet Report, which highlights a "catastrophic 73% decline in the average size of global wildlife populations over the last 50 years."

Nonetheless, COP16 saw some breakthroughs. A new global levy on products derived from genetic resources was introduced, creating one of the world’s largest biodiversity conservation funds. Additionally, Indigenous communities achieved a milestone with formal inclusion in the UN biodiversity decision-making process.

3- ESMA Issues 2024 European Common Enforcement Priorities for Corporate Reporting

On October 24, the European Securities and Markets Authority (ESMA) released its 2024 European Common Enforcement Priorities for corporate reporting. Key priorities include a strong focus on sustainability reporting, alongside standards for IFRS financial statements and ESEF reporting.

 For sustainability reporting under the Corporate Sustainability Reporting Directive (CSRD), ESMA emphasizes materiality considerations in reporting under ESRS, the need for well-structured sustainability statements that align with financial statements, and disclosures related to Article 8 of the Taxonomy Regulation. ESMA also clarified that enforcers will take action on any significant misstatements, countering expectations of leniency due to early implementation challenges with the CSRD.
4- Tech Giants Turn to Nuclear Power to Fuel AI Growth Amid Rising Emissions Concerns

Last month, new research from Morgan Stanley projected that data centers powering AI technologies could generate approximately 2.5 billion metric tons of CO₂-equivalent emissions globally by 2030. This finding has amplified concerns over the energy demands of AI, which risk undermining tech companies' sustainability goals. 

In response, Microsoft, a major player in AI technology, formed a team dedicated to reducing cloud and AI emissions and signed a deal with Constellation Energy to restart the Three Mile Island nuclear plant, aiming to source low-carbon energy for its data centers.

Following Microsoft, Google and Amazon also turned to nuclear power this month. Google became the first corporation to purchase energy from small modular reactors (SMRs) under development by Kairos Power. Amazon signed agreements to advance SMR technology in the Pacific Northwest with Energy Northwest and X-energy and in Virginia with Dominion Energy. While these agreements refer to nuclear energy as carbon-free, this designation remains debated due to emissions generated during uranium extraction, transport, and processing.

- Content prepared with the help of Defne Fresko Tasci.

September 2024: New York Climate Week, SEC dismantles ESG Task Force, climate disclosures in Australia & more

Key highlights from September 2024 in the sustainability space.

1- New York Climate Week 2024
The New York Climate Week was held between the 22nd and 29th of September in New York, coinciding with the UN Summit of the Future that took place between the 20nd and 23th of September in the same city. With 100.000 attendees and more than 900 events, the week was significant for the future of global climate goals. As COP29 is expected to see a sharp decline in attendance, due to the host state Azerbaijan's vested interests in oil and gas and the long travel times for US executives, the week is set to be the climate event of the year. During the week, the Climate Group unveiled an urgent 12 month action plan to get the world ‘on-track’ in relation to the climate in just one year. The global to-do list includes seven ambitious actions to deliver on climate commitments, highlighting the fact that the world does not have another year to waste when it comes to the climate crisis. Key takeaways from the week centre around alarm raised as the world breached the 1.5°C warming limit for an entire year for the first time, companies’ regulatory concerns as they ramp up for sustainability related disclosures for the first time in 2025, and geopolitical unrest interfering with the delivery of climate commitments. Other highlights from the week can be accessed here. 

2- SEC dismantles Climate and ESG Task Force

The SEC has quietly disbanded its Climate and ESG Task Force, which was launched in 2021 to address misleading environmental, social, and governance (ESG) disclosures. Initially formed with nearly two dozen staffers, the task force played a significant role in high-profile enforcement cases, including actions against Bank of New York Mellon, Goldman Sachs, and Vale SA. Despite its closure, the SEC emphasized that the expertise developed by the task force has been integrated across its Enforcement Division.

The move comes amid growing backlash against ESG initiatives, with both the SEC and companies increasingly distancing themselves from the term. ESG priorities have been dropped from the SEC’s compliance examiners' focus, and it is uncertain if pending ESG regulations will be finalized before the potential change in SEC leadership in early 2025.

3- Australia passes legislation introducing mandatory climate-related disclosures

On the 9th of September, both houses of the Parliament of Australia passed the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024, requiring in-scope entities to disclose climate-related risks and opportunities in accordance with the relevant sustainability standards (ASRS) starting from January 2025. This introduction is a welcome step in harmonising sustainability related financial disclosures internationally. An interesting inclusion in the bill is a requirement for companies to disclose scenario analyses for a low warming scenario (1.5°C) and a high warming scenario (> or = 2.5°C), tying in with the abovementioned concern around the sustained breach of the 1.5°C warming target in 2024. 

4- California’s Responsible Textile Recovery Act signed into law

On September 22, 2024, California Governor Gavin Newsom signed the Responsible Textile Recovery Act (SB 707), establishing the nation's first extended producer responsibility (EPR) program for apparel and textiles. This law requires manufacturers, distributors, and other producers of apparel and textile products to form or join a producer responsibility organization (PRO) by 2026, shifting the burden of managing end-of-life products to the producers. The program will include creating collection systems, education initiatives, and performance standards, and aims to handle post-consumer textile waste through repair, recycling, and managing chemicals like PFAS.

SB 707 is part of a growing EPR trend in California, which also passed EPR laws for electric vehicle batteries, marine flares, carpet, and paint. As more states and countries adopt EPR frameworks, manufacturers and retailers should closely monitor developments and ensure compliance with emerging regulations.

- Content prepared with the help of Defne Fresko Tasci.