Another ESG Rebrand?

Tim Mohin
07 Mar

What’s in this week’s newsletter:

Under political pressure, investors are rebranding ESG to resilience.
More US climate policies are rescinded while tariffs and budget cuts also take a bite.
The energy transition, driven by economics, is largely immune to politics.
The EU weakens vehicle emissions, and US Republicans weigh in on the Omnibus.
Biodiversity (COP16) agreement yields a $200 billion fund for nature by 2030.

Sustainability, impact investing, responsible business, transition finance, energy pragmatism, and now “resilience” have all been floated as the next rebrand for the now weaponized abbreviation ESG (Environmental, Social, and Governance). Resilience is the new term financial institutions are using as they feel pressure to rebrand their sustainable investing, but will it stick?

And the pressure is real. Large asset managers and banks have been leaving net-zero groups under threats of legal action from Republican Attorneys General. Now, there are more threats for firms that left the net zero groups but maintained their corporate climate goals. This pressure found its first victim this week, with a major US bank dropping its net-zero goal.

Companies from all sectors are shifting their rhetoric toward business value. With the practice of greenhushing at an all-time high, Jennifer Holmgren CEO of carbon capture firm Lanzatech said, “I think we have to stop talking about, ‘Everything we do is climate change,’ because it’s almost like there’s a visceral reaction to those words, this isn’t a good time to put a red flag in front of the bull.”

Pressure is also coming from the US Securities and Exchange Commission (SEC), which has done a full 180 under the Trump administration. Instead of proposing climate disclosure rules for listed companies, the SEC is now imposing onerous regulatory requirements on asset managers deemed to be influencing companies on environmental, social, and governance issues.

The new SEC guidance is causing uncertainty for asset managers regarding engaging their portfolio companies. Danielle Fugere of As You Sow said, “US stock markets are the largest [in the world] because the rules are clear. [The new guidance] increases risk and potentially impacts the ability of companies to find investors."

Despite political pressure, investors still need to consider material climate and other sustainability risks/opportunities regardless of branding. As Marisa Drew, at Standard and Chartered, said, “What we’re seeing in response to these devastating [natural disasters] is growing demand for investment in resilience, to mitigate economic losses caused by extreme weather events.”

Some asset owners are pulling funds from investors that fail to consider ESG factors, especially long-term investors, like pension funds. The first example is one of the UK’s biggest pension funds, which took $28 billion from State Street because of their lack of consideration for ESG factors.

More US Climate Policies Axed

The Trump administration accelerated its attack on US climate policies in the last week.

A Biden-era methane fee, which charged oil and gas companies for emitting this potent greenhouse gas, was canceled by Congress. The President also announced expanded logging in National Parks, potentially removing vital carbon sinks from protected lands.

Federal employee layoffs and slashed budgets are also having an impact. Agencies like the National Oceanic and Atmospheric Administration (NOAA), the Federal Emergency Management Agency (FEMA), and the Environmental Protection Agency (EPA) have been hit hard, lessening the US capacity for warning and recovery from extreme weather events. And new tariffs have increased the costs of wind turbines, solar panels, and batteries, which are mostly made in China.

Energy Transition Unstoppable

While investors and corporations debate what to call sustainability and climate policies are gutted, the momentum of the clean energy transition is unstoppable. Cost reduction and technical advances in solar, wind, and batteries make the energy transition an economic imperative, not a political issue.

Refering to the potential the Trump administration might have on the energy transtion Biden's Senior Climate Adviosr John Podesta said, “Will they kill the direction from fossil to clean? They can’t really do that. They can make a mess of things, and they’re doing that. They can slow things down, but they can’t kill it.”

Research released this week from the American Clean Power Association found that 94% of all new US energy capacity in 2024 was clean energy. It also found that red states are leading the way in the adoption of clean power.

While the U.S. government attempts to slow clean energy, China reaffirmed its leadership by announcing a raft of new projects both domestically and in developing nations - further cementing its dominance in the energy transition.

More EU Streamlining, US Weighs In On Omnibus

After last week’s “omnibus” proposal to streamline the EU Green Deal, the EU relaxed its fleet emissions limit rule for automakers. After a slowdown in EV sales, EU automakers have had to buy emissions credits from EV carmakers like Polestar to avoid fines. Now, under new proposals, automakers would be given an additional 2 years to meet this year's emissions limits. A move environmental groups say would reward laggards and reduce EV competitiveness.

On the same day that last week’s Omnibus proposals were released, prominent House and Senate Republicans sent a letter to the Trump administration asking them to weigh in on the Corporate Sustainability Due Diligence Directive (CSDDD). The letter claimed the CSDDD would undermine US ‘jurisdictional sovereignty’ and it poses a risk to US competitiveness. The letter requested the Trump administration to support proposals to delay and asserted that CSDDD’s extraterritorial nature is untenable.

Biodiversity Breakthrough

Negotiators managed a last-minute deal for a $200 billion/year fund for nature protection and biodiversity. The deal starts with $20 billion for nature protection in 2025 and increases by $30 billion each year until 2030, with the aim of protecting 30% of nature and restoring another 30%. Linda Krueger of the Nature Conservancy said, “At a complicated geopolitical moment, this is an exciting show of progress and international cooperation for nature.”

This is the first multilateral meeting on environmental action that has ended positively in months and builds momentum heading into the international climate meeting (COP30) in Brazil later in the year.

The views expressed on this website/weblog are mine alone and do not necessarily reflect the views of my employer.

Other Notable News:

Sustainability Research

A new report found that senior executives consider the ESG performance of future employers more than junior employees, with 41% of execs saying they consider ESG reputation when selecting a job and that 43% are willing to take a pay cut to work with a high performer.

Energy Transition

Lack of energy storage and transmission infrastructure is causing high percentages of clean energy to be wasted, resulting in volatile energy prices.
As the US government steps back from renewable investing, big business is stepping up. Long-term power purchase agreements were up 35% last year, giving renewable developers the upfront funds required for the CapEx costs for clean energy projects.

Sustainability Regulations

Japan has released three new ISSB-aligned sustainability reporting standards. One is for climate-related disclosures, one is for general sustainability disclosures, and another details how to apply the standards. The standards are expected to be used in mandatory reporting for listed Japanese companies in the coming years.

Global Weirding

February was the third hottest February of all time, making it the first month not to be the most or second-most warm month since June 2023.
The world’s strongest ocean current, the Antarctic Circumpolar Current, could slow down by 20% by 2050 under high-emission scenarios. A slower current in Antarctica would create a cascade of climate uncertainty, glacial melting, and biodiversity loss.

Carbon Markets

Climate software company Watershed announced an RFP to add one megaton of carbon removals to their portfolio.

Biodiversity

The Science Based Target Network (SBTN), which validates science-based nature targets, has now opened its validation service.

Notable Podcasts:

I was featured this week on Nathan Senthil’s Business & Society podcast. Together, we discussed how to navigate the new sustainability landscape. The conversation focuses on why companies should stick to their values, how companies can articulate their ESG policies and performance, and how to engage stakeholders on sustainability.
This week’s episode of Bloomberg’s Zero: The Climate Race podcast is titled “Why (Almost) Everyone Hates ESG Right Now” and is on the same theme as our newsletter this week. It looks at the history and future of Environmental, Social, and Governance, and why companies are now facing a backlash and are rebranding or keeping quiet about sustainability.

Notable Jobs:

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