As we celebrate the tenth anniversary of the Paris Agreement, the United States is withdrawing from it for the second time, while sustainability regulations are being attacked from all sides.
This year should have been one of celebrations. Ten years ago, in the Parisian chill of December, states had succeeded in aligning their positions to move forward together toward carbon neutrality and reduce the impact of our lifestyles on the planet.
With 195 signatory nations, the Paris Agreement was then described as historic: “It brings together for the first time all nations in a common cause according to their historical, current and future responsibilities,” recalled the United Nations Framework Convention on Climate Change.
But as we celebrate the ten years of the Paris Agreement, the United States are withdrawing from it for the second time, while sustainability regulations are being attacked from all sides. These attacks reflect growing desires for deregulation — or simplification — in the wake of the Trump administration’s return to power and the 2024 European elections.
In Europe, the Corporate Sustainability Reporting Directive (CSRD) has been the target of much criticism, notably from Germany. A letter sent to the European Commission on December 17 expressed these reservations, and the demands it contained were taken up by Chancellor Olaf Scholz in early January.
In France, the attacks are no less virulent. Government spokeswoman Sophie Primas thus called this directive “a nightmare for companies,” while Stéphane Séjourné, Vice-President of the Commission in charge of industrial strategy, speaks of the possibility of “removing reporting” while maintaining the targets, particularly climatic ones. For the two European heavyweights, this is therefore a real wing-turn that could call their own commitments into question.
In the United States, some Republican states have for some time now been firing broadsides at sustainability policies and ESG (Environmental, Social, Governance) criteria applied by asset managers, notably by bringing legal actions. These latter would not be fulfilling their fiduciary duty to investors and would be putting certain sectors, such as fossil fuels, at risk.
This intimidation has intensified further since Donald Trump took office on January 20. Many financial players, such as BlackRock (the world's largest asset manager, ed.), have on their own decided to backtrack on their participation in Net Zero alliances as well as on their ESG investment policies.
With their “European Green Deal”, Europeans aim to be the first continent to reach carbon neutrality by 2050. To that end, they seek to decarbonize the economy while stimulating research and investment in the transition to create a “green” growth segment. Beyond decarbonization, the Old Continent intends to promote the circular economy, reduce pollution and preserve biodiversity, while ensuring a fair and socially responsible transition.
A wide range of regulations follows from this, among them the CSRD, but also the taxonomy (classification of sustainable economic activities), the CSDDD (sustainability due diligence obligations), the SFDR (regulation on the sustainability of financial products) and the ESRS (sustainability reporting standards). This list, far from exhaustive, for some reflects a holistic approach to the ecological transition, while others see an inflation of rules and acronyms.
“Americans have an approach more focused on creating value for shareholders, whereas the European Union considers that companies play a fully-fledged societal role,” explains Giulia Neri-Castracane, professor of law at UNIGE and a specialist in corporate governance and sustainability.
The European approach indeed goes further than that of its competitors, notably because the CSRD puts into practice the principle of double materiality. This requires companies to describe both the impact of the environment on their activities — such as financial risks related to the climate — and their own impact on the environment. It also introduces an obligation of verification by audit and extends its requirements to the entire value chain of companies.
The United States, for their part, apply the principle of financial materiality through the IFRS sustainability standards. “Americans have an approach more focused on creating value for shareholders, whereas the European Union considers that companies play a fully-fledged societal role,” explains Giulia Neri-Castracane, professor of law at UNIGE and a specialist in corporate governance and sustainability.
European Commission President Ursula von der Leyen announced the implementation of an “omnibus” law, expected on February 26. This is a legislative initiative intended to revise and simplify several laws simultaneously. In this spirit, a round table organized by the Commission was held behind closed doors on February 5 and 6 to lay the groundwork for this future law.
According to the specialist newspaper “Novethic”, 31 companies and 26 professional associations were present, including many actors among the most resistant to the CSRD and the CSDDD. These participants came notably from the energy, cement, construction, automotive sectors, but also from finance and aviation. In contrast, only 10 organizations from civil society as well as environmental and human rights associations were represented. The balance of power therefore appears totally skewed.
According to Giulia Neri-Castracane, it is still too early to determine with certainty the direction the European Union will take: “The United States are disengaging politically, and the direction given by Europe, on February 26, will be watched closely. The regulation there is certainly ambitious, but too complex.”
By way of example, the number of data points to be taken into account in the CSRD is over a thousand and companies do not all have the resources to analyze them in depth. “Reducing their number could bring more efficiency without diminishing the impact. However, removing the consideration of the value chain beyond the direct supplier or restricting the duty of diligence would considerably limit the scope,” adds the Geneva law professor.
“The international geopolitical situation is delicate with regard to the financial center’s commitments to sustainability. But the efforts made, notably in terms of transparency, classification and comparability, have not been in vain,” assures Aurélia Fäh, sustainability expert at the Asset Management Association Switzerland (AMAS)
In the financial sector too, things are evolving rapidly. Actors have massively turned to international voluntary initiatives, such as the Glasgow Financial Alliance for Net Zero (GFANZ), launched in 2021 at COP26, under the leadership notably of Michael Bloomberg and Mark Carney.
This alliance aimed to coordinate several sectoral initiatives, like the Net Zero Banking Alliance (NZBA) and the Net Zero Asset Managers Initiative (NZAM), which propose setting decarbonization targets accompanied by quantified transition plans and interim targets for banks and asset managers.
However, several large American banks have left the NZBA since December 2024, sending a negative signal. On the asset manager side, seven actors have left the NZAM since November 2024, including the giant BlackRock. The initiative even announced that it is “under review to ensure it remains fit for purpose in the new global context.”
The NZAM also declared that it “suspends its monitoring activities of the implementation and reporting by signatories, and removes from its site the statement of commitment, the list of its signatories, as well as the targets and case studies related thereto […]”.
According to Aurélia Fäh, sustainability expert at the Asset Management Association Switzerland (AMAS), the suspension of the NZAM has the merit of avoiding the domino effect observed within the NZBA. “Only 2 AMAS members left NZAM in 2024. The international geopolitical situation is delicate with regard to the financial center’s commitments to sustainability. But the efforts made, notably in terms of transparency, classification and comparability, have not been in vain.”
According to her, Switzerland has a card to play by distinguishing itself from its competitors through the quality of its offering and its framework conditions.
In this changing international context, Switzerland has also integrated provisions into the Code of Obligations, largely adopting the European approach, notably the principle of double materiality in corporate reporting. However, it acts with some delay and subsidiarity to the market, which does not give it the status of a regulatory leader. On the other hand, this stance allows it to select what works and discard what poses problems.
“If Switzerland finds the right balance between flexibility and a clear framework, with incentives, it has the potential to play a leading role and become a model internationally,” believes Giulia Neri-Castracane.
Moreover, Switzerland confines itself more to principles in its regulation, leaving economic actors responsible for their implementation. This way of self-regulating may not be sufficient given the scale and urgency of the climate challenge.
That is at least the opinion of Giulia Neri-Castracane, who argues for regulation that plays the role of framework and catalyst, while leaving room for economic actors, notably in the free choice of internationally recognized standards. “If Switzerland finds the right balance between flexibility and a clear framework, with incentives, it has the potential to play a leading role and become a model internationally,” says the specialist in corporate governance and sustainability.
In an international context where the United States turn their back on the climate while China maintains the course of the transition, Europe finds itself at a strategic turning point. Backing down would not only be an admission of failure, but also a sign of a loss of identity, while the effects of climate change become more visible every day.
A few days ago, James Hansen, former chief climate scientist at NASA, stated that the objective of keeping long-term global warming below +2 °C compared to the pre-industrial period — the upper limit set by the Paris Agreement — was “dead”.
In this gloomy context, Europe must nevertheless stay the course so as not to be definitively outrun by China in its energy transition. Switzerland, for its part, has a unique window of opportunity to establish itself as a true leader and accelerate the pace of its transition. Provided it dares.
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