In this week’s edition of Economy and Society:
- ESG funds drive defense sector boom in Europe
- U.K. investor survey shows renewed support for ESG, partly linked to Trump
- California identifies more than 4,000 companies subject to emissions reporting
- Report finds one-third of corporate spending aligned with net-zero
- Survey finds companies face rising pressure on sustainability reporting
Around the world
ESG funds drive defense sector boom in Europe
What’s the story?
European defense and aerospace stocks have risen about 300% since Russia’s 2022 invasion of Ukraine, according to the Financial Times. ESG investment funds—once reluctant to include weapons makers—are now a major factor in the surge. Some funds have expanded their list of investment-eligible companies by more than 200 and increased exposure to the defense sector by as much as fourfold.
Why does it matter?
The trend reflects a shift in how investors balance traditional ESG criteria with security concerns. The war in Ukraine and heightened defense spending across Europe have led asset managers to reconsider whether defense firms can be categorized as contributing to social stability. That change could alter the definition of ESG investing in European markets.
What’s the background?
Before the war in Ukraine, many ESG funds excluded weapons makers, grouping them with tobacco or fossil fuels. Sustained demand for defense equipment, combined with new European Union policies on defense integration, has made the sector increasingly attractive.
U.K. investor survey shows renewed support for ESG, partly linked to Trump
What’s the story?
A September report by the Association of Investment Companies (AIC) found that 53% of U.K. investors now use ESG in their investment strategies, up from 48% in 2024. It was the first increase in ESG adoption in the U.K. since 2022. About 19% of respondents said President Donald Trump’s (R) opposition to ESG made them more favorable toward it, while 8% said his stance made them less supportive.
Why does it matter?
The findings suggest that political dialogue in the United States is influencing investor perceptions abroad. The report highlights a rebound in investor interest in ESG in the U.K., even as U.S. policymakers scaled back regulatory requirements. That divergence may influence global capital flows and create different standards across financial markets.
What’s the background?
The AIC has published its “ESG Attitude Tracker” annually since 2020. In recent years, ESG consideration among U.K. investors had declined amid concerns about costs and greenwashing—the practice of making misleading or exaggerated claims about sustainability—but this year’s results show renewed support.
In the states
California identifies more than 4,000 companies subject to emissions reporting
What’s the story?
The California Air Resources Board (CARB) released its preliminary list of 4,160 companies that the state will require to begin climate-related disclosures in January 2026. About 60% of the companies fall under Senate Bill 253, which mandates reporting of direct and supply chain greenhouse gas emissions, while the remainder are subject to Senate Bill 261, which requires disclosure of climate-related financial risks.
Why does it matter?
The new disclosure rules extend beyond California-based firms to any large company with significant business in the state and cover the majority of S&P 500 companies. By publishing the preliminary list months before the rules take effect, CARB is giving companies advance notice of how broadly the laws will apply. The move also highlights California’s role in setting climate policy as federal regulators and international bodies continue to debate their own reporting standards.
What’s the background?
Governor Gavin Newsom (D) signed SB 253 and SB 261 into law in October 2023. SB 253 applies to companies with more than $1 billion in revenue; SB 261 applies to those with revenues over $500 million.
The release of California’s list comes as the U.S. Securities and Exchange Commission (SEC) has paused its own climate disclosure rule, raising the likelihood of a patchwork of state, federal, and international standards.
On Wall Street and in the private sector
Report finds one-third of corporate spending aligned with net-zero
What’s the story?
A September report from climate advisory firm Risilience found that large corporations are increasingly considering climate and nature risks in their business strategy. The survey of 513 executives in the U.S., U.K., Canada, and Europe showed that 95% of boards now discuss climate risks and 88% of companies plan to increase spending on decarbonization. About 36% of corporate capital expenditure is already aligned with net-zero targets.
Why does it matter?
The findings suggest companies continue to prioritize sustainability despite political opposition in the U.S. The report adds evidence that board-level attention to climate risk is becoming standard corporate practice.
What’s the background?
Companies globally are under rising regulatory and stakeholder pressure to report on climate and nature risks. In the U.S., state-level laws are proceeding even as the SEC’s climate disclosure rule remains on hold due to legal challenges. In Europe, the Corporate Sustainability Reporting Directive (CSRD) sets new standards for environmental disclosures, including nature and biodiversity, starting in 2025.
Survey finds companies face rising pressure on sustainability reporting
What’s the story?
PricewaterhouseCoopers (PwC), one of the Big Four global accounting and professional services firms, found in a 2025 survey that companies worldwide are under mounting pressure to expand their sustainability disclosures. Based on responses from 500 corporations in 40 countries, the report showed that investors, customers, and other stakeholders increasingly expect detailed reporting—even as governments scale back or delay mandates. For example, the European Union is revising its Corporate Sustainability Reporting Directive (CSRD) to ease compliance costs, and the United States has withdrawn its proposed climate disclosure rule.
Why does it matter?
The findings suggest stakeholder demand may drive sustainability reporting more than regulation itself. PwC notes that companies view sustainability data as essential for investor trust, customer loyalty, and competitiveness. The report emphasizes that organizations unable to provide reliable data risk losing access to capital or falling behind peers in markets where disclosures are becoming standard
What’s the background?
As discussed above, the CSRD is scheduled to begin applying to many large European companies in 2025, requiring extensive reporting on ESG metrics. At the global level, the International Sustainability Standards Board (ISSB) has published baseline standards to align disclosures across jurisdictions.