Traditionally, talk about ESG has focused on environmental exposures, which were very much the star of the show. In the last year or so, however, climate change, particularly, has started to lose its shine, at least politically.
The UK has seen the rolling back of some targets, such as the deadline for all cars to be zero emission by 2030 (with the deadline delayed to 2035). The US has for several years seen a backlash against ESG-related matters in many states and while the Securities and Exchange Commission (SEC) did finally publish its climate-related disclosure rules on 6 March 2024, they were almost immediately stayed pending the outcome of legal challenges and have now been scrapped by Trump. Even the EU, which has championed climate-related rules and regulations had to water down its Corporate Sustainability Due Diligence Directive in order to get it passed.
This is reflected in what we see in the results from the Global Directors’ and Officers’ Survey, with climate change falling from 55% of respondents considering it to be a very or extremely important concern in our 2024 report to 52% in this year’s report. For the second year running, pollution is ranked higher than climate change, but it is still down by 3% compared to last year.
In Australia and New Zealand, climate change fell out of the top seven despite the increase from 46% of respondents considering it to be at very or extremely important in 2024 to 47% in 2025. Mandatory sustainability reporting was introduced in Australia in 2024 and commenced for large businesses and financial institutions on 1 January 2025, with reporting for other organisations to be phased in over 2026 and 2027. Reporting entities are required to include details of the direct emissions that are owned or controlled by the entity, as well as indirect emissions that are consequences of the activities of the entity that occur from sources not owned or controlled by it. Reporting entities have expressed concern in relation to the breadth of the indirect emissions reporting requirements.
On the other hand, nature and biodiversity and PFAS are both significantly up, by 8% and 7% respectively. While they are still ranked very low, PFAS is up from being the bottom risk overall and nature and biodiversity is ranked five places higher – above risks such as Shareholder Claims/Class Actions and Shareholder Activism.
As well as the change in political focus on climate change, there could be other reasons why survey respondents are de-prioritising climate change as a risk for directors and officers. While there are thousands of climate change-related claims, very few claims against directors and officers personally have materialised. The softness of the D&O liability insurance market has also meant that insurers are less focused on climate change as a risk (see WTW’s article on this topic for more details: Climate Change and D&O Insurance).
By contrast with climate change, social risks are seeing an increase in attention. Health and safety continues to be ranked as the number one risk for directors and officers globally by the survey respondents, with 80% of respondents ranking it as very or extremely important. This result is actually slightly lower than last year, but it remains at number one. After the surprise result of health and safety becoming the number one risk for directors and officers in the last survey, for this survey, we added an additional set of categories for respondents to identify which aspect of health and safety is most important. Physical health and safety in the workplace comes out as the top risk, but workplace and personal matters impacting mental health and wellbeing, combined, (40%) were ranked almost equally as important as physical health and safety (43%).
The most fascinating result in this category is the ranking of diversity, equity and inclusion (DEI), which was added as a risk for directors and officers for the first time, along with geo-political risks and outsourcing decisions.
DEI may not be in the top seven risks overall, but it is ranked as number 12 out of 30 risks in total. This is above geo-political risks, pollution, social engineering crime, employment claims and climate change, to name a few.
And, while DEI may not be in the top seven risks overall, it is ranked in the top seven for GB, North America and Africa. It is ranked as a top seven risk for the healthcare industry and for companies with turnover of $5 billion or more.
Obviously, DEI means different things in different jurisdictions. However, what is particularly interesting about this as a risk for directors and officers is that, depending on where you are based, you may be faced with difficulties if you do prioritise DEI or if you don’t.
The US Supreme Court decision prohibiting affirmative action based on race, together with the Trump administration’s stance on DEI, has seen various global companies reducing the scale of their DEI policies. NASDAQ, which introduced board diversity disclosure requirements effective in 2023, saw those requirements struck down in December 2024 by the United States Court of Appeals for the Fifth Circuit.
On the other side of the Atlantic, the observable trend with regards to disclosure requirements is different. A rule similar to NASDAQ’s, issued by the FCA and applicable to companies listed in GB, remains in effect. The EU strengthened its diversity disclosure with the advent of the Corporate Sustainability Reporting Directive (CSRD) in 2022 and the European Sustainability Reporting Standards in 2023, imposing a “comply or explain” obligation either to report on diversity policies (and, if so, that must include gender aspects) or to explain why the organisation has not done so. However, there are proposals from the EU which could limit the application of the CSRD to a smaller group of companies.
Governance risks remain a core part of the risks for every director or officer to consider. Systems and controls and bribery and corruption are top seven risks this year, as they were last year.
Overall, ESG-related topics remain a contentious issue, subject to changing political and social expectations. Directors and Officers, of course, remain responsible for the accuracy of the information they do provide (whether because of regulatory obligations or when provided on a voluntary basis) and are, therefore, exposed to potential claims if it is alleged not to be accurate.
