ESG Corner- January 2025

31, January 2025

IN THE NEWS

This section focuses on key developments globally, in the US, India, and the Middle East. It dissects the most recent news and analyzes its potential to influence regional landscapes, businesses, and consumers. Uniqus provides insights into how these developments may shape current market dynamics and set the stage for future opportunities and challenges.

Global

1. IOSCO’s GEM Committee launches a dedicated Network to support its members in the adoption or other use of ISSB Standards

The International Organization of Securities Commissions (IOSCO) has launched the Growth and Emerging Markets Committee (GEMC) Network for Adoption or Other Use of ISSB Standards, a dedicated network to support emerging markets in adopting the International Sustainability Standards Board’s (ISSB) sustainability reporting standards. The network aims to enhance international consistency and comparability of climate-related and sustainability disclosures for investors. It will support the implementation of the ISSB standards, facilitating information sharing and market readiness assessments. The alignment of emerging markets to global sustainability disclosure standards will help connect participants in these markets to global capital.

2. EFRAG Releases Sustainability Reporting Standard for Small Companies

The European Financial Reporting Advisory Group (EFRAG) has released a voluntary sustainability reporting standard tailored for non-listed small and medium-sized enterprises (SMEs) that do not meet the thresholds for the Corporate Sustainability Reporting Directive (CSRD). This initiative aims to simplify and standardize ESG reporting for these companies, enabling them to meet the growing demand for sustainability information from larger corporations and financial institutions and enhance their access to business and financing opportunities. The standard removes the obligation to conduct a materiality analysis, which can often challenge SMEs due to high complexity and cost. EFRAG plans to support the implementation of this standard through guides, educational materials, and awareness-raising events in 2025.

Uniqus’ POV

The introduction of the Green Steel Taxonomy marks a significant step toward promoting low-carbon steel production in India. By setting clear emission thresholds and encouraging innovation, this initiative creates a pathway for the steel industry to reduce its carbon footprint. Including certifications and star ratings enhances accountability, motivating plants to meet stringent environmental standards. While this is a strong start, expanding the emissions’ scope and ensuring robust monitoring systems will be essential for long-term success. This effort demonstrates India’s determination to balance industrial growth with sustainability and global competitiveness. This is especially crucial, as steel is one of the most carbon-intensive industries, accounting for almost a tenth of worldwide emissions annually.

US

1. Outgoing Biden Administration Sets New 2035 US Climate Goal – Incoming Trump Administration Will Make Ambitions Difficult to Achieve

In December 2024, the outgoing Biden administration announced a new climate goal for the United States: reducing greenhouse gas emissions by 61% to 66% from the 2005 baseline levels by 2035. This target is part of the updated US Nationally Determined Contribution (NDC) under the Paris Agreement, which requires countries to update their climate action plans every five years with increased ambition. This new 2035 target builds upon the current US NDC, which aims for a 50% to 52% reduction in emissions by 2030.

2. New York to Fine Fossil Fuel Giants USD 75 Billion Under New Climate Superfund Law

New York State has enacted a new law to fine fossil fuel companies USD 75 billion over the next 25 years to address climate change damages. Governor Kathy Hochul signed the legislation to shift financial responsibility for climate-related impacts from taxpayers to fossil fuel companies. Fines will be assessed based on greenhouse gas emissions released by fossil fuel companies from 2000 to 2018, targeting companies responsible for over 1 billion tons of global emissions.

3. G&A’s 2024 Trends Report: The Few Remaining Non-Participants in ESG Reporting

The Governance & Accountability (G&A) Institute recently released its 2024 Trends Report highlighting current practices in sustainability reporting from companies listed in the Russell 1000 Index. The report reveals that 93% of Russell 1000 companies published sustainability reports or disclosures in 2023, leaving only 7% non-participants. Notably, 90% of non-reporting companies are in the smaller half of the Russell 1000 Index, indicating that larger companies are more likely to engage in sustainability reporting. The report also highlights sector-specific variations, with the Materials and Utilities sectors achieving 100% reporting rates, while the Communication sector had the highest non-reporting rate at 36%.

Uniqus’ POV

At the nexus of state, federal, and corporate levels, ambitious climate- related initiatives are emerging, but their potential impacts remain uncertain. New York has become the second state to enact a law fining fossil fuel companies, representing a historic attempt to shift the financial burdens of climate damages. By targeting companies responsible for over 1 billion tons of historic emissions, the state aims to hold the industry accountable for its role in the climate crisis. Yet, implementing the law isn’t guaranteed, as fossil fuel producers are already preparing for legal challenges. Critics may question whether the fines, which are set to be paid out starting in 2028, will ever be collected, whether the fines will survive in court, or whether the funds will come soon enough to address the growing tolls of climate change. A potential unintended consequence, furthermore, is that these fines will lead to higher costs for companies, which could ultimately be passed on to consumers through higher prices, ultimately defeating the original purpose of the laws to align with the ‘polluter pays’ principle.

India

1. India launches world’s first green steel taxonomy, aims to cut emissions to 2.2 tCO2 by 2030

India has launched its first-ever Green Steel Taxonomy, unveiled by Union Minister Shri H.D. Kumaraswamy. The taxonomy defines “Green Steel” based on carbon dioxide equivalent emissions per ton of finished steel (CO2e/tfs), with star ratings assigned to steel based on emission intensity. Steel plants achieving lower emissions earn higher ratings, with those exceeding 2.2 t-CO2e/tfs not eligible for certification. The framework includes Scope 1, Scope 2, and parts of Scope 3 emissions, and will be reviewed every three years by policymakers. The initiative aligns with India’s commitment to decarbonizing the steel sector, complemented by draft policies for stakeholder consultation.

Uniqus’ POV

2. India’s Renewable Energy Leadership: 2024 Achievements and Vision for 2030

India made historic progress in renewable energy (RE) in 2024, achieving 214 GW of non-fossil fuel energy capacity by November, representing 14% annual growth from the prior year. Key developments included adding 27 GW RE capacity, reaching 94.17 GW solar and 47.96 GW wind capacity. Initiatives like PM Surya Ghar: Muft Bijli Yojana enabled 7 lakh rooftop solar installations in 10 months. The INR 19,744 crore National Green Hydrogen Mission also advanced India’s green hydrogen leadership with a 4.12 lakh TPA target by 2030. Policies like mandating locally manufactured solar cells from 01 June 2026 and Viability Gap Funding for offshore wind projects promote self-reliance and innovation. India’s global partnerships, including a Green Ammonia export deal with Japan, strengthened its position as a leader in the energy transition, setting the stage for its 500 GW goal by 2030.

Uniqus’ POV

India’s renewable energy achievements in 2024 signify more than just numbers—they demonstrate a strategic policy shift toward energy security, self- reliance, and global leadership. The mandate for locally manufactured solar cells from 01 June 2026 is a decisive move to reduce import dependency, particularly from China, while boosting domestic manufacturing capacity. However, ensuring competitive pricing and scaling up production will be critical to its success.

Middle East

1. Oman to set up ‘Net Zero Centre’ to drive 2050 carbon neutrality goals

The Ministry of Energy and Minerals issued Ministerial Decision No. (35/2024) establishing the Oman Net Zero Centre. The move aims to support the Sultanate of Oman’s efforts to reach net zero greenhouse gas emissions by 2050. The Oman Net Zero Centre will undertake a crucial role in expediting the implementation of net zero initiatives and supporting all sectors in achieving their objectives, as outlined in the National Net Zero Strategy.

Uniqus’ POV

In 2022, Oman committed to achieve net zero emissions by 2050. Since then, the Sultanate has shown progress in establishing initiatives and policies to ensure a smooth transition to achieving net zero. The decision to establish the Oman Net Zero Centre aims for it to supervise and follow up on plans and programs in the Sultanate. This will actively contribute to energy efficiency and support relevant entities in reaching net zero in alignment with the country’s target. The Centre will actively contribute to defining and refining Oman’s net zero strategy, collaborating with relevant authorities to ensure alignment with national objectives.

IN-DEPTH ANALYSIS

This section delves deep into significant ESG development, offering comprehensive insights and a nuanced perspective. We break down the critical facets of this development, analyzing its implications for businesses, investors, and regulators. Our in-depth analysis clarifies the potential impact on global markets and how this change may influence strategic decisions across sectors. Join us as we explore this development, shedding light on the opportunities and challenges in the evolving ESG landscape.

Canadian Sustainability Disclosure Standards (CSDS)

The Canadian Sustainability Disclosure Standards (CSDS), in December 2024, were developed to meet growing demands for transparency and comparability in sustainability reporting for Canadian companies. The Canadian Sustainability Standards Board (CSSB) spearheaded this initiative, engaging various Canadian stakeholders – including policymakers, corporations, investors, NGOs, civil society, and indigenous groups – to improve the quality of sustainability-related disclosures among Canadian businesses. CSDS is based on the IFRS Sustainability Disclosure Standards (IFRS S1 and S2) of the International Sustainability Standards Board (ISSB), which provide a voluntary global baseline for sustainability reporting. The CSDS integrates frameworks like the Sustainability Accounting Standards Board (SASB) and aligns with the Global Reporting Initiative (GRI), ensuring compatibility with international standards while addressing Canadian-specific contexts and priorities.

IN CONVERSATION WITH ESG PIONEERS

The National Investment and Infrastructure Fund (NIIF) is a collaborative investment platform for international and Indian investors anchored by the Government of India. Through its funds, NIIF manages over USD 4.4 billion in assets. We interviewed Mr. Ashok Emani, Director & Head – ESG at NIIF. Mr. Emani has over 27 years of experience in applying ESG and Sustainability considerations across the financial sector, consulting, and research. He heads the NIIF’s approach to investing responsibly for impact while working closely with investors, investment champions, and company management to assess and manage ESG risks & impact, opportunities, and value add. Mr. Emani is a member of the ESG working group at the Global Infrastructure Investors Association (GIIA).

REGULATORY WATCH

Regulation around ESG continues to evolve rapidly. This section summarizes some of the latest regulatory developments across critical global markets, including the US, EU, UK, India, and the Middle East. Our analysis captures the nature of the legislative changes or updates and our high-level assessment of broader implications on business practices and compliance strategies.

CSRD UPDATES

In recent weeks, significant developments have unfolded regarding the European Union’s Corporate Sustainability Reporting Directive (CSRD), a key regulatory framework to enhance corporate transparency in sustainability. These updates have far-reaching implications for EU-based organizations and international companies with regional operations in the EU.

EFRAG’s Draft Guidance:

The European Financial Reporting Advisory Group (EFRAG) has unveiled a draft of its Transition Plan Implementation Guidance, offering a comprehensive framework to integrate climate transition plans into an organization’s core strategy. This guidance underscores the critical need for businesses to provide regular updates on implementing these plans, ensuring transparency and accountability. In addition to addressing climate objectives, the draft highlights the importance of incorporating social and biodiversity considerations into transition plans, recognizing their interconnectedness with sustainable development goals. EFRAG plans to open a public consultation on the draft in early 2025, inviting stakeholders to provide feedback. The final version is expected to be published by March 2025, setting the stage for enhanced corporate climate action.

Member State Transpositions:

The deadline for European Union (EU) member states to transpose the CSRD into national law was 06 July 2024. As of mid-January 2025, the pace of implementation varies significantly across Europe, reflecting differing legislative priorities and approaches. Several countries have made notable progress. For instance, Belgium, Poland, and Slovenia have approved the necessary legislation, with Poland finalizing its law on 06 December 2024 while adjusting financial thresholds to the Polish zloty (PLN). Sweden’s implementing legislation took effect on 01 July 2024, requiring initial reports for financial years starting after 30 June 2024. Meanwhile, Greece and Spain have introduced draft laws currently under review. However, other nations are lagging. Austria, Malta, Portugal, and Iceland have yet to begin formal consultations, highlighting the uneven pace of adoption across the region. As the 2025 reporting deadlines approach, European businesses must stay informed on national-level legislation to ensure compliance.

Germany’s Implementation Status:

As of late December 2024, Germany has faced delays in transposing the Corporate Sustainability Reporting Directive (CSRD) into national law. This delay poses significant challenges for businesses required to prepare sustainability reports for the 2024 financial year, leaving companies uncertain. Despite the absence of finalized national legislation, German enterprises are strongly encouraged to align with EU-level requirements and the European Sustainability Reporting Standards (ESRS) outlined in the directive. Adhering to these standards proactively will help ensure compliance and minimize risks when the national framework is eventually formalized. In response, auditors and advisory firms emphasize the importance of early preparation.

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