Flint advises international businesses and investors on policy, politics, regulation and competition.
Flint advises international businesses and investors on policy, politics, regulation and competition.
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With the return of the Trump administration, the US has moved beyond rhetoric to policy in its backlash against climate action, corporate sustainability, and environmental, social and governance (ESG) frameworks, including withdrawal from multilateral efforts such as the Paris Agreement. Climate regulations are being rolled back, and ESG investing is often portrayed as ideological overreach; meanwhile “woke capitalism” is cast as a threat to free enterprise. In Washington, the pendulum has swung. But does this spell the end for climate action, ESG, and sustainable finance in financial services, or is this the beginning of a more focused, credible approach to managing long-term value and risk?
Globally – especially in APAC – the picture is complex and nuanced. While political noise has dampened sentiment, regulatory momentum impacting financial institutions (FIs) continues.
For a wider perspective on how global green finance momentum has evolved, see our blog ‘Green finance in 2023: getting into gear, albeit at a lower speed’.
Earlier this year, the G20’s Sustainable Finance Working Group (SFWG) made strengthening the global sustainable finance architecture a priority, while the Network for Greening the Financial System (NGFS) released scenarios outlining short-term climate risks. However, progress has not been uniform. For instance, the Financial Stability Board (FSB) has paused work on new global policies addressing climate-related financial risks due to internal divisions, with US officials notably pushing back against a more ambitious regulatory agenda.
In APAC, Hong Kong and Singapore continue to position themselves as leading global centres for green and sustainable finance, while India is scaling up its sustainable finance initiatives and reforms. China has reaffirmed its “dual carbon” goals – to peak carbon emissions by 2030 and achieve carbon neutrality by 2060 – while advancing disclosure and cross-border alignment.
This two-part blog explores the state of play for climate action, ESG, and sustainable finance for FIs in 2025 through an APAC lens – what’s changed, what’s evolving, and what businesses and FIs must navigate in a politically fragmented but increasingly risk-aware environment.
How committed is the EU still to climate action? With a wave of regulatory reviews underway in 2025 to simplify ESG and sustainable reporting frameworks, that question is being asked more pointedly. On 2 July, the European Commission proposed a 90% carbon net emissions reduction target by 2040 – tempered by “flexibilities” such as the limited use of international carbon credits. At the same time, reforms under the Omnibus simplification package I signal a shift towards a more streamlined, interoperable framework for FIs.
However, these developments do not indicate a retreat from the EU’s climate agenda, but rather reflect an ongoing commitment that is being realised through a more pragmatic, proportionate, and implementation-focused regulatory approach.
The UK reaffirmed its climate aspirations by announcing its updated Nationally Determined Contribution (NDC) at COP29. On 25 June, it launched consultations on transition plans for large firms, draft UK Sustainability Reporting Standards (UK SRS), and a voluntary sustainability assurance regime. These initiatives translate the government’s 2024 manifesto and Mansion House ambitions into a coherent set of potential regulatory frameworks. Meanwhile, the Financial Conduct Authority (FCA) has expanded the UK’s Sustainability Disclosure Requirements (SDRs), introducing fund labels and strengthening anti-greenwashing rules.
While the government has dropped plans to introduce a green taxonomy – citing stakeholder concerns over complexity and potential misalignment with market needs – this pivot reflects a more pragmatic, market-led approach to sustainability regulation. These actions demonstrate the UK’s ongoing regulatory momentum to embed climate and sustainability goals into corporate and financial governance, with an increasing focus on enforceability and market integrity, even as the approach becomes more flexible to align with the government’s growth agenda.
While federal progress on climate and environmental issues has slowed or even reversed, some key states continue to show ambition, with California and New York advancing climate disclosure laws. However, the Securities and Exchange Commission’s (SEC) scaled-back rule, which only mandates the reporting of Scope 1 and 2 emissions, has created a fragmented regulatory environment. Nevertheless, 71% of the 50 largest US companies maintain climate targets, with only 20% scaling back their efforts and 8% intensifying them.
For US businesses and FIs, this means balancing near-term adaptation to a fragmented domestic landscape with a longer-term focus on climate and sustainability in order to meet investor and global client expectations. Simultaneously, there is a need to deal with the evolving climate-related requirements in other important markets, especially those aimed at FIs.
APAC continues to advance climate action and sustainable finance, albeit cautiously. Australia and India’s bids to host COP31 and COP33, underscore their long-term commitment to climate action. By 2025, Australia, China, Hong Kong, Japan, Indonesia, India, Singapore, and Thailand had all introduced sustainability disclosure frameworks that aim to meet the standards set by the International Sustainability Standards Board (ISSB). Furthermore, Singapore and Hong Kong reaffirmed their ambitions as carbon trading hubs, while Malaysia, in its capacity as ASEAN Capital Markets Forum Chair, introduced an ESG disclosure guide for SMEs. Among regional initiatives, Australia’s 2025 sustainable finance taxonomy marked a significant step forward in mobilising green investment for Australian FIs.
The intersection of climate, sustainability, and geopolitics is nowhere more evident than in Asia, where economies must balance energy security and affordability with rising climate vulnerability. Sectors such as agriculture, tourism, manufacturing, and infrastructure are exposed to extreme weather, water scarcity, and other climate-related risks.
As a key player in global supply chains – from minerals to renewables and electronics – APAC is where climate risk and economic resilience converge. Managing the stability of these sectors amid these risks is vital for investors and FIs, particularly those with a longer-term outlook.
Although politics have reshaped the sustainability and ESG narrative among FIs, investor interest in managing long-term risks persists, albeit in a more sophisticated and targeted manner. The growing emphasis on sustainable transition, and adaptation finance signals a move away from generic ESG scoring towards a more material, outcome-oriented approach.
There is hope for renewed recognition that ESG is a means of identifying and managing financial risks, rather than a tool for making superficial “green” claims. However, ongoing challenges around data quality, environmental claims, and investment product labelling have prompted institutions to recalibrate their strategies amid heightened scrutiny and anti-greenwashing regulations.
In Part B of our analysis, we explore how FIs are responding – from reshaping ESG and internal sustainability functions to addressing the challenges and innovations shaping the future of transition and green finance.
This blog was written by Matthew Chan, Dr Lisa Ross, and Gwenda Ang. Based in Hong Kong, Matthew spent three years at J.P. Morgan, establishing its APAC Corporate Sustainability function, prior to which he held senior policy and business roles at ASIFMA and DTCC. Lisa and Gwenda are both based in Singapore. Lisa has 13 years of experience in the financial services industry and legal academia, with a PhD in law in sustainability regulation in the financial sector. Gwenda has experience in sustainability policy including previous roles in the banking and carbon industries.