ESG+ Newsletter – 27 February 2025

European Commission unveils Omnibus proposals for sustainability regulation

The European Commission has introduced the first Omnibus Simplification Package, proposing major amendments to streamline sustainability regulations and reduce administrative burdens. The package primarily affects the CSRD, CSDDD, EU Taxonomy, and Carbon Border Adjustment Mechanism (CBAM). Key changes include raising CSRD reporting thresholds to companies with over 1,000 employees and €50 million in turnover, eliminating sector-specific standards, and limiting value chain data collection. The CSDDD amendments reduce corporate due diligence obligations to direct business partners, extend compliance timelines, and remove civil liability for non-compliance. Additionally, EU Taxonomy reporting becomes voluntary for firms below €450 million in annual revenue, and CBAM introduces exemptions for small importers. 

The proposal largely aligns with a recently leaked draft, as reported by Responsible Investor, which points to a significant rollback of sustainability obligations. However, some significant alternations from earlier versions — such as abandoning double materiality in CSRD — were not included in the final text. While the package maintains key principles, it drastically reduces the regulatory burden on businesses. The European Parliament remains divided, with some viewing it as a shift toward deregulation rather than simplification. Negotiations over the coming months will play a key role in shaping the final outcome of the legislative process. 

Vanguard faces anti-ESG backlash while gathering fund board votes

A group of Republican state treasurers plans to withhold votes for Vanguard fund board nominees, criticising the firm’s choices as “tone-deaf” on sustainability matters given recent legal, legislative and regulatory changes in the US. Reuters reports that while their objections are unlikely to sway the election outcome, it is demonstrative of the political pressure on asset managers regarding ESG concerns. Though Vanguard has rolled back its boardroom diversity guidance, pulled out of the Net Zero Asset Managers (NZAM) initiative, and promised a more hands-off role with banks, Vanguard has been criticised for its choice of directors, some of whom are seen as supporting climate risk and diversity initiatives.

What is the future of ESG in Canada?

In the context of the US trade war with Canada and the American anti-ESG sentiment, the latest episode of The Globe and Mail’s the Decibel podcast discussed the uncertainty surrounding ESG in Canada. Big banks in Canada have left the Net-Zero Banking Alliance, which was perhaps to be expected given that Canadian banks work a lot in the US; however, it seems that individual efforts to meet sustainability targets will continue. This in part is due to the fact that the Canadian Securities Administrators (CSA) demands that banks report on climate risks. While Canadian businesses are less vocal about ESG goals; ESG risk management tools, and sustainability and diversity concerns have been integrated into how Canadian companies do business. In 2024, 95% of companies listed on the TSX Composite Index published some form of ESG, sustainability or climate action transition report – and in 4/5 of cases included ESG, sustainability, climate or environmental in their overall skills inventory of board of directors. Interestingly, 59% of companies tied a portion of executive pay to meeting climate targets. 

Inevitably, the US anti-ESG sentiment, as well as the building anti-Americanism in Canada, will have an impact on sustainability matters. There has been a renewed interest in building oil and gas pipelines in Canada as part of a reaction to the Canada-US trade war. Yet, it is also possible that growing anti-American sentiment could lead to a greater adoption of ESG principles in business in order to differentiate Canadian companies from American businesses. As the first piece of Canadian anti-greenwashing legislation and the first Canadian Sustainability Disclosure Standards were published in 2024, it seems unlikely that the tide will turn completely against ESG this year in Canada. 

Investors back DEI policies in the US despite continuing political pressure

Much of the ESG discourse to start 2025 has been on the pushback against DEI policies, particularly in the US. As covered in this newsletter recently, the change in administration in the US has led to US companies scaling back or evolving DEI initiatives and diversity policies. However, this week two proposals at leading US company’s to end aspects of its DEI policies were overwhelmingly voted down by their shareholders. Two resolutions put forward at the respective AGMs of Apple and Deere by conservative groups were rejected by over 97% of shareholders. However, in the aftermath of the vote, US President Trump called on Apple to again scrap its DEI policies, indicating that there could be federal investigations by his government into what he views as policies that are discriminatory and that violate the law.

Some will view these voting outcomes as vindication for companies to stand behind their diversity commitments. However, President Trump’s post vote commentary indicates that, while companies may have support from their shareholders, they will continue to face political pressure. Companies will have to strike a balance with DEI policies, ensuring that they are aligned with core business objectives to ensure they don’t land their businesses and reputations in the crosshairs US politics.

Female representation at UK board and management levels continues to improve

This week, the FTSE Women Leaders Review — an independent, business-led framework supported by the UK Government — released its annual report, highlighting continued progress in female representation across the boards and senior leadership teams of large UK companies. At the end of 2024, women held 43.4% of board seats in the FTSE 350 Index, up from 42.1% the previous year and 29.6% five years ago. Similarly, the proportion of women in senior leadership teams within FTSE 350 companies reached 35.3% in 2024, compared to 34.5% in 2023 and 28.2% in 2019. Pessimists may note the slower progress in leadership teams compared to boards and the slim chances of reaching the 40% target set for 2025, the final year of the review. However, amid a flood of anti-ESG and anti-DEI news—mainly from the US—it is encouraging to highlight some positive momentum. 

ICYMI 

• The New Zealand parliament is debating a bill aimed at preventing financial institutions from refusing their services on businesses on ESG grounds, according to Responsible Investor. 
• Several Chinese SAF plants are delaying startup due to a lack of government policy guidance, limiting their ability to market the fuel domestically or for export. Following reports last May that investments were to exceed $1 billion to build China’s first plants, companies were hoping for government mandates by the end 2024 to blend 2-5% SAF with traditional jet fuel by 2030, however these regulations have yet to be announced.
• India expects its compliance carbon market to be launched by mid-2026, Environmental Finance reports. The policy, which will impose tariffs on high-emitting imports to the bloc, will likely have a significant impact on India’s steel sector, among others.