Key news in this edition:
- EU proposes ESG Omnibus to streamline sustainability rules.
- The People’s Pension reallocates GBP 28 billion from State Street, citing ESG priorities.
- Companies recalibrate ESG targets in response to changing regulations and climate policies.
Editorial
Recent shifts in ESG regulations and investment strategies are reshaping corporate and financial landscapes globally, with notable changes in Europe and the US indicating a move towards reduced ESG commitments and more relaxed regulatory frameworks. In the EU, the proposed ESG Simplification Omnibus aims to streamline sustainability regulations by reducing the compliance burden on businesses. While this could foster economic growth, industry observers warn that scaling back mandatory sustainability disclosures may weaken ESG reporting's overall impact.
Meanwhile, in the UK, The People’s Pension's decision to reallocate GBP 28 billion from State Street to Amundi and Invesco highlights the growing divergence between asset managers and long-term investors regarding climate commitments. The move was partly prompted by State Street’s withdrawal from the Climate Action 100+ coalition, demonstrating the increasing weight of ESG considerations in investment decisions, despite political headwinds in the US. These political shifts are evident in the US, where the new administration’s policy rollbacks have prompted several companies to adjust their ESG targets. Major financial institutions, such as Wells Fargo, and corporate giants like Ingka Group (IKEA), have recalibrated sustainability goals in response to changing regulatory landscapes. The uncertainty surrounding long-term policy direction indicates that companies must find a balance between adapting to regulatory changes and meeting stakeholder expectations when managing their ESG commitments.
At the same time, new players are entering the ESG space. The Tadawul, Saudi Arabia’s stock exchange, recently listed its first sustainable ETF, signalling growing regional interest in sustainable finance. This aligns with global trends that indicate ESG’s increasing mainstream adoption, particularly in emerging markets seeking to attract international investors through enhanced transparency and reporting standards. Similarly, Thailand's government has introduced reforms to boost ESG investment, including tax incentives for transitioning to sustainable funds. This shows a broader trend of emerging markets aligning with global ESG standards to attract investment through enhanced transparency and reporting.
As policies and regulatory landscapes evolve, sustainability continues to be a key focus for investors and businesses. As a result, companies must stay vigilant and monitor ESG developments to manage emerging risks and seize new opportunities.
EU proposes ESG Omnibus to streamline sustainability rules
On February 26, the European Commission unveiled the EU Simplification Omnibus, a legislative initiative intended to streamline ESG regulations, in order to bolster the EU’s global competitiveness. The initiative is set to include amendments to several EU ESG directives and mechanisms introduced in recent years, including the Corporate Sustainability Reporting Directive (CSRD), Corporate Sustainability Due Diligence Directive (CSDDD), the Carbon Border Adjustment Mechanism Regulation (CBAM) and the InvestEu Regulation. The changes are principally focussed on reducing the regulatory burden on business, in order to spur economic growth. This initiative has been introduced within a wider context of long-term low economic growth within the EU, economic repercussions of prevailing conflicts, the aggressive trade policy approach of the new US government, as well as the growing pressure from right-wing parties throughout Europe to deregulate and focus on economic imperatives. The initiative is currently in draft form, and open to amendments from the European Parliament and Member States, with no indication yet as to when it might be formally adopted as law.
So what?
If the proposed changes are enacted into law, the Simplification Omnibus would have significant implications for ESG reporting. In some respects, the adjustments will be a welcome change, particularly for small- and mid-size companies which will be relieved of mandatory sustainability disclosures. However, industry observers have raised concerns that a softer approach to sustainability reporting will undermine the legislation’s ability to bring about meaningful change, and will reduce the breadth of ESG data available. Nevertheless, the amended regulation still encourages companies to engage in ESG reporting on a voluntary business, premised on the fact that ESG analysis and reporting can help businesses to identify potential risk areas and build proactive mitigation strategies, that are ultimately good for business regardless of the legislation.
S-RM Director of ESG, Kendall Reid, has discussed the Simplification Omnibus and its specific adjustments in further detail here
[Contributor: Emma Shewell]
The People’s Pension reallocates GBP 28 billion from State Street, citing ESG priorities
The People’s Pension, one of the largest UK pension funds, removed GBP 28 billion (USD 36 billion) from State Street, the US-headquartered global asset managing company. The funds have been re-invested with Amundi, the French-headquartered asset managing company, and Invesco, the US-headquartered independent investment management company. Amundi has reportedly been tasked to manage GBP 20 billion (USD 25.8 billion) of the funds in “passive developed market equities”. Invesco is to manage the remaining GBP 8 billion (USD 10.32 billion) through “active fixed income investments”. The remaining funds in the People’s Pension portfolio, some GBP 5 billion (USD 6.45 billion) will continue to be managed by State Street.
One of the catalysts for this change is that State Street is among many large Wall Street firms to withdraw from the Climate Action 100+ coalition, an investor-led initiative the with aim of ensuring “the world's largest corporate greenhouse gas emitters take appropriate action on climate change”. The chair of trustees for The People’s Pension, Mark Condron, said spoke about the move and said: “By selecting Amundi and Invesco, we have chosen to prioritise sustainability, active stewardship, and long-term value creation for our near seven million members.”
So what?
This divestment is another escalatory step in the divergence between the approaches of long-term investors and large asset managers on how to approach and reverse climate change. The move comes amid moves away from sustainability and DEI by the current administration in the US. It remains to be seen if this reinvestment will set a precedent for other pension and investments funds.
[Contributor: Nickolas Bruetsch]
Companies recalibrate ESG targets in response to changing regulations and climate policies
As highlighted in the previous issue of ESG Watch, the US President Trump’s recent executive orders signaled a clear departure from the previously set ESG goals. His rollback of climate policies along with the withdrawal from the Paris Agreement, was followed by the suspension of climate initiatives; and several major US banks – including Citi, Bank of America, and Goldman Sachs – quitting the Net Zero Banking Alliance, a UN-backed coalition of financial services companies focusing on net zero alignment. Last month, the rollback trend has continued with several major companies having announced revisions of their ESG targets, including Wells Fargo, a US multinational financial services firm, and Ingka Group, the group operating the Swedish furniture retailer IKEA, along with other companies pulling back from their DEI programs.
Wells Fargo, announced that it is removing its goal of achieving net-zero emissions across its financed portfolio by 2050, stating that the initial goal had relied on many factors “outside of their control”. On the other hand, Ingka Group announced that they have revised their goal of making all IKEA home deliveries by zero emission vehicles by 2025, and that they now aim to achieve more than 90 percent of home deliveries made by zero-emissions vehicles by 2028. Ingka Group cited reasons such as significant increase in online shopping and the lack of charging infrastructure for EVs for the revision, several days after the President Trump suspended the USD 5 billion National Electric Vehicle Infrastructure program. These revisions reflect how firms from different sectors are now adapting their ESG initiatives amid the new political reality in Washington.
So what?
Many firms have started adapting their ESG targets, or removing their DEI programs amid the change in the political sentiment towards ESG in the US with the new Trump administration. However, the risks the ESG initiative try to tackle remain, alongside stakeholder demands. There is always a possibility that the companies pulling back from ESG targets could face repercussions, should the political sentiment swing back.
[Contributor: Elif Korca]
Saudi stock exchange enters ESG space with first sustainable ETF listing
In February 2025, the Tadawul, the Saudi Arabian Stock Exchange, listed its first ESG exchange-traded fund, launched by Yaqeen Capital, a Saudi investment company. The fund, Yaqeen S&P ESG MENA ETF was launched with USD 2.7 million in assets under management. According to Yaqeen Capital’s head of asset management, the company expects to see a huge increase in ESG-focused funds, impact investments, and green bonds in line with the current global trends.
ESG has largely shifted from a subcategory for niche investors to a more mainstream investment, highlighted by the fact that the global pool of assets under management is estimated to reach over USD 34 trillion by 2026. According to the Saudi Investment Minister, Khalid Al Falih, the Tadawul is reportedly working closely with the London Stock Exchange to promote green finance and ESG to promote better transparency, sustainability, and reporting – to ultimately increase the amount of global capital flowing into the Kingdom.
So what?
This move indicates that markets not historically deeply involved with ESG initiatives are now interested in exploring the values of sustainability, transparency, and increased reporting, and the cash-flow impacts that these initiatives can have in historically opaque markets, especially for risk-averse investors.
[Contributor: Haddie Hamal]
Thai government implements ESG-focused investment reforms to revitalise economy
In February 2025, the Thai government announced new ESG investment regulation reforms following the success of its initial ESG product platform launched in January 2023. These reforms, launched in partnership with the Federation of Thai Capital Market Organizations (FETCO) and aimed at boosting ESG investment practices, is focused on the Long-Term Equity Fund (LTF), a group of equity funds heavily invested in companies listed on the Stock Exchange of Thailand.
Thai finance minister, Pichai Chunhavajira, announced that prospective and existing domestic investors will now have access to integrated information about Sustainable and Responsible Investing (SRI), including the details of tax-benefit products like Retirement Mutual Funds (RMF), Super Savings Funds (SSF), and Thai ESG funds. These updates are available daily and include the assets of specific funds, fund counts, and even participating asset managers.
To further stimulate the economy, the Thai cabinet approved the “ESG Extra Tax Deductible Fund – LTF” initiative, allowing investors who transition their investments from LTF to the new ESG Extra fund to qualify for tax deductions of up to THB 900,000 (approximately USD 26,568) in 2025. The move aims to encourage long-term investment in key sectors, provide attractive tax incentives, and stabilize the domestic stock market during a period of global economic uncertainties.
These measures come amid signs of stagnant economic growth and a struggling local stock market, with the Stock Exchange of Thailand index falling to its lowest level since April 2020. Foreign investors have sold THB 26 billion (approximately USD 767.6 million) worth of Thai equities this year. The government hopes that these reforms will promote sustainable and high-growth investments, thereby supporting the economy and enhancing the investment landscape for Thai savers.
So what?
This new investment framework signals an effort to improve domestic investor confidence and economic growth, while also contributing to governmental carbon-neutral investment strategies and encouraging citizens and corporations to choose sustainable finance products where possible. These regulations will continue to reinforce both the demand for improved market transparency and the country’s move towards addressing the sustainability of capital market investment.
[Contributor: Emma van der Walt]
