Hundreds of Companies Have to Meet ESG Goals This Year or Pay Up
By and Ethan M Steinberg
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A growing number of companies are facing deadlines for sustainability commitments they made to lenders years ago, testing a key corner of the market for ESG debt.
More than 250 bonds globally will face deadlines this year to either meet their sustainability performance targets or face a coupon step-up, according to the Anthropocene Fixed Income Institute. That's up from the roughly 24 securities facing such deadlines last year, setting the stage for a potential rash of step-ups.
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Forbes
7 hours ago
- Forbes
What Executives Need To Know About The State Of Sustainability Reporting In July 2025
ESG environment social governance investment business concept. Sustainability has dominated the conversation in the corporate world over the past few years. Sustainability reporting; environmental, social, and governance reporting; and climate related-risk reporting were poised to be new standards alongside other financial reporting requirements. However, elections around the world shifted political leadership to the right, resulting in a"green backlash." The future of sustainability reporting is being reevaluated and debated. With so many moving pieces in jurisdictions around the world, it is difficult to know what to watch. Below are key developments that occurred leading up to June and to watch for in July. U.S. Department of Labor Under powers delegated to them under the Employee Retirement Income Security Act, the Department of Labor regulates what factors fund managers can consider when investing retirement funds. In 2020, under Trump, the DOL issued a rule that said investments should be made based on 'pecuniary factors' only. In 2022, under Biden, the DOL issued a new rule saying that investments can consider ESG as a tiebreaker. The 2022 rule allows for the consideration of ESG factors, if, and only if, they are going to make the investment more profitable. The Trump Administration is seeking to reverse the 2022 rule. However, any action created through rulemaking can only be reversed through the same rulemaking April 25, an attorney for the DOL gave notice to the Court of the department's intent to reverse the rule. On May 28, the DOL filed an update, stating the "Department has determined that it will engage in a new rulemaking on the subject of the challenged rule. This rulemaking will appear on the Department's Spring Regulatory Agenda, and the Department intends to move through the rulemaking process as expeditiously as possible.' The posting of regulatory agenda is the first step to the rulemaking process, providing official notice to the public that an agency intends on creating, editing, or rescinding a rule. The DOL will release the 2026 Spring Regulatory Agenda in July. Prepare for the new rule to be released in early 2026, with a comment period in the summer. U.S. Securities and Exchange Commission In March 2024, the U.S. Securities and Exchange Commission adopted the Climate-Related Disclosure Rule to require large publicly traded companies to disclose climate action, greenhouse gas emissions, and the financial impacts of severe weather events. The rule was immediately met with legal challenges and was delayed while the court heard the cases. The lawsuits came from both sides. In February, acting SEC Chair Mark Uyeda began the process to permanently end the rule. At the time, he asked the court for a delay in the proceedings while the SEC takes action to rollback the Climate-Related Disclosure Rule. In March, the SEC officially voted to end their legal defense of the rule. As with the DOL, the reversal of the Biden era rule must go through the rulemaking process. The SEC will also release their 2026 Spring Regulatory Agenda in July, expect the Climate-Related Disclosure Rule to be on the list. Prepare for the new rule to be released in early 2026, with a comment period in the summer. On June 12, the SEC gave notice the are withdrawing a number of proposed rules that were still in the process of being drafted. Most notably, the 2022 'Enhanced Disclosures by Certain Investment Advisers and Investment Companies About Environmental, Social, and Governance Investment Practices.' As those rules were never enacted, the withdrawal is effective immediately. State Level Sustainability Reporting With the collapse of sustainability reporting at the national level, focus shifted to state level requirements. Sustainability activists held hope that what could not be obtained at the national level, could be accomplished in Democrat led states. Unlike Congress that meets year round, state legislatures typically meet for 60 days at the beginning of the year. Those legislative sessions mostly concluded in June, with no new notable climate reporting or sustainability reporting requirements adopted. For now, California stands alone as the only state with a climate reporting requirement. In September 2023, California approved the Climate Accountability Package, a pair of bills aimed at creating sustainability reporting requirements. Senate Bill 253 required companies that do business in California and have an excess of $1 billion in revenue, defined as 'reporting entities', to submit an annual report for Scope 1 and Scope 2 starting in 2026, for FY 2025. Scope 3 reporting will begin in 2027, for FY 2026. 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Now is the time for interested parties to weigh in. Once the formal process begins, the template will be set and changes are hard to argue. I question if the California standard will survive the 2026 legislative session. Governor Newsome questioned the viability of the initial proposal, but still signed it. With the SEC withdrawing reporting requirements, no other states following California's lead, and the European Union rolling back international standards, it is difficult to believe California will stand alone in imposing such a burdensome requirement. EU Corporate Sustainability Reporting The most vigorous debate on the future of sustainability reporting is unfolding in the European Union. The EU was the world leader in the establishment of sustainability reporting requirements. They are now rolling back those requirements. As part of the European Green Deal, a trilogy of directives were passed to force businesses to address climate change and report GHG missions. However, the cost of these proposals on businesses and the broader impact on the EU economy became a theme during the 2024 elections. The shift to the right in EU politics embolden opponents to the European Green Deal directives. As a result, the Commission proposed a package of new directives to 'reduce the burden' on businesses. The Omnibus Simplification Package was officially adopted by the Commission in February. The Commission proposal raised the thresholds for businesses to have to report under the Corporate Sustainability Reporting Directive and the Corporate Sustainability Due Diligence Directive. The Council adopted their proposal on June 23. Now it is being debated in the Parliament. The current CSRD uses a two out of three criteria test to determine if a company must report: 250 employees, €50 million in net turnover, and €25 million in assets. The Commission proposes raising the employee threshold. Stating 'to be subject to the reporting requirements an undertakings must have an average of more than 1000 employees during the financial year and either a net turnover above €50 million or a balance sheet total above €25 million.' The Council's proposal uses the 1000 employee threshold, but raises the annual turnover to €450 million. The Parliament is debating a proposal to raise the employee threshold to 3000. The current CSDDD requires companies to execute due diligence in ensuring that companies along the value chain are in compliance with environmental and human rights requirements. The Commission did not propose changes to the scope, but the Council wants to raise the employee threshold to 5000 employees and an annual net turnover of €1.5 billion. The Parliament is debating a proposal to raise the employee threshold to 3000. Sustainability advocates are fighting to save the directives, but it is a losing battle. 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The Directive banned generic environmental claims 'without recognised excellent environmental performance which is relevant to the claim.' In June 2024, the Council of the European Union announced its position on the Green Claims Directive. The Commission, Council, and Parliament were in the 'trilogue' negotiations on the final language. The directive appeared poised for passage, but momentum to rollback green initiatives caught the green directive. In mid-June, members of Parliament from the EPP sent a letter to the environment Commissioner Jessika Roswall threatening to pull all support of the directive. On June 20, the Commission announced they were planning to withdraw the proposal, a procedural step that would terminate negotiations. The political blowback was swift from moderate political parties, threatening the support of Commission President Ursula von der Leyen. 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Forbes
a day ago
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What's Holding Back Sustainable Business? The Challenges That Matter Most
The race to a sustainable future is on In the next five years, an entire generation of 2030 sustainability goals will finally come due. ESG reports and shareholder letters alike are soon going to face their biggest reckoning yet: will all the lofty promises translate into real progress? Early signs suggest the answer will be sobering. While ambition has soared, actual outcomes have continued to lag stubbornly behind. The reality is not that business leaders lack the will, rather, it's that the pathways to sustainability are far murkier, slower, and more difficult than anyone knew, or perhaps wanted to admit. For many organizations, the past few years have revealed a brutal truth: good intentions alone are not enough. Across industries, leaders are confronting the growing reality that sustainable business challenges run deeper than public promises and ESG reports might suggest. Without the right goals, infrastructure, and incentives, sustainability efforts either stall or end up serving more as marketing than meaning. The subtle forces working against sustainability are often invisible at first: misaligned incentives, fragile infrastructure, and underpriced risk. It's time we look at them more clearly if we want to build companies that can genuinely claim to have moved the world forward. The Importance of Aligning Goals With Real-World Sustainability Execution At the heart of any real change is leadership that understands both the limits of today and the possibilities of tomorrow. Kenn Ricci, founder of Flexjet, is an executive who strives to embody both while also running a business in one of the more challenging industries to be sustainable in, aviation. As he explains it, Ricci's sustainability philosophy doesn't fall into the trap of setting goals that look good but collapse under operational scrutiny. Instead, he focuses on what could become possible with enough pressure and patience, and then works to build the conditions to achieve it, whether it is to further sustainability across his fleet of jets or simply managing the day-to-day operations at the back office. 'When you lead people, you can't just say, 'This is where we're going,'' Ricci explains. 'You have to build a path under their feet, step by step, that makes it believable and doable. Otherwise, it's just a dream. Worse yet, it might be just your dream, and never become theirs.' At Flexjet, Ricci has consistently pursued operational improvements that align with larger sustainability aims, but without forcing the business to lurch into goals it cannot yet support. He argues that trust, not slogans, is what sustains long-term change. 'Sustainability isn't a checkbox even if some still treat it as such,' Ricci continues. 'It's an ongoing negotiation between ambition and reality. The leaders who win are the ones who never let go of either side.' His pragmatic optimism stands in stark contrast to much of the corporate world, where sustainability targets are often designed by communications departments rather than operational leaders. And herein lies the first reason why we haven't seen as much progress on ESG goals as we would have wanted. For far too many companies, sustainability has not been a metric that they have actively led with themselves. Ricci puts it bluntly: 'Sustainability has to be a steering wheel, not a rearview mirror. If you're just reporting it, you're already too late. And the leaders have to be the ones with both hands on it, not just the sustainability or comms team.' He's also keenly aware that true leadership requires putting real capital behind sustainable change, not just political or reputational capital, but operational resources that can withstand market cycles. 'Anyone can make promises when the sun is shining,' Ricci says. 'The question is what you stick to when the headwinds come. That's where real commitment shows.' Why Sustainability Depends on Infrastructure: Lessons From Aviation and Energy If setting the right goals is the first battle, building the right infrastructure is the war. Kennedy Ricci, CEO of 4AIR and son of Kenn Ricci, has spent his career focusing precisely on this frontier. His company offers a certification program for aviation's environmental impact, not by promising zero emissions tomorrow, but by helping aviation stakeholders take verifiable, incremental steps today. 'A lot of people get paralyzed because they think the only good goal is net-zero tomorrow,' Kennedy Ricci explains. 'But if you can measure, track, and improve a little bit every day, that's how you actually get there.' 4AIR's approach doesn't pretend aviation can become clean overnight. Instead, it recognizes that building credibility today through offset programs, sustainable aviation fuels, and transparent reporting lays the groundwork for deeper decarbonization later. The company's rise is testament to the power of pragmatic ambition anchored by real-world execution. Kenn Ricci reflects on his son's growing success: 'Building an empire is one thing. Building a legacy that adapts to the future is something else entirely. I'm proud that Kennedy's taking on the harder challenge.' He continues, "We've always believed that real leadership isn't about announcing goals, it's about laying bricks, patiently, and getting others to walk the road with you. 4AIR is doing just that." Meanwhile, infrastructure challenges aren't limited to aviation. The broader energy ecosystem faces its own existential bottlenecks that a handful of companies are doing their best to break open for the rest of us. Deóis Ua Cearnaigh, CTO at Aeon Blue, a company specializing in energy transition technologies and sustainable fuel, emphasizes that sustainability isn't about simply adding more renewables into the grid. It's about fundamentally rethinking how the grid operates. 'It's wonderful that we have more wind and solar now,' says Cearnaigh. 'But you still need a spinning reserve for when the wind dies and the sun sets. If that reserve is fossil-powered, your emissions story isn't as clean as it looks.' Their bigger point is this: you can't just add renewables on top of a fragile or misaligned system and expect magic. Without reengineering grid storage, reserve capacity, and distribution models, the true sustainability gains remain elusive. Cearnaigh believes that while renewables will dominate the next twenty years, nuclear energy will inevitably rise as the long-term backbone for sustainable baseload power. 'The zeitgeist today is wind, solar, and geothermal,' he reflects. 'But it does also seem that nuclear is one inevitable destination as well.' Without grappling with these infrastructural realities, sustainability risks becoming a story we tell ourselves, not a future we actually live. This mindset mirrors the thinking of Brett Bouchy, CEO of Freedom Forever, a company deadset on revolutionizing residential solar. 'The solar revolution doesn't happen because people feel good about the environment,' Bouchy points out. 'It happens when saving money on your electricity bill is cheaper and easier than sticking to the grid.' Bouchy's laser focus on efficiency is another reminder that for sustainability to scale, it must compete not just morally, but economically. As Bouchy frames it, "We don't succeed by selling dreams. We succeed by selling better economics. And better economics drive real environmental change." He's blunt about the reality check the green economy still needs: "Nobody switches to solar because you guilt them into it. They switch because it's cheaper, easier, and works better. That's how you win hearts, wallets, and the future. And for that, you need the infrastructure to be in place, management to know what goals to drive towards, and an audience that is ready to trust what you are selling." Bouchy also sees a deeper, long-term opportunity that transcends energy bills: "Every home we upgrade is a client win, sure. But it's another node in a smarter, decentralized energy system. Sustainability isn't a utopian idea. It's the byproduct of millions of small, self-interested decisions that add up to a revolution." If only revolutions were easy, which is exactly why stories like the above are worthy of retelling. Companies that rise up to the challenge of sustainability cannot be taken for granted, simply because of how rare they still remain. That is particularly true for investments, which is the third missing pillar that is making 2030 feel further away than it should. Why Long-Term Investment Is the Missing Piece in Sustainability Strategy If setting the right goals is the first battle, and building the right infrastructure is the war, then making the right investments is the long campaign, often fought without fanfare, headlines, or even immediate returns. And it's here where sustainable business faces one of its most persistent barriers: the cruel mismatch between moral urgency and financial immediacy. Capital, by its nature, seeks returns. It rewards speed, liquidity, and demonstrable gains. But sustainability often demands patience, long arcs of investment, and a willingness to fund seeds that may only bear fruit decades from now. It asks us to invest in forests we may never personally walk through. Doing good, it turns out, is relatively easy. But doing good money, investments that compete at par with traditional, short-horizon opportunities, remains the real Everest to climb. This doesn't mean that the private sector is full of villains twirling their overgrown mustaches. It's simply important to recognize the system we've built and how it operates. Until the returns of sustainability become structurally competitive, whether through market shifts, regulatory frameworks, or pure innovation, capital will continue to flow where it always has: toward the short, the sure, the profitable and the now. The uncomfortable truth is that economics, not ethics, will be the final arbiter of the transition's speed, even if ethics gets to set the goal. And yet, there are signs of things shifting. Signs that smart leaders know: a world where customers demand sustainable products is fast approaching. A world where supply chains simply cannot function without green tech is not far behind. Companies who wait until the economics are easy will find that the customers, the talent, and the licenses to operate have already gone elsewhere. Which brings us to the handful of players quietly laying the groundwork. ENEOS, Japan's largest energy group, offers one instructive case. They are investing heavily in hydrogen transportation, synthetic fuels, battery recycling, and carbon capture, not because it makes perfect financial sense today, but because they know what survival will require tomorrow. 'There's no question the world needs cleaner energy,' an ENEOS representative explained in an interview. 'But if you exit fossil fuels too quickly, you leave markets in chaos, and ironically, you can make the transition slower, not faster.' The trick, as they frame it, is not to burn the bridges while crossing the river. Real transition demands continuity, not collapse. "You can't dismantle today's infrastructure before tomorrow's infrastructure is ready," added another ENEOS representative noted. 'The world is too interconnected for idealism alone. You need to build pathways people can actually walk.' This recognition, that reality, not rhetoric, is the substrate upon which change must be built, permeates the thinking of those who are keen to see sustainability truly take root today. Brett Bouchy, CEO of Freedom Forever, who is busy scaling residential solar across America, frames it in plain terms: 'You don't win by selling dreams. You win by selling better economics. If going solar isn't easier and cheaper than sticking with the grid, the revolution doesn't happen. Period.' It's a bracing, necessary reminder that narratives alone don't move markets. Incentives do. And this brings us full circle to the real challenge ahead: building an economy where sustainability isn't a premium add-on for the wealthy or the virtuous, it's the baseline expectation for everyone. In that future, "green" won't be a differentiator. Instead, it will simply be the cost of doing business. Those who invest today with that reality in mind, patient, practical, sometimes lonely, will be the ones best positioned when the forest finally blooms. And those who don't may find themselves, too late, standing outside the gates of a new economy that has no room left for yesterday's math.
Yahoo
2 days ago
- Yahoo
Beyond the ESG Label: From Metrics to Meaning
As ESG scrutiny intensifies, Marco Carlizzi, Partner Lawyer at RSM Italy, explores the challenges and opportunities ahead, from tightening regulations to measurable impact, and why integration is now the real differentiator. The ESG landscape is undergoing a quiet transformation. While headlines focus on regulation or greenwashing scandals, many firms are recalibrating their environmental, social and governance (ESG) strategies to move beyond compliance and toward credibility. The partner lawyer at RSM Italy, shares how investors and institutions are responding to this shift, and where the next wave of ESG innovation lies. The pressure to quantify ESG is now coming from multiple angles, regulators, stakeholders, and internal leadership. 'While regulatory expectations around ESG metrics continue to grow, the picture on investor demand is more nuanced,' Carlizzi explains. 'Compared to a year ago, we've seen a degree of hesitation among some investors – particularly in response to the political and international situation (tariffs battles and war). In that sense, demand isn't rising uniformly; in some areas, it's stabilising or becoming more cautious.' Nonetheless, environmental indicators remain front and centre. 'The push for measurability remains strong, particularly from regulators and supervisory authorities. Environmental metrics are still the most widely adopted, especially carbon emissions, energy use and water consumption, because they are more easily quantified.' In parallel, sustainability-linked KPIs are gaining ground inside organisations themselves. 'Increasingly, firms are also using sustainability-linked KPIs to align leadership incentives with environmental outcomes including Managing Directors. So even in a more restrained climate, the emphasis on rigour and transparency is very much here to stay.' But turning ESG intentions into metrics isn't easy, especially for small and mid-sized companies. 'The core issue is data – not just the collection of ESG data, but its quality and reliability,' Carlizzi says. 'Many small and middle market businesses are unable to provide the detailed data that banks or asset managers request.' Even on the institutional side, accuracy can be elusive. 'Investors typically depend on a small number of ESG ratings agencies and data providers – such as MSCI, Sustainalytics, or ISS – to assess thousands of companies across global markets. Because so many asset managers use the same sources, there's a risk of overreliance on standardised, and sometimes inconsistent, datasets.' The consequence? 'It's difficult to benchmark performance accurately or uncover meaningful distinctions between companies, especially when methodologies lack transparency or comparability.' In Europe, ESG regulation is quickly catching up with industry practices. 'Regulatory scrutiny around ESG labelling has intensified in Europe,' Carlizzi notes. 'The European Securities and Markets Authority (ESMA) recently issued guidance on how terms like 'green,' 'sustainable,' or 'impact' can be used in product naming. While not yet law, the guidance is already prompting changes in how firms describe their products.' The implications for private banks and asset managers are significant. 'Many asset managers are re-evaluating product labels and marketing language. We've seen clients having to rename certain products to remain aligned with new expectations – not because the strategies changed, but because the language needed to be clearer and more defensible. This shows just how seriously the market is taking the risk of overstatement.' As scrutiny increases, so too does the spotlight on greenwashing. Carlizzi believes credibility must be built from within. 'Avoiding greenwashing starts with building internal credibility. That means ESG strategy can't be delegated to a single board member or compliance officer. It must be understood across leadership – just like finance, marketing, or corporate governance.' He recommends concrete, preventative steps: 'Practical steps include regular board education, external legal review of ESG claims, and ensuring that communications reflect actual outcomes, not just intentions. The simplest advice is often the most important: be transparent, be cautious with language, and only promise what you can prove.' When it comes to impact investing, performance and transparency are no longer optional. 'There's been a clear shift toward measurability and accountability in impact investing,' Carlizzi says. 'It's no longer enough to talk about positive intentions – investors now expect evidence of tangible outcomes.' This has implications for both institutional and private clients. 'Both are asking tougher, more technical questions: How is impact defined? How is it measured? And how does it relate to financial performance?' This shift is reengineering product design. 'Managers need to integrate impact into the structure of the investment strategy, not just the marketing,' he explains. 'Increasingly, this includes setting portfolio-wide targets – such as emissions reductions or social outcomes – and linking them to financial mechanisms like hurdle rates, carried interest, or sustainability-linked fees. In the current environment, impact must be treated not just as a value, but as a measurable, reportable obligation tied to both returns and accountability.' Looking ahead, Carlizzi points to two EU policy developments that will reshape reporting obligations across the corporate landscape: the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD). 'Both will increase the depth and scope of required ESG disclosures in Europe. Even businesses not directly affected will see expectations rise through their commercial relationships.' And while AI is emerging as a tool to handle complex data, he urges caution. 'There is also growing attention on how AI will be used to support ESG – particularly in data analysis and risk screening. But it's essential to remember that AI must support, not replace, professional judgement. As I often say to my clients: artificial intelligence may be fast, but legal responsibility remains human.' Finally, Carlizzi sees innovation blooming where ESG is embedded into strategy, not tacked on. 'Innovation is happening across all three – but the most exciting developments are in integration,' he says. 'For example, sustainability-linked loans and ESG covenants in financing structures are becoming more sophisticated.' On the reporting front, technological advances are starting to bite. 'The use of AI and blockchain to trace data through complex supply chains could significantly improve transparency.' Ultimately, success will depend on mindset. 'The firms that will lead in ESG are those who treat it as a core strategy – not as a compliance exercise,' Carlizzi concludes. 'The next wave of ESG leadership will be defined not by who has the best disclosure, but by who can act on it.' "Beyond the ESG Label: From Metrics to Meaning" was originally created and published by Private Banker International, a GlobalData owned brand. The information on this site has been included in good faith for general informational purposes only. It is not intended to amount to advice on which you should rely, and we give no representation, warranty or guarantee, whether express or implied as to its accuracy or completeness. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content on our site. Sign in to access your portfolio
