auctusESG | Insights | August H1 2025

auctusESG

Accelerating global sustainable finance & climate transition

Published Aug 16, 2025

Data dashboard

The graph shows how the sectoral distribution of climate finance has shifted between 2018 and 2023 across four country groups: advanced economies, China, emerging markets & developing economies (EMDEs) excluding China, and least developed countries (LDCs).

In advanced economies, energy systems remain dominant but have slightly declined as a share, with buildings & infrastructure and transport gaining prominence, indicating a pivot toward decarbonising built environments and mobility. China has sharply increased the share of energy systems financing, crowding out buildings and infrastructure, potentially reflecting industrial policy priorities in renewables and grid expansion. EMDEs show a broader spread, with notable growth in AFOLU (agriculture, forestry, land use, fisheries) and water investments, critical for adaptation. LDCs have seen a striking rise in AFOLU and water/wastewater financing, signalling a stronger adaptation focus, but energy systems have proportionally declined.

This rebalancing has major implications: while mitigation via energy dominates globally, adaptation-linked sectors are gaining in climate-vulnerable economies. However, the relatively small shares for waste, industry, and cross-cutting resilience indicate underinvestment in systemic, circular economy approaches, potentially locking in vulnerabilities and missing opportunities for integrated climate solutions.

News roundup

US to retaliate against IMO members that back net zero emissions plan

The U.S. rejected the International Maritime Organization’s proposed Net-Zero Framework for shipping, citing cost concerns and threatening retaliation against supporters. The Trump administration, which left IMO talks in April, opposes measures that raise costs for citizens or businesses. The framework, backed by 63 member states, aims to cut shipping’s 3% share of global CO₂ emissions to net zero by 2050.

The U.S. rejection stalls global maritime decarbonisation efforts, risks weakening multilateral climate governance, and undermines momentum toward cutting shipping’s significant CO₂ contribution by 2050.

23 US State coalitions warns SBTi, financial firms over antitrust risk from net zero commitments

23 US State coalitions sent a letter to the Science Based Targets initiative raising concerns of antitrust, consumer protection violations, demanding information about the organisation and its members. This letter centers around the recently released Financial Institutions Net-Zero (FINZ) Standard, enabling banks and investors to set net zero-aligned targets for their lending, investing, insurance and capital market activities.

This move signals growing scrutiny over ESG frameworks—blurring the line between corporate climate ambition and possible regulatory overreach.

Danske Bank divests more than 85% of fossil fuel companies over transition plans

Copenhagen-based Danske Bank announced major divestment of its fossil fuel companies' investments. The bank's new investment methodology has a specific focus on companies in the fossil fuel sector that have credible transition plans, aligning with customers' investment preferences. The companies are assessed based on the entity's climate targets and the bank's Net-Zero Pathway Framework model, based on the Transition Pathway Initiative (TPI) .

Through this move, the bank is sharpening its ESG playbook by pivoting from broad fossil fuel divestment to curated investment—targeting companies that are genuinely charting a path toward net-zero. This signals a more nuanced, risk-aware approach to sustainable finance.

EBA instructs regulators to hold off on enforcement of ESG disclosure requirements for banks

The European Banking Authority (EBA) issued a no action letter advising regulators not to enforce new 2025 ESG Pillar 3 bank disclosure rules yet, citing uncertainty from the EU’s Omnibus initiative to simplify sustainability reporting. The EBA expects upcoming changes to alter disclosure requirements and aims to avoid conflicting rules or excessive burdens, especially for smaller banks.

The delay eases compliance pressure on banks, prevents conflicting ESG disclosure rules, and reflects regulatory caution amid evolving EU sustainability reporting reforms, potentially slowing near-term transparency but ensuring future alignment.

Bangladesh launches Renewable Energy Policy 2025, targeting 30% clean power by 2040

Bangladesh’s new Renewable Energy Policy 2025 aims to generate 20% of electricity from renewables by 2030 and 30% by 2040, with 17,470 MW capacity planned. It offers tax breaks, duty waivers, and peer-to-peer energy trading. Experts welcome the ambition but warn that weak execution, investor uncertainty, and unclear priorities could undermine its success.

The policy signals Bangladesh’s intent to align energy transition with economic incentives, potentially reshaping regional clean power markets and fostering innovation like peer-to-peer energy trading.

China releases new Green Finance Taxonomy

China’s financial regulators have released a unified Green Finance Endorsed Project Catalogue, effective October 1, 2025, to standardise which economic activities qualify for green financial products like bonds and loans. Developed by the PBOC, NFRA, and CSRC, the catalogue consolidates previously fragmented green finance standards and expands eligible project categories to include areas such as green trade, consumption, and industrial transitions. It aims to boost market liquidity, improve asset management efficiency, and reduce project identification costs. While partially aligned with international standards, it diverges in certain criteria for green-enabling activities.

China’s unified green finance catalogue could streamline capital flows, enhance market confidence, and expand green investment scope, but partial divergence from global standards may affect cross-border financing alignment.

SECI conducts first-ever auction for procurement of Green Ammonia under National Green Hydrogen Mission

In a major milestone for India’s National Green Hydrogen Mission, Solar Energy Corporation of India Limited (SECI)’s first auction for Green Ammonia under the SIGHT Scheme (Mode-2A) discovered a record low price of ₹55.75/kg (USD 641/MT) for a 10-year supply to Paradeep Phosphates Limited. This is a significant drop from earlier auctions and makes Green Ammonia cost-competitive with Grey Ammonia (USD 515/MT as of March 2025). The auction, covering 75,000 MT/year, is the first of 13 upcoming tenders totaling 7.24 lakh MT/year. The success reflects growing market confidence and positions India as a key global player in green hydrogen.

This price breakthrough could catalyse downstream green industrial value chains, attract export-oriented investment, and strengthen India’s role in shaping global cost benchmarks for clean hydrogen derivatives.

AWS signs renewable energy purchase deal in India with Gentari

Amazon Web Services (AWS) and Malaysian clean energy solutions provider, Gentari, signed a power purchase agreement for an 80 MW wind project in Tamil Nadu, set to start in 2027 and generate ~300,000 MWh annually. The deal supports AWS’s 100% renewable energy goal and Gentari’s regional clean energy expansion, advancing scalable low-carbon solutions in Asia.

The partnership could stimulate Tamil Nadu’s renewable supply chain, enhance corporate-driven clean power procurement models in India, and encourage multinational participation in scaling Asia’s low-carbon energy infrastructure.

Spotlight

When energy dominance crowds out other climate frontlines: Rethinking where the money flows in the net zero race

Global climate finance almost doubled between 2019-2020 and 2021-2022 reaching US $1.3 trillion annually - this is driven largely by mitigation projects in energy (attracting 44% funding) and transport (29%). Yet that sum still falls drastically short of the US $5.9 to US $12 trillion needed each year by 2030 to meet Paris-aligned goals.

Within this already constrained pool, sectoral skew is stark -

Agriculture and industry, a combined source of over 20 GtCO₂ mitigation potential, receive less than 4%
Adaptation gets a mere 5% of the total, with just US $63 billion directed toward it annually

The result? A dangerous mismatch between where capital flows and where emissions reductions and resilience gains are actually needed.

The risk of a narrow portfolio

This concentration fuels two key risks for investors -

Overexposure to mature, bankable energy and transport projects
Missed upside in high-impact, underinvested sectors like industrial decarbonisation, waste, water, and AFOLU (agriculture, forestry, land use)

These structural gaps are particularly stark in developing countries -

Adaptation finance in developing countries averages only US $28 billion annually, while needs are estimated at US $212 billion per year, and up to US $239 billion post-2030
Africa’s climate finance flows rose from US $29.5 billion in 2019–2020 to US $43.7 billion in 2021–2022, but still fulfill only some 20% of mitigation and adaptation funding needs

Funding these underrepresented sectors faces a unique mix of structural and market barriers -

Many projects, particularly in AFOLU, water, and waste, lack predictable cash flows, making them unattractive to commercial lenders accustomed to steady energy tariff revenues
Asset sizes are often small, dispersed, and difficult to aggregate into investable portfolios, driving up transaction costs
Risk perception is also higher, as these sectors are vulnerable to climate shocks, regulatory uncertainty, and shifting commodity markets.
The absence of standardised metrics for resilience outcomes makes valuation and impact measurement challenging, limiting their appeal for institutional investors who require comparability and scale

The untapped trillion-dollar opportunity

Underrepresented sectors aren’t just impact-critical—they’re commercially significant -

The IFC identifies US $23 trillion in “climate-smart” investment opportunities across 21 emerging markets by 2030. India alone offers US $3.1 trillion with Bangladesh and Bhutan identified as emerging hubs
Green urban infrastructure, covering water, waste, and buildings, requires US $86 billion of investment in cities worldwide just to meet immediate climate-ready infrastructure needs
Green buildings across emerging markets also represent trillions of dollars: US $768 billion in Sub-Saharan Africa, US $4.1 trillion in Latin America, US $881 billion in Eastern Europe & Central Asia, and US $1.1 trillion in the Middle East & North Africa

These asset classes such as urban resilience, industrial decarbonisation, sustainable land use, are ripe for institutional investors seeking impact-aligned growth and jurisdictional diversification.

Levers to unlock capital in neglected sectors

To rebalance climate finance, a multi-pronged strategy is required:

Policy-led incentives across sectors - Governments should extend tax credits, resilience-linked bonds, and outcome-based subsidies beyond energy to sectors like water, AFOLU, and industrial emission reductions
De-risking through blended finance - Multilateral Development Banks (MDBs) and Development Finance Institutions (DFIs) must ramp up guarantees, concessional loans, and risk-sharing facilities. Notably, MDB climate finance reached US $125 billion in 2023, yet adaptation portions are shrinking with just US $27.7 billion, or 22% of total climate flows. Realigning such capital toward resilience would help build pipelines in underserved sectors
Capital market innovation - Instruments such as securitised retrofit loan pools, impact-rating frameworks for resilience projects, and tradable waste-diversion credits could bring in institutional capital. IFC’s large-scale identification of climate investment corridors provides fertile ground for such instruments
Portfolio diversification strategies - Investors must actively hedge sectoral concentration by allocating a portion of their climate capital to underfunded domains, balancing their energy-heavy holdings with high-impact, long-term resilience plays

With these levers, climate finance can become both broader in reach and deeper in impact, channelling investment where it’s most needed and building a transition that is not only cleaner but also more resilient and inclusive.

Climate Policy Initiative Network for Greening the Financial System (NGFS) Global Center on Adaptation United Nations Environment Programme Finance Initiative (UNEP FI) IFC - International Finance Corporation

Featured events

Climate Governance Forum, 8th August 2025, Melbourne

On 8 August 2025, the Australian Institute of Company Directors (AICD) hosted the fourth Climate Governance Forum at the Melbourne Convention and Exhibition Centre, bringing together business leaders, policymakers, and climate experts to explore how boards can move from climate ambition to concrete action.

Discussions highlighted the growing financial risks of climate change, with insured losses from extreme weather in Australia reaching US $22.5 billion over the past five years, and emphasised that climate disclosures should be treated with the same legal rigour as financial reporting. Case studies from companies such as Stockland and IAG showcased practical decarbonisation measures, from engineered timber construction to large-scale solar partnerships. Speakers also stressed the importance of integrating nature governance into business strategy and leveraging sectors like sport for climate advocacy. The forum’s overarching message was that climate governance is now a core business responsibility, essential for both risk management and long-term competitiveness.

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