Zara Plummer

Principal Consultant

Lana Baker-Cowling

Senior Consultant

Table of Contents

• Leveraging the New Guidance
• Climate Ambition
• Climate Reporting
• Private Equity Concerns
• Impact on Financial Institutions
• Contact Us

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In July 2025, the Science Based Targets initiative (SBTi) released its updated Financial Institutions Net Zero (FINZ) guidance, marking a significant step forward for the sector and arriving just as early adopters of the previous guidance reach their 5-year target review horizon. The guidance also presents greater alignment with other frameworks, such as the Net Zero Investment Framework (NZIF).

In this article, we outline how and when companies should leverage this updated guidance for target setting, summarise the key points about the new standard’s requirements for climate ambition and reporting, and outline what this all means for financial institutions.

How and when to leverage the new guidance

Companies are encouraged to start applying the new guidance as soon as practicable, but a phase-in period has been proposed. Either the FINZ v1 or the FINZ v2 guidance may be used for companies looking to set targets until December 2026. SBTi suggests:

	How to Set Targets	Timing
Financial Institutions	Set near and long-term targets using FINZ v1; or set near-term targets only using FINZ v2.	Both versions can be used until at least December 2026.
Financial Institutions with Net-Zero Commitments	Set near and long-term targets using FINZ v1.	Within 24 months of FINZ publication.
Financial Institutions with Existing Near-Term Targets	Existing near-term targets remain valid. Revalidate near-term targets using FINZ v2; or set near and long-term targets using FINZ v1.	Both versions can be used until at least December 2026.

Redefining climate ambition

SBTi has redefined climate ambition in its FINZ guidance, with more stringent requirements on certain sectors, namely the fossil fuel, transport, industry, energy, and real-estate sectors. The latest guidance introduces the concept of portfolio segmentation – four segments are used to define target-setting requirements and climate ambition:

• Segment A: Fossil fuels (coal, oil, gas).
• Segment B: Transport (air, maritime, land); Industrial (steel, cement); Energy (power generation); Real estate (residential and commercial buildings); Forest, land and agriculture (FLAG).
• Segment C: Other sectors (not listed in segments A or B).
• Segment D: Subset of activities in emissions-intensive sectors and other sectors. This includes private equity, venture capital and private debt in non-fossil fuel sectors with <25% ownership or no board seat, as well as funds of funds.

SBTi’s updated guidance introduces clearer criteria for how financial institutions should treat different types of assets on their journey to net zero. Assets are now categorised as either “in transition” (shifting toward lower-carbon operations), “climate solutions” (assets that directly support decarbonisation, such as renewable energy), or already in a “net zero state”.

For “in transition” assets, the guidance includes an Implementation List of approved benchmarks and third-party methodologies that institutions can use. This expands options for demonstrating portfolio alignment, which previously were limited to either using the ITR methodology or having SBTi-validated targets.

Unlike earlier drafts of the guidance, the final version does not require financial institutions to demonstrate that their portfolio is making progress towards the targets they have set. Institutions must still report their own progress annually and renew targets at the end of each near-term cycle (typically five years). However, there is no requirement to show that portfolio companies are delivering on the targets they have set, as is required in NZIF. In practice, this means financial institutions can meet the standard by ensuring companies set targets, without being responsible for how quickly those companies achieve them.

Climate ambition requirements also depend on the location of assets – financial institutions with assets in developing economies have longer timelines to bring those holdings into alignment, recognising regional differences in transition pace.

As with previous guidance, SBTi mandates that companies make certain over-arching strategic commitments to align with climate goals. These have been expanded with the addition of a commitment to monitor and phase out deforestation and land conversion from the portfolio, as well as to conduct and publish a deforestation assessment by 2030. Requirements for ending new finance to fossil fuel assets and divesting from fossil-fuel related assets remain similar to those outlined in the near-term guidance and are in alignment with coal phase-out by 2030 for OECD countries and 2040 for the rest of the world. The guidance also makes clear that offsets or carbon credits cannot be used to meet near- or long-term decarbonisation targets. Only residual emissions at the point of net zero can be neutralised.

Increased climate reporting expectations

Alongside these ambition requirements, SBTi FINZ also raises expectations for climate reporting and transparency. This includes requirements to report:

• Scope 1 & 2 financed emissions for segments A, B, and C. This was previously only required where companies were setting portfolio coverage targets on an emissions coverage basis. Reporting requirements are stricter if targets are set based on the share of emissions covered rather than the share of assets. If setting portfolio coverage based on emissions coverage, investors must also include segment D activities in their financed emissions statement.
• Scope 3 financed emissions for automotive, coal, oil & gas, and real-estate assets, as these are deemed to be “high impact” sectors. From 2030, Scope 3 financed emissions must be included for all assets.
• Exposure to fossil fuel-related activities and related GHG impacts. This includes a new requirement to report a ratio of fossil fuel financing relative to renewable energy financing.

Addressing private equity concerns

During the consultation period, key concerns raised by private equity firms included the need to maintain the 24-month post-investment grace period for portfolio companies to be integrated into targets, as well as the looser requirements around minority investments (<25% ownership or no board seat). SBTi has honoured these concerns by classifying private equity, venture capital, and private debt of private corporates and SMEs in non-fossil fuel sectors with <25% ownership or no board seat as segment D, on which the least stringent requirements are placed. Segment D assets are only required to be included in near-term targets if the target coverage of segment A-C assets is <67%, but it must be phased in to targets from 2040.

What this means for financial institutions

The new FINZ guidance is currently in a period of transition and will take a while to be adopted more widely in the sector. The target-setting tools and associated documentation are not yet published, and there is a generous transition period to prepare key elements of new target-setting requirements, notably portfolio GHG accounting.

The guidance provides increased flexibility in defining climate alignment targets, which is intended to make internal implementation more straightforward. However, this flexibility may also lead to slight discrepancies in target ambition, as it is not always obvious from the standard SBTi target language how ambitious a target really is.

While it will be a few months before the first FINZ-aligned targets start to be validated and published, Anthesis is already supporting clients in navigating the new guidance and the implications for their businesses. The practice of setting SBTs enables companies get on track and future-proof growth, and is one of the best practices for publicly communicating a company’s commitment to limit the effects of climate change. At Anthesis, we view the process of setting Science Based Targets not merely as a checkbox but as a transformative business journey.

Table of contents

• Access to Finance Incentives
• Unmet Demand
• Regulatory Harmonisation
• How Anthesis Can Help

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Emerging markets – nations that are progressing through rapid growth and industrialisation – represent increasingly attractive opportunities for corporate global expansion. At the same time, governments, financial institutions, and consumers across such markets in Latin America, Africa, and Asia are driving a shift toward more sustainable economic models to accelerate growth, respond to growing investor interest, and align with global regulatory developments. Credible environmental, social, and governance (ESG) strategies can therefore be powerful enablers for companies looking to enter these new markets and to grow their business.

This article will explore three ESG-related opportunities in emerging markets:

1. Access to ESG-linked financial instruments
2. Unmet demand for sustainable products and services
3. Regulatory harmonisation

We’ll also examine how companies with robust ESG strategies may be better positioned to successfully enter these markets.

Greater access to sustainable finance incentives

Governments and financial institutions in emerging markets have recently introduced a range of sustainability-linked financial instruments to attract investment and incentivise companies to pursue ambitious sustainability objectives. Among these is the fast-growing sector of sustainability-linked loans (SLLs), offering preferential terms such as potential interest rate reductions or increases, depending on the borrowers’ performance against predefined ESG performance targets (e.g., emissions reduction or gender equity).

The market for SLLs in emerging markets has expanded significantly, growing by nearly 60% between 2017 and 2021, and the adoption of SLLs is expected to continue accelerating, with the Asia-Pacific market leading at a projected compound annual growth rate (CAGR) of 27.8% through 2033. This growth is fueled by heightened awareness of climate risks, expanding public regulations on sustainable finance, and increasing technical assistance and investment from Development Finance Institutions (DFIs).

Notable SLL examples include the International Finance Corporation (IFC)’s $85 million loan to Precious Shipping Limited (PSL) in Thailand, tied to freshwater-use reduction targets for its vessels, and a $30 million loan to the Izmir Water and Sewerage Administration (IZSU) in Turkey, linked to a gender equity target of hiring at least 300 women in industries in which they are underrepresented. Similar financing arrangements have also been rolled out by multi-lateral development banks such as the African Development Bank and the Asian Development Bank.

Companies with robust ESG strategies supported by clear KPIs and measurable sustainability performance targets are best positioned to secure SLLs, as they effectively fulfill the eligibility requirements set by issuers. These strategies not only demonstrate alignment between business and sustainability objectives but also reflect strong internal performance management and mature performance relative to peers. This strategic positioning also supports market entry in regions where sustainable development is a national priority.

Unmet demand for sustainable products

Consumer preferences have long played a pivotal role in emphasising the business value of ESG, particularly in regions like the EU and North America. Recent research indicates that the demand for sustainable products is similarly rising in other parts of the world, especially in emerging markets across Asia, Latin America, and Africa. Consumer segments such as “zero-wasters” are now actively seeking sustainable product alternatives in these regions, signaling a shift toward more conscious consumption.

Additionally, another report found that over 80% of survey respondents in emerging markets indicated they care about the sustainability of products such as leisure travel, laptop computers, and apparel. Companies such as Kärcher are recognising this trend and strategically aligning their business expansion to respond, investing in the growth of sustainable and efficient cleaning technologies and addressing the growing demand for “green cleaning” in countries such as India.

Presently, this growing consumer demand in emerging markets remains unmet, as barriers such as unclear sustainability labelling still deter purchasing behavior. Companies that can identify and address these challenges are well-positioned for growth. For companies who do not yet have clearly articulated products or services related to sustainability, the development of an ESG strategy can help focus effort and investment into product innovation related to ESG that aligns with a company’s values, core competencies, and responds to evolving consumer expectations.

Regulatory harmonisation

Driven by rising investor and trading partner expectations for transparency, country-level ESG regulations in emerging markets have expanded and aligned with leading global frameworks and standards. For example, Brazil’s adoption of the ISSB standards integrates key elements from both the TCFD and SASB, signaling a shift toward internationally harmonised reporting. Similarly, Rwanda’s green taxonomy is deliberately structured to align with the TCFD and GRI frameworks, ensuring consistency in climate-related and broader sustainability disclosures. Aligning with global ESG frameworks is also expected to accelerate in emerging markets as global investors and companies continue to advocate for streamlined standards to reduce reporting and compliance complexity.

Companies with robust ESG strategies are well-positioned to recognise and respond to these shifts. By proactively aligning with foundational frameworks such as ISSB, TCFD, SASB, and GRI, they can embed regulatory readiness into their operations, reducing the cost of compliance that is often tied with expanding into new markets. This forward-thinking approach not only facilitates smoother market entry but also enables companies to meet growing expectations for transparency and performance measurement from regulators, investors, and other key stakeholders. Ultimately, a strong ESG strategy equips businesses to navigate multiple stakeholder demands simultaneously, enhancing trust, reducing regulatory risk, and creating competitive advantage in both domestic and international markets.

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While increasing political and economic shocks have caused markets in North America and Europe to retreat and slow down on their sustainability agendas, some other regions such as Asia and Latin America are viewing these shocks as opportunities to accelerate their sustainability efforts. A recent survey revealed regional differences in attitudes toward sustainability, as 91% and 71% of respondents in North America and Europe, respectively, reported backlash against the sustainability agenda in their countries, while only 38% in Asia reported similar sentiments. Coupled with the continued development of mature financing instruments, unmet consumer demand, and increasing regulatory harmonisation, ESG has evolved beyond a resilience strategy and into an opportunity for business growth and value.

How Anthesis can help

At Anthesis, we specialise in guiding organisations to develop and implement robust ESG strategies or refresh existing strategies to keep pace with change. Our team of global experts can support your company to develop ESG programs and strategies that support entry into emerging markets through regulatory horizon scans, mandatory reporting readiness, materiality assessments, and stakeholder engagement. We are experts at identifying and mitigating ESG-related risks, uncovering opportunities for innovation through ESG, and making the business case for sustainability.

For more information about how our ESG advisory services can support expansion into emerging markets, please get in touch using the form below.

Caroline Gaudreault

Director

Table of Contents

• What are Avoided Emissions?
• Reporting Frameworks
• Who Benefits?
• How Anthesis Can Help
• Contact Us

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In the race to limit global warming to 1.5°C, businesses are under increasing pressure to reduce their greenhouse gas (GHG) emissions. But what if companies could go beyond just shrinking their carbon footprints and actually become part of the climate solution?

Traditional GHG inventories focus solely on the emissions a company causes through its operations and value chain, but they may overlook the positive climate impact of the solutions a company provides. Reporting avoided emissions fills this gap by capturing how a company’s products or services help reduce emissions in society compared to a reference scenario. This enables organisations to demonstrate their contribution to global decarbonisation, prioritise high-impact innovations, and provide a forward-looking metric that reflects their role in enabling a low-carbon future – something GHG inventories alone cannot reveal.

What are avoided emissions?

There are different definitions for avoided emissions but one of the most used is from the World Business Council for Sustainable Development (WBCSD): “The estimated difference in full life cycle GHG emissions that result from a scenario with a solution in place, compared to a reference scenario without the solution when reference scenario emissions are higher” and where the reduction needs to occur in another actors’ direct emissions.

Note that, in contrast, the GHG Protocol currently does not require that emissions reductions are in another party’s direct emissions. Solutions that can generate avoided emissions can be classified in intermediary solutions (or enabling solutions) and end-use solutions.

Accounting approaches for GHG inventories and avoided emissions are fundamentally different. A corporate GHG inventory contains data on the historical GHG emissions of a company’s value chain (Scope 1, Scope 2 and Scope 3 emissions using inventory accounting). Avoided emissions, on the other hand, are calculated as the difference between two scenarios.

In some cases, avoided emissions will overlap with a company’s scope 3 emissions. For instance, a company that introduces a product that is more efficient in the use phase will see a reduction in its scope 3 – category 10 (use of sold products) emissions, but could also claim the difference between the life cycle emissions of the two generations of products as avoided emissions.

Frameworks for credible reporting

To ensure integrity and avoid greenwashing, there are three main guidance documents for accounting and reporting avoided emissions:

• Guidance on Avoided Emissions – Helping business drive innovations and scale solutions toward Net Zero (WBCSD 2025);
• Avoided Emissions & Climate Investing: A Guide for Investors and Businesses (WBCSD 2025); and
• Estimating and Reporting the Comparative Emissions Impacts of Products (The GHG Protocol 2019).

To measure avoided emissions, the GHG Protocol offers a flexible, product-level comparative framework that is based on life cycle assessment (LCA). In contrast, WBCSD proposes a more comprehensive step-by-step calculation framework.  A company should report avoided emissions only under a certain set of criteria defined by the GHG Protocol and WBCSD:

1. Climate Action Credibility: The company must have a comprehensive GHG inventory and a science-based climate strategy.
2. Climate Science Alignment: The solution must align with 1.5°C pathways.
3. Contribution Legitimacy: The solution must have a direct and significant decarbonising impact.

In all cases, avoided emissions must be reported separately from a company’s carbon footprint and cannot be used to claim carbon neutrality. Transparency is key: companies must disclose methodology, third-party verification, overlaps with and any potential rebound, and side effects.

Who benefits from reporting on avoided emissions?

Reporting avoided emissions is most useful to capture positive GHG impacts that are not already captured in a company’s GHG inventory, especially when a company will report higher emissions in their Scope 1 emissions to provide solutions that reduce another party’s direct emissions.

Many companies that report their corporate GHG inventories do so because their operations inherently produce emissions – often as a result of manufacturing, transporting, or selling goods that fulfill a specific function in the global economy. However, there is another category of companies whose primary role is to enable the functioning and transformation of that economy. These are the recyclers, waste management firms, next-generation materials startups, clean tech innovators, digital optimization platforms, and infrastructure providers for renewable energy and electrification. While their own emissions may appear modest or even misleadingly high under traditional Scope 1, 2, and 3 accounting, their true climate value lies in the emissions they help others avoid. These enablers are the backbone of decarbonisation, yet their contributions are often invisible in standard GHG inventories.

Another case where reporting avoided emissions becomes interesting is in cases where a company would see an increase in its reported GHG emissions, despite the net effect of a given change being to reduce total GHG emissions. This can occur, for example, by increasing product longevity. This is where avoided emissions become essential—not just as a metric, but as a recognition of their catalytic role in accelerating the net zero transition.

How Anthesis can help

Anthesis can support organisations in reporting and leveraging avoided emissions by integrating this forward-looking metric into broader decarbonisation and net zero strategies. Recognising that traditional GHG inventories do not capture the positive climate impact of low-carbon solutions, Anthesis can help clients quantify and communicate how their products, services, or projects reduce emissions in society compared to conventional alternatives.

Through tailored consulting, life cycle assessments, and scenario modeling, Anthesis can enable companies to identify high-impact opportunities, validate claims with scientific rigor, and align with frameworks such as the WBCSD guidance. This empowers businesses not only to demonstrate their contribution to global decarbonisation but also to drive innovation, attract investment, and differentiate themselves in a climate-conscious market.

Barbara Chen-Gore

Principal Consultant

Kylee Chang

Principal Consultant

Table of contents

• Reasons for SBTi-Validated Targets
• Reasons against SBTi-Validated Targets
• Other considerations
• The bottom line
• How Anthesis Can Help
• Contact us

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The Science Based Targets initiative’s (SBTi) recent release of the version 2.0 draft of the Corporate Net-Zero Standard adds another layer to the ever-growing stack of sustainability standards, frameworks, and climate nuances that practitioners must navigate.

The rapid and extensive changes transforming the sustainability landscape—including evolving regulations and increasingly complex reporting standards—pose significant challenges, even for the most experienced sustainability professionals striving to uphold their sustainability commitments while maintaining strategic clarity.

Still, SBTi remains a top-tier standard that drives innovation and climate impact reduction within a business while bolstering brand image.

In this article, we explore both the benefits and hurdles of setting SBTi-validated targets to help you decide if they are a strategic fit for your business.

Reasons for SBTi-validated targets

Let’s start with the good. SBTi is still one of the best, if not the best, and most robust emission reduction target-setting standards available for the business sector. Other frameworks, such as Business Ambition for 1.5°C and the Race to Zero campaign, or ISO Net Zero and the Oxford Principles, are either signatory-based or represent a collection of best practices, respectively. They do not serve the function of setting discrete, measurable, time-bound corporate emission reduction targets. SBTi’s standards are one of the only frameworks that serve this niche.  

Key benefits of setting SBTi-validated targets include:

1. Recognised, standardised, comparable targets supported by external validation
2. Reduced target-setting loopholes
3. Holding the line internally
4. Supported by science and industry-specific research
5. Validity across raters and rankers
6. Specific benefits for small and medium-sized enterprises
7. Keeping companies accountable

1. Recognised, standardised, comparable targets supported by external validation

When you set an SBTi-validated target, your customers, peers, investors, and other stakeholders have instant assurance that your target is robust and aligned with the latest climate science and your company has gone the extra step of obtaining SBTi’s seal of approval. Further, by joining the group of 8,500+ companies that have already set SBTi-validated targets, you have the ability to quickly assess how your progress stacks up against your competitors and peers in a standardised and comparable way.

2. Reduced target-setting loopholes

The SBTi framework helps prevent companies from obfuscating emissions growth or focusing on less materially significant emissions sources when setting targets. Specifically, the forthcoming version 2.0 draft standard, although more complex, is purposefully designed to promote a “right action” approach, ensuring that target-setting drives meaningful and high-impact climate outcomes.

3. Holding the line

Choosing to set SBTi-validated targets means that your target ambition (i.e., how much you must reduce and by when) is firmly grounded in the latest scientific consensus.  A common challenge for sustainability practitioners is the progressive dilution of climate commitments during internal negotiations with operational and executive teams. Often, without a starting point or line in the sand, targets are framed solely around what is achievable, rather than what is also aligned with science. Pursuing an SBTi-validated target helps sustainability leaders set this boundary internally and reduce complexity during target implementation.

4. Supported by science and industry-specific research

On a global scale, the science is clear: we must reduce emissions 50% by 2030 and achieve net-zero by 2050 to preserve a habitable planet. Embedded within those overarching targets, however, lie numerous important nuances that shape how we approach climate action on the ground. SBTi has undertaken the laborious work of translating complex climate science into clearly defined standards that account for nuances such as variations in sector-specific approaches, the calibrated role of carbon offsets, and acceptable base years for target setting.  Below, we’ve explored how some of these nuances play out within SBTi’s standards.

• Unique Sectoral Approaches: As an example, the energy sector plays an outsized role in driving the climate transition. Achieving net-zero globally necessitates that the energy sector decarbonise more rapidly than other sectors, thereby serving as a springboard for other sectors to decarbonise.  Likewise, the forestry, land, and agriculture (FLAG) sector holds a distinct responsibility in carbon sequestration and atmospheric regulation. Consequently, target-setting methodologies for the energy sector differ significantly from those applied to the FLAG sector, reflecting their respective climate impacts. Choosing to set a SBTi-validated target ensures that your emission reduction goals are tailored specifically to your business context and industry.
• Carbon Offsets: Similarly, carbon offsets carry specific nuances in how they can be applied within an emission reduction target. Internally, organisations often face significant challenges in achieving consensus on the appropriate role of carbon offsets within their sustainability programs. By choosing to set SBTi-validated targets, companies align their positions with the most recent scientific guidance and best practices regarding the role of carbon offsets.

In sum, SBTi has translated complex climate science into a tangible, explicit standard that incorporates critical nuances, effectively distilling scientific insights into practical frameworks for guiding credible climate action. This means organisations don’t need expert-level climate knowledge to set credible, science-aligned emissions reduction targets.

5. Validity across raters and rankers

An SBTi-validated target often enhances an organisation’s performance across leading disclosure and rating platforms, including CDP, DJSI, and Ecovadis. These programs generally award higher scores to companies that adopt emission reduction targets validated by an independent third party and standardised to a recognised science-based framework, compared to those with unvalidated or internally defined targets. Consequently, setting SBTi-validated targets strengthens credibility and comparability in sustainability reporting and benchmarking.

6. Specific benefits for small and medium-sized enterprises (SMEs)

If you qualify as an SME, there is a reduced fee and reduced complexity in target-setting with SBTi. We strongly recommend SMEs obtain SBTi validation as there is a low barrier to entry to securing the highest seal of approval.

7. Keeping companies accountable to their commitments

With voluntary requirements to disclose emissions progress annually and a database that tracks and denotes current target validation status (as well as companies that have withdrawn their commitments), SBTi validation can help companies stay on track.

Reasons against SBTi validation

Taking all the benefits into account, there may still be some challenges your business may wish to consider before pursuing SBTi-validated targets.

Common hurdles to setting SBTi-validated targets include:

1. Cost to commit
2. Cost to maintain
3. Updates and stricter requirements
4. Regulatory uncertainty

1. Cost to commit 

Securing official SBTi validation typically involves a fee ranging from approximately $10,000 to $25,000 (USD), depending on whether you are submitting near-term targets alone or alongside net-zero targets. Additional expenses frequently arise from engaging external consultants to interpret SBTi standards, ensure full compliance with rigorous criteria, and navigate the diverse methodologies, timelines, and sector-specific requirements integral to an SBTi-aligned target. Depending on the level of internal capacity versus consultant involvement—which can range from light advisory support to comprehensive end-to-end guidance—total costs often range from $15,000 up to $250,000, and are dependent on various factors include company size and unique needs.

2. Cost to maintain

After SBTi validation, ongoing annual maintenance is required. Beyond regularly updating your greenhouse gas inventory and disclosing your progress, which is standard practice for most established sustainability programs, you must also manage base year adjustments. This includes accounting for changes in methodology, mergers, acquisitions, or divestitures that may affect your emissions baseline. For companies with two or more years of GHG Protocol-aligned inventories, this process is typically familiar. However, organisations undergoing frequent structural changes or anticipating significant methodological shifts should be prepared for additional base year maintenance efforts. Furthermore, companies wishing to maintain an active SBT must also conduct a mandatory five-year review to revalidate their target. While reviewing targets regularly is surely good practice, the burden and cost of additional validation could be another potential obstacle.

3. Upping the ante

SBTi regularly updates its standards, requirements, and validation process to enhance rigor and reflect the latest global emissions reduction progress, as well as insights gained from corporate climate action. For example, in July 2022, SBTi discontinued acceptance of Scope 1 and 2 targets aligned with well-below 2°C pathways in order to accelerate decarbonisation efforts and address the stagnation in global emissions reductions. The draft version 2.0 net-zero standard further rules out some target-setting practices that were previously allowed. These changes and shifts can make staying up-to-date and maintaining the business case for SBTi challenging.

4. Regulatory uncertainty

Regulatory uncertainty around disclosing emission reduction targets has become a heightened concern of many organisations in recent years. While most current regulations focus on emissions and climate risk disclosure, some emerging laws – such as New York’s Fashion Sustainability and Social Accountability Act and earlier drafts of the SEC’s climate disclosure rule – also involve the disclosure of emission reduction targets.

Meanwhile, greenwashing lawsuits are increasing, especially in the realm of consumer protection. High-profile lawsuits against companies like H&M, JBS, and Volkswagen underscore legal risks tied to false or misleading environmental claims that misrepresent a company’s or product’s sustainability impact. It’s important to note, however, that there is little evidence to suggest that companies face legal risks solely for voluntarily committing to reduce their emissions –the vast majority of lawsuits in this space pertain to consumer protection and green claims.

Regulatory developments remain in flux, exemplified by the SEC’s March 2025 decision to end its defense of climate disclosure rules, which has left federal climate disclosure regulation in legal limbo, increasing uncertainty for organisations navigating this space.

Other considerations

When designing and implementing sustainability programs, it is essential to consider both the broader environmental context and the evolving expectations for corporate ambition. The following points highlight key factors that can influence the effectiveness and integrity of target setting beyond SBTi-validated targets.  

• Planetary Boundaries: The SBTi focuses on greenhouse gas emissions and atmospheric impacts, not on other critical planetary boundaries like freshwater use, land-system change, or biodiversity loss. Several of these boundaries have already been surpassed or are approaching critical tipping points. When setting emission targets, it’s critical to avoid shifting environmental burdens from one area to another within their decarbonisation roadmaps.
• Ambition Beyond Minimums: The SBTi sets a 42% reduction target for Scope 1 and 2 emissions by 2030, but the Paris Agreement calls for a more aggressive 50% reduction. Many countries have missed their Nationally Determined Contributions, highlighting the urgency for faster cuts. Companies should strive to exceed SBTi targets—especially for emissions directly under their control—to meaningfully contribute to achieving global net-zero goals.

The bottom line

Deciding to pursue SBTi-validated targets is a key step in a company’s sustainability strategy. It’s important to assess how the standard aligns with your business goals and where it may pose limitations. Grounded in science, the SBTi offers a credible, consistent framework aligned with global climate goals. However, the financial costs, ongoing effort, and need to keep up with evolving criteria require careful evaluation of your organisation’s capacity and readiness.

Ultimately, companies must balance the value of external recognition against their internal priorities and capacity. If your company is equipped with the resources and ambition to lead on climate action, SBTi validation can help demonstrate credibility and drive meaningful progress. Alternatively, beginning with science-aligned internal goals and preparing for future validation may be more practical. Target-setting is a driving force for progress rather than a task to complete—start where you can, stay informed, and continuously evaluate the tools and frameworks that best support your sustainability journey.

Focus on building a foundation with complete, accurate GHG emissions data, realistic reduction plans, team collaboration, and systems designed to evolve with future demands. In essence, choose the path that moves your organisation forward—always remembering that starting early amplifies your impact on global climate efforts and fortifies your company’s long-term resilience.

How Anthesis can help

Anthesis supports companies pursuing or renewing SBTi-validated targets, ensuring these targets remain credible, ambitious, and aligned with the latest climate science. Through this process, we help mitigate climate risks and prepare your business for future relevance and resilience in a net-zero economy.

We also assist organisations throughout their decarbonisation journeys, offering comprehensive support across inventory development, target-setting, revalidation, and implementation. Additionally, we guide companies in investing in high-quality carbon removal projects.

For companies not currently pursuing SBTi-validated targets, we provide support to achieve internal and strategic alignment on alternative climate goals, ensuring you have the data, roadmaps, and resources needed to take actionable next steps.

There are numerous complementary strategies that effectively address a company’s climate impact and help mitigate climate and nature risk, both alongside and beyond science-based targets.  These include renewable energy strategies, product life cycle assessment and the implementation of circular business models, supplier engagement and supply chain due diligence, and enhanced nature, biodiversity, and water stewardship.

Michael Lengahan

CBAM Lead

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Michael Lengahan

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Contents

• Steel exports
• Aluminium exports
• What CBAM means for SA metals
• Assess your CBAM risk

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South Africa is among the countries most exposed to the EU’s Carbon Border Adjustment Mechanism (CBAM), with iron, steel, and aluminium exports particularly at risk. These sectors face heightened vulnerability due to high Scope 2 emissions from the country’s coal-heavy power grid and a relatively low domestic carbon price—factors that together raise the risk of revenue leakage. In 2023 alone, CBAM-covered exports to the EU were worth €1.1 billion, accounting for 5% of South Africa’s total exports.

Here, we explore how exposed South Africa’s metals sectors are, why carbon intensity matters, and what companies must do to remain competitive under CBAM.

Steel exports

The EU is a critical destination for South Africa’s iron and steel exports, making the sector especially vulnerable under CBAM. In 2023, South Africa produced 4.9 million tonnes of crude steel, ranking 32nd in the world. While the country is not a major producer globally, it plays a significant role in EU supply chains. In 2018, South Africa exported 0.9 million tonnes of CBAM-covered steel products to the EU—2% of total EU imports—making it the 16th largest supplier to the region.

Recent figures reinforce this trend. According to the South African Iron and Steel Institute, nearly 140,000 tonnes of primary steel products were exported in March 2023 alone, with 59% of those exports destined for EU member states and an additional 6% going to the UK. This heavy dependence on EU markets places the steel sector at significant risk from rising CBAM costs.

Steel’s carbon challenge

South Africa’s steel production is dominated by the Blast Furnace–Basic Oxygen Furnace (BF–BOF) process, which is one of the most carbon-intensive methods globally. While the Electric Arc Furnace (EAF) route offers significantly lower emissions, its benefits are limited in South Africa due to the country’s coal-based electricity grid. Even EAF production here remains more emissions-intensive than in many other countries.

This structural challenge means that South Africa’s steel sector generally carries a higher carbon footprint than its global competitors, making exports more costly under CBAM and reducing their attractiveness in the EU market unless mitigation efforts are introduced.

Aluminium exports

Aluminium is another key export for South Africa, particularly to the EU. The country produces approximately 700,000 tonnes of primary aluminium annually—roughly 1% of global output. Despite this modest share, South Africa ranks as the 8th largest aluminium exporter to the EU.

The aluminium industry is also economically significant at home, contributing around 1% to South Africa’s GDP. It supports roughly 11,000 direct jobs and an estimated 29,000 indirect jobs across the value chain. In 2022, South Africa exported 189,000 tonnes of unwrought aluminium to the EU, representing 35% of total aluminium exports. This close trade relationship exposes the sector to significant CBAM-related cost pressures.

Aluminium’s emissions footprint

The emissions intensity of South Africa’s aluminium sector is among the highest in the EU’s import base. Hillside Aluminium, the largest producer in Africa, reports a carbon intensity of 18 tonnes of CO₂ equivalent per tonne of aluminium, well above the global average of 10 tCO₂e. The country’s reliance on coal-fired power significantly drives up the carbon footprint of its aluminium production.

Many global competitors are already operating at much lower emissions intensities, thanks to the use of cleaner electricity sources or more efficient technologies. This puts South African producers at a competitive disadvantage as CBAM costs begin to reflect emissions differences more directly in pricing.

What this means for South African metals

South Africa is emerging as a carbon outlier in the EU’s metals supply chain. Without meaningful decarbonisation efforts, both the steel and aluminium sectors will face increasing CBAM charges that could squeeze margins, reduce demand, and erode long-term market access.

To stay competitive, South African companies must act now. This means assessing their emissions exposure, re-evaluating supply chains, and investing in lower-carbon production methods. The CBAM is not just a compliance issue—it’s a catalyst for change and a clear signal that carbon performance will increasingly shape global trade relationships.

Assess and mitigate your CBAM risk

As CBAM costs rise over the coming decade, South African exporters must act now to protect EU market access.

Start by assessing your CBAM footprint—the emissions linked to your materials, suppliers, and products—and calculating your effective carbon price (ECP) to understand what’s already been paid before import. This will give you a clear picture of your exposure and where the risks lie.

Mitigation strategies fall into two main buckets:

• Supply chain optimisation – shifting to lower-carbon suppliers to reduce CBAM exposure without major internal changes.
• Process decarbonisation – cutting emissions through electrification, fuel switching, scrap use, and other efficiency gains.

Download the Cost of Silence Report

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How many times have we heard it? That sustainability initiatives are being deprioritised – pushed down the agenda by competing demands and persistent doubt over their financial return.

Now, with our new report, The Cost of Silence, we finally have the data to respond decisively. Based on three years of analysis across 500 companies and 16 sectors, this research shows that environmental action isn’t a reputational luxury – it’s a driver of commercial performance.

Our data shows a clear correlation between environmental action and business performance:

• Companies with strong environmental performance see up to 6% higher EBITDA than their peers
• Up to 31% of the reputational advantage held by market leaders comes down to how they are perceived on sustainability
• And yet, 79% of companies are still risking that advantage, either by overstating their efforts or staying silent altogether

A 6% uplift in earnings is not a matter of ideology – it’s a strategic priority; therefore, the choice to remain silent can no longer be considered a neutral decision. Sustainability is a lever for financial growth and a cornerstone of reputation. This report gives business leaders the evidence they need to act boldly and speak with confidence.

This report doesn’t just quantify impact. It shows where to focus, what to say, and how to avoid the risks of greenwashing or greenhushing. For anyone responsible for sustainability, reputation, growth, or all three, this is essential reading.

Contact us

Speak with our experts and discover how we can support you in creating impactful, purpose-driven communications for your brand.

Zara de Belder

Associate Director

Lucy Tinson

Go to Market Digital

Contents

• ESG Data Management Platforms
• Selecting an ESG Reporting System
• How Anthesis Can Support You
• Contact Us

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For General Partners (GPs), establishing a robust environmental, social, and governance data management system as part of their portfolio engagement and data reporting process has become crucial to meeting regulatory compliance obligations, benchmarking portfolio progress, and driving sustainable growth.  

Mature digital platforms can also support GPs with their own reporting and disclosure requirements, including alignment to the ESG Data Convergence Initiative (EDCI), Principles for Responsible Investment (PRI), and Sustainable Finance Disclosures Regulation (SFDR), provide valuable data-driven insights to inform their portfolio improvement programmes, and assist in exit preparations. 

With more GPs considering a standardised approach to ESG data collection, we explore how private equity firms can leverage ESG data management tools to streamline data collection across their portfolio, unlock value creation opportunities, and support regulatory compliance. 

ESG Data Management Platforms: What are the Key Drivers and Opportunities?

Managing scattered sustainability data across a diverse portfolio can be overwhelming and time-consuming, especially with ever-evolving and demanding compliance needs. ESG data management platforms turn sprawling data into streamlined reports and dashboards, in the process, revealing insights to drive value creation. By automating ESG data gathering, validation, and reporting, portfolio managers can significantly improve efficiency, allowing them to focus on meaningful, data-driven discussions with portfolio companies about sustainability performance rather than being burdened by manual data collection challenges. 

ESG data management platforms offer the following opportunities: 

• Streamlined ESG data collection and reporting: Automating data gathering from portfolio companies, ensuring accuracy, consistency, and efficiency. 
• Regulatory and disclosure compliance: Simplifying adherence to ESG disclosure requirements (e.g., SFDR, SEC, EDCI, PRI, TCFD), reducing regulatory risks, and identifying broader company risks. 
• Portfolio oversight and performance tracking: Providing centralised dashboards to monitor ESG performance across all portfolio companies in real time. 
• Stakeholder engagement: Enhancing transparency and trust with LPs by providing clear, verifiable ESG reporting and impact metrics across diverse portfolios. 
• Value creation and competitive advantage: Helping identify ESG-driven value creation opportunities that enhance financial returns and long-term sustainability. 
• Exit readiness: Robust datasets can show how ESG activities and initiatives have created value through margin improvement and top-line and bottom-line growth. 

How to Select a Portfolio ESG Reporting System

An ESG portfolio reporting programme should be underpinned by robust ESG data governance and data management processes. By adopting secure, framework-aligned, and integrated ESG software, GPs are well positioned to monitor and benchmark ESG performance across their portfolio, regardless of sector or geography.

Here are our top tips when considering your portfolio data management process: 

1. Encourage Portfolio Companies to Leverage Existing Datasets

Organisations often possess valuable data, but the information is often fragmented and located in disparate systems across different business units. Integrating these data sets in a single platform can provide a holistic view of a portfolio company’s ESG vulnerabilities and strengths. 

2. Upskill and Educate GP ESG and Portfolio Management Teams

Developing in-house capacity is essential for General Partners. Educating ESG and deal teams on how to scrutinise and assess portfolio ESG data analytics will deepen understanding of the value of strong portfolio ESG data and the steps required, post-acquisition, to implement sustainable practices to drive improvement.

The delivery of a portfolio-wide training programme will also educate portfolio management teams on the importance of regular and robust ESG data reporting, while guiding how to integrate a GP’s ESG data management platform within their own internal processes and systems. 

3. Understand What Criteria Will Best Support Your Portfolio Reporting Needs

• Integration with Existing Portfolio Data Collection Processes: Your selected platform should collect and integrate each portfolio company’s data in a simple, systematic, structured way configured to your disclosure needs and responsible investment strategy. Moving away from spreadsheets and into a digital solution opens opportunities for GPs by creating efficiency and accuracy in the data collection process and visualising data in a standardised way to gain actionable insights. Advanced platforms are SaaS based and support API integrations, enabling seamless data transfer and ease of transition. This connectivity simplifies the tracking of ESG metrics across departments, making the entire data pipeline cohesive and manageable.
• Regulatory and Industry Reporting Requirements: Critically assess which frameworks you need to support with your broader stakeholder disclosure requirements and portfolio performance analytics. ESG data platforms which align to frameworks such as the EDCI, PRI and SFDR can streamline a GP’s external reporting requirements, establish consistency within portfolio data requests and support portfolio benchmarking and baselining. Some regulatory requirements, such as CSRD, also require complex audit requirements, so investing in a digital platform that can provide audit trails is a useful reporting function. 
• Protecting Sensitive Portfolio Data: Cybersecurity and digital resilience are of paramount importance to GPs and their portfolio companies throughout the investment lifecycle. Safeguarding sensitive ESG information and ensuring compliance with privacy regulations means that any digital platform should incorporate robust security measures to protect data integrity and prevent unauthorised access, such as multi-level encryption. Regular ethical hacking and an incident management process are indicators of best practice. As a minimum, identify a platform with an information security management certificate, such as ISO 27001, and SOC Type 2 certification to ensure the safeguarding of data.
• Value Creation Through Data Visualisation: Effective ESG data management goes beyond just collecting information – it’s about turning portfolio data into actionable insights for portfolio management, deal teams and prospective buyers. A well-designed ESG data management solution should include dashboards tailored to the unique needs of a GP, offering customised views that align with investment strategies and reporting frameworks. Whether it’s portfolio benchmarking, bespoke scoring systems, framework-specific dashboards, or tracking data collection progress, a flexible digital solution ensures that ESG insights are not only accessible but also drive meaningful decision-making.

How Can Anthesis Help? 

For private equity firms seeking comprehensive ESG data management solutions, Anthesis is equipped to support. We combine insights from our award-winning global team of private capital consultants with our comprehensive ESG data management platform, MERO, to offer GPs and their portfolio companies an effective ESG data collection and management platform. 

Teo Guzu

Principal Consultant

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Teo Guzu

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Table of Contents

• The Decisive Decade
• Focus on What Matters Most
• How Anthesis Can Help
• Contact Us

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Halfway Through the Decisive Decade

The 2020s are widely seen as the ‘decisive decade’ for sustainability action. Many organisations set their initial sustainability strategies and targets between 2019 and 2021, with interim targets in 2025 and final goals in 2030. These deadlines are far from arbitrary as 2030 aligns with global climate goals, regulatory shifts like the EU’s CSRD, and growing investor and consumer demands for measurable action.

With 2025 underway, we have officially entered the year where interim targets will start to expire, requiring companies to reassess their progress towards sustainability goals and Environmental, Social, and Governance (ESG) targets. Through this process, many are finding that they are off track to meeting their goals and need to recalibrate to ensure their new targets are focused, clear, and ultimately impactful.

Over the years, businesses have expanded their sustainability strategies and the ESG metrics that track them to cover an ever-growing list of material ESG topics, including, among others, climate commitments, human rights and DEI programs, and circular design initiatives. This comprehensive approach has been effective at managing a wide range of environmental and social impacts and ensuring stakeholder interests are addressed.

As organisational priorities shift and resources become increasingly constrained – driven by economic pressures, evolving regulations, and the imperative to demonstrate a clear return on investment – sustainability teams are facing heightened scrutiny. In response, these teams must look at approaches that ensure sustainability initiatives remain both viable and impactful, even amidst limited funding and growing accountability demands.

It’s not about doing less—it’s about doing more of what matters most.

At Anthesis, we’re seeing a shift toward more strategic prioritisation within ESG, where organisations are leaning in on the issues that drive the most meaningful business and sustainability outcomes while thoughtfully deprioritising others. This doesn’t mean abandoning responsibility or compliance but rather focusing resources and attention on the areas where they can lead, differentiate, and create real value.

Instead of spreading efforts thin across a long list of commitments, companies should consider identifying and prioritising fewer, bigger, and better sustainability initiatives backed by evidence for higher levels of investment and commitments that are unique to their business and ultimately drive value creation. Companies that focus on a few high-impact, business-aligned initiatives will create value and deliver on sustainability goals. It’s not about doing less—it’s about doing more of what matters most.

Focusing on What Matters Most

Addressing these strategic imperatives can help to cut through the noise, align your sustainability strategy and ESG efforts with what drives business and societal value, and move from intent to impact.

1. Reprioritise Efforts on High-Value Initiatives

Many companies continue to track and report on a long list of material ESG topics without clear prioritisation in their sustainability strategy, which can dilute their overall impact and messaging. A focused reprioritisation of sustainability efforts will clarify which can drive the most value and impact. Rather than addressing each material issue in isolation, organisations should identify areas where they have both the ambition and capability to lead. This begins with distinguishing between initiatives that are critical to business success while ensuring continued compliance with regulatory and stakeholder expectations.

2. Embed Value Creation at the Core

Many sustainability programs operate in parallel to business strategy, rather than as an integrated driver of business performance. In Anthesis’ experience, successful sustainability leaders clearly link sustainability to value creation, and ensure their efforts directly contribute to growth, cost savings, risk mitigation, or differentiation. Financial return and relevance to strategic business priorities are becoming core expectations for major sustainability investments.​

3. Elevate Performance Metrics and Accountability

For sustainability efforts to drive meaningful impact, they must be backed by high-quality metrics, transparent reporting, and strong accountability mechanisms. Many companies still feel pressured to track an overwhelming number of ESG indicators while losing sight of the strategic sustainability goals they were meant to support, often leading to data collection that becomes an end in itself, rather than a tool for informed decision-making. Too often, the data gathered lacks the consistency and rigor needed to be truly decision-useful. By focusing on fewer, higher-impact topics and improving the quality of the data collected—using digital solutions when applicable—companies can better integrate sustainability into core business strategy.

4. Make Sustainability a Defining Part of Organisation Identity

Any strategy will inevitably run into obstacles if it’s disconnected from your organisation’s culture and brand – after all, it’s your employees and leaders who bring these goals to life. To gain momentum, sustainability efforts in particular must go beyond compliance and risk management, evolving into a visible, strategic pillar of the organisation’s long-term positioning. Shifting the perception of sustainability from a cost center to a value driver requires embedding it at the heart of corporate strategy. For many leading companies, sustainability is shifting from a siloed vertical to a horizontal enabler supporting critical business objectives. By aligning sustainability with your organisation’s values, identity, and strategic direction, you create stronger internal buy-in and a foundation for sustained impact.

Final Thoughts

Imagine two hikers gearing up for a challenging journey. The first hiker brings many items into their backpack—useful or not—making it heavy, unfocused, and difficult to carry. Along the way, unexpected obstacles force them to shed gear or slow down. Meanwhile, the second hiker carefully selects a few high-value tools aligned with the route and conditions they will face—each item has a purpose tied directly to the journey’s success. By focusing on depth over breadth, keeping track of their gear, and seamlessly weaving these essentials into their identity as a skilled adventurer, this second hiker maintains agility, resilience, and ultimately makes more meaningful progress.

Whether you’re an early-stage organisation developing your first sustainability program or a mature organisation seeking to sharpen your focus and maximise impact, this approach can help you achieve meaningful results.

The companies making the most progress in sustainability aren’t the ones addressing the most ESG topics—they’re the ones making deliberate choices about where to focus and lead. The future of sustainability will be defined by sharp, strategic, and business-integrated approaches over broad, all-encompassing efforts.

The question isn’t just whether your organisation is addressing sustainability, but whether your organisation is focusing on its unique spheres of impact and influence that also drive business value.

How Anthesis Can Help

Anthesis partners with businesses to refine their sustainability strategies by focusing on what truly drives impact and value creation. Our expertise helps companies transition from managing ESG checklists to executing high-impact sustainability strategies that align with business priorities.