Sustainability update February 2025

2025 has seen a significant shift in the political backdrop for ESG and sustainable investing, with some of the recent drivers of this outlined below. Against this backdrop, we believe it is important to restate our belief that tackling climate change, and the many broader social and environmental challenges facing the world today, is not a political consideration but one grounded in scientific evidence. 

Proper oversight and management of all risks facing the assets we invest in is an essential part of our fiduciary duty to our clients. We remain committed to helping our clients navigate these uncertain times, helping them meet their financial objectives without losing sight of the need to support an orderly transition to a more ecologically sustainable and just world. 

Our engagement with companies, both individually and via collaborative initiatives that are aligned with our own views, remains an important dimension of the positive impact we can create on behalf of our clients. You can read more about our plans in this area in our 2025 Engagement action plan.

“Chilling effect” sees global financial institutions pull back from climate initiatives

Major global banks and asset managers caught between real-world climate risks and escalating political opposition to sustainability are withdrawing from financial sector climate initiatives. Despite the growing environmental costs of inaction, deregulation in the energy sector and the threat of government criticism has created a “chilling effect” among financial institutions less certain about the future of their climate strategies.

In the US, JP Morgan, Citigroup, Bank of America, Morgan Stanley, Wells Fargo and Goldman Sachs have all withdrawn from the UN-sponsored net zero banking alliance (NZBA) which committed members to align lending, investment and capital markets activities with global net zero ambitions by 2050 or earlier. The NZBA previously faced withdrawal threats in 2022 when 19 Republican-led states considered legal action to investigate whether the initiative was forcing US banks to “starve companies engaged in fossil fuel-related activities of credit”. Republican states also combined to sue major asset managers, claiming that pro-climate policies to reduce reliance on coal had inflated energy prices. 

Elsewhere, Jeff Bezos’s $10 billion Earth Fund withdrew its support for the Science Based Targets initiative (SBTi), one of the world’s leading climate certification organisations. Earth Fund was a core founder of the SBTi along with the Ikea Foundation and both accounted for 61% of the initiative’s funding in 2024. Advisers at the SBTi expressed concern that Earth Fund’s withdrawal was indicative of a broader trend of wealthy individuals distancing themselves from causes and initiatives targeted by the Trump administration. 

Political rollback on DEI programmes emphasises the need for diversity, equity and inclusion to evolve beyond good intentions

At first glance, President Trump’s executive order “Ending Illegal Discrimination and Restoring Merit-Based Opportunity” appeared to signal the end for all DEI programmes across federal agencies and the US private sector, however the language of the directive throughout indicated that only “illegal” DEI-related activities were being targeted. 

Ensuring diversity of thought and inclusive working environments remains a crucial business driver, shaped by compelling data, evolving market demands, and shifting workforce demographics, but organisations must focus on efforts beyond tick-box exercises. 

While companies are of course obligated to adhere to legal requirements around DEI, it is important that they take a long-term view on how they manage their workforce. Data-driven research into the business case for diversity consistently demonstrates that companies upholding their DEI commitments through economic downturns often emerge stronger and better positioned for future growth. The cost of abandoning strategies extends beyond short-term savings, potentially impacting talent retention, consumer loyalty, market position, and development prospects. 

To progress DEI in the current environment, companies may need to audit their approach and avoid definitions, hiring cultures and incentive structures that may attract the strongest political and regulatory opposition. This should not prevent companies from continuing with thoughtful approaches to workplace inclusion that look beyond immutable characteristics and focus ensuring teams can draw on a broad range of individual skills, experiences and perspectives.

However companies decide to navigate the DEI backlash, continuing to focus on the inclusion of diverse talent sends a powerful and positive message to workforces, business partners, investors and consumers. Greenbank will continue engaging with companies to understand how they’re managing their DEI commitments in this changing environment.

UK and US refuse to sign declaration on “inclusive and sustainable” artificial intelligence (AI) at landmark summit

Following on from the UK’s 2023 AI Safety Summit, the landmark AI Action Summit in Paris brought together over 1,000 participants from more than 100 countries. Key presentations warned against the environmental and resource impacts of generative AI, highlighted the risk potential for AI-driven productivity to create new global inequalities, and emphasised the importance of safeguarding security and sharing developmental breakthroughs. The French government also announced the launch of a $400 million endowment for Current AI, a mechanism to democratise access to high-quality datasets, invest in open-source AI tools, and measure AI’s wider societal impacts.

A spokesperson for the UK government said the Statement on Inclusive and Sustainable Artificial Intelligence for People and the Planet hadn’t gone far enough to address global AI governance and the technology’s impact on national security.

A key outcome was the Statement on Inclusive and Sustainable Artificial Intelligence for People and the Planet, which outlined priorities such as promoting AI accessibility to reduce digital divides, ensuring AI is ethical and trustworthy, and reinforcing international cooperation for effective AI governance. However, while 60 countries endorsed the final declaration, the UK and US governments refused to. A spokesperson for the UK government said the statement hadn’t gone far enough to address global AI governance and the technology’s impact on national security. The UK’s position coincided with the Department for Science, Innovation and Technology’s decision to rebrand the AI Safety Institute as the AI Security Institute, reflecting a shift in focus from existential risk and bias in AI language models to national cybersecurity and crime prevention. J D Vance, the US vice-president, criticised European “trepidation” over AI development, warned against partnering with authoritarian regimes in a pointed allusion to China, and argued that excessive AI regulation “could kill a transformative industry”.

EU’s Omnibus proposal to reduce the scope of regional sustainability reporting criticised as a deregulation setback

The European Commission’s Omnibus proposal presented itself as a “simplification” of corporate sustainability reporting obligations under legislative measures like the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD), and the Carbon Border Adjustment Mechanism (CBAM). Omnibus aims to limit the scope of companies required to report under the EU Taxonomy, increase the number of company exemptions to relieve them of reporting burdens, and significantly reduce the number of reporting templates. 

Should the vote for Omnibus pass, around 80% of companies originally mandated to report under the CSRD would be exempted – this would also extend to supply chains that fell below revised turnover thresholds. Elements of the CSDDD which required companies to identify and mitigate human rights and environmental risks across their operations and supply chains would be reduced in scope to relate only to “direct business partners”. Civil liability conditions requiring companies to compensate for harm caused by non-compliance under the CSDDD would also be removed, ostensibly to protect businesses from over-compensation in member state jurisdictions. Proposed changes to the CBAM’s threshold for embedded emissions would extend reporting obligation exemptions to approximately 182,000 small- and medium-sized importers. Rules for remaining companies regarding reporting and emissions calculations would also be simplified.

The Commission argued that Omnibus would ease regulatory burdens, increase regional competitiveness, and generate an additional €50 billion in public and private investment. Critics warned that the proposed scale of deregulation undermined climate action, human rights protections and fair trade.