January 2025 Newsletter

Here is our latest selection of ESG stories from January 2025.

Texas Court Ruling Challenges ESG Focus in Retirement Plans

The U.S. District Court for the Northern District of Texas ruled that American Airlines breached its fiduciary duty under the Employee Retirement Income Security Act (ERISA) or its 401(k) plans by allowing its asset manager and major shareholder BlackRock to prioritise ESG factors. The court found that the plan administrators’ actions must be solely based on participants’ financial interests. The ruling highlights that ESG risks extend beyond investment selection to proxy voting and shareholder rights and emphasised that selecting and overseeing service providers is a key fiduciary duty. Plan sponsors should be aware of corporate ESG policies influencing retirement plans. Read our full article here.

NZAM Announces Extensive Review

The Net Zero Asset Managers (NZAM) initiative, which supports investors in managing climate-related transitions and financial risks, has announced a comprehensive review in response to recent U.S. policy changes, evolving global regulations, and shifting client expectations. During this period, NZAM will pause signatory reporting and temporarily take its commitment statement, signatory list, targets, and case studies off its website. This decision follows BlackRock’s decision to leave the initiative. Despite the review, NZAM remains committed to guiding investors through the net zero transition while ensuring alignment with fiduciary responsibilities and clients’ financial goals.

U.S. To Exit Paris Agreement; 24 States Revolt

On January 20th, President Trump signed an executive order to withdraw the US from the Paris Agreement as part of the new administration’s broader effort to rescind climate policies, including the U.S. International Climate Finance Plan and slowing the renewable energy transition. Within days of the withdrawal order, 24 U.S. states, part of the U.S. Climate Alliance, reaffirmed their commitment to the Paris Agreement’s long-term temperature goal. Led by the governors of New York and New Mexico, the coalition promised to cut greenhouse gas emissions by at least 50% by 2030 and up to 66% by 2035, compared to 2005 levels. The states referred to their constitutional authority, emphasising their ability to pursue ambitious climate action independent of federal policy changes.

Scientists Link Severity of Californian Fires to Climate Change

Climate scientists confirm the direct link between climate change and the severity of the Californian wildfires, which forced over 179,000 people to evacuate their homes around Los Angeles region this January. The study finds that climate change increased prolonged dry and wet weather periods by 31-66%. In LA the rapid swings between wet and dry extremes initially promoted the growth of flammable vegetation which then became extremely dry following periods of drought. These changes in topography are suggested to have exaggerated the speed of spreading and severity of the recent fires in California.

FSB Releases New Report on Transition Plans and Financial Stability

The Financial Stability Board (FSB) has released a report highlighting the importance of climate transition plans in financial stability. The report outlines three key ways transition plans help navigate climate-related financial uncertainties: (1) guiding firms in strategic planning for better risk management, (2) improving investment decisions by increasing access to reliable information, and (3) enabling broader monitoring of financial and economic risks. While transition plans offer valuable insights, their utilisation in financial stability assessments is still developing. The FSB stresses the need for wider adoption and standardisation to enhance their effectiveness and practical application.

If you’d like to know more or discuss any of these topics, please get in touch.