The past four years were a boom time for ESG and climate considerations for businesses. The SEC proposed greenhouse gas disclosures for public companies in 2022, the European Union set up the Corporate Sustainability Reporting Directive that same year, and in 2023, half of the world’s largest companies had some kind of net zero commitment.
Yet with the boom came the backlash. Also in 2023, mentions of ESG on earnings calls dropped to their lowest level since 2020, according to the Harvard Law School Forum on Corporate Governance. And more than 150 anti-ESG bills were introduced into 37 state legislatures that year. But these were just preamble to the vibe shift after the 2024 reelection of President Trump. His administration’s withdrawal from the Paris climate agreement, the SEC dropping climate disclosure rules, and the EPA’s bid to cancel $20 billion in climate grants signaled to companies that sustainability is not a top priority.
But the question is, have CFOs been listening, and what does it mean if they haven’t? The Trump administration’s hatred of DEI resulted in a massive pullback from corporate DEI initiatives by businesses from Target to Home Depot. However, companies seem to be charging ahead with climate-related spending, according to experts who spoke with CFO Brew.
Quick returns? Climate investments are multi-year, if not decades-long, undertakings. For example, in the carbon credits marketplace, many high-quality credits are claimed years in advance.
According to Yee Lee, chief growth officer at Terraformation, a carbon credits project developer focusing on native biodiverse reforestation, many of the conversations happening today are about creating projects that will deliver their first credits in five or six years (at least a year after Trump has left the White House) and continually deliver credits for the next 30 to 40.
Companies are building future carbon credit supply streams to ensure priority access for the long run. As such, the projects that were created during the ESG boom are still being paid off and delivering credits today.
But even in the short term, carbon credit spending is still expanding in some interesting ways.
New data collected over the past six months from Patch, a carbon credits supplier, showed that “the number of unique companies retiring credits,” aka taking them out of the market after using them to offset emissions, “during the post-election period” was up 6% YoY. But the total volume of carbon credits retired decreased 17%—indicating that more companies were interested in buying credits, but that there’s a supply crunch emerging, especially over high-quality and carbon removal credits. Hence the need to lock in those projects years in advance, as Terraformation is seeing.
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Patch CEO Brennan Spellacy agrees. “A lot of CSOs, CFOs, heads of supply chain are aware that it sometimes takes four or more years to even implement a large-scale program across their business,” Spellacy told CFO Brew.
But the easing off of climate scrutiny and other regulatory pullbacks could be a blessing for CFOs and companies who still want to take climate action.
“What we’ve seen is actually companies getting a breather,” Kevin O’Connell, US sustainability assurance services leader at PWC, told us. “The opportunity to essentially take a breath and really figure out the best way to comply with a lot of these regulations.”
Long haul. It took 75 years to create a financial reporting ecosystem, he noted, and now we’re trying to do the same for environmental reporting in only five years.
But the big change in the Trump 2.0 era, according to Spellacy, is the move from greenwashing to “greenhushing.”
Companies are “maintaining or increasing their climate change mitigation efforts, but taking care to draw less attention to what they’re doing as a way to shield themselves from potential backlash from the new administration,” according to the Patch report. Spellacy told us that some of Patch’s “largest customers, companies spending tens of millions of dollars on carbon per year,” aren’t listed on the website and won’t talk about it publicly, which is a huge inhibitor for climate action.
“The only thing that results in is a drag on information flow,” he said. “Which results in people not being able to triangulate and find the best way to do something.”