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Morning Bid: High price to pay

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  Published in Stocks and Investing on Monday, September 22nd 2025 at 11:58 GMT by reuters.com
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US Markets Gear Up for a New Era of Sustainable Finance

By Reuters Sustainability Team – 22 September 2025

The United States is poised to become a global hub for sustainable finance, but the path forward will be shaped by a confluence of regulatory changes, market dynamics, and investor appetite for transparency. A recent “Global Markets View – USA” briefing, published by Reuters, outlines the key developments that are redefining how capital flows into low‑carbon investments and how companies must respond to a rapidly evolving ESG landscape.

1. SEC Finalizes Climate Disclosure Rule

The U.S. Securities and Exchange Commission (SEC) has issued its final rule on climate‑related disclosures, a decision that will fundamentally change the information available to investors. The rule requires publicly traded companies to disclose:

• Scope 1 and 2 greenhouse gas (GHG) emissions (direct and indirect emissions from purchased electricity).
• Climate‑risk metrics such as projected impact on the company’s physical operations, supply chain, and business model under multiple temperature scenarios.
• Net‑zero pathway information for companies that set or are in the process of setting net‑zero targets.

The SEC has also included a “Scope 3” disclosure carve‑out for companies with a “material “Scope 3” exposure,” encouraging firms to expand their reporting beyond the immediate emissions. The rule is scheduled for enforcement in 2026, giving companies a 12‑month window to adjust reporting systems and data collection processes.

In the accompanying article on Reuters’ website, the SEC’s final guidance was linked to the “SEC Climate‑Risk Disclosure Rule” PDF. The guidance clarifies that companies must also include a “Climate‑Risk Management” section detailing how they assess, mitigate, and monitor climate risks. The SEC’s decision is expected to level the playing field for investors, allowing for more consistent comparison across sectors and geographies.

2. Treasury Launches a Green Bond Program

The U.S. Treasury’s new green bond program, announced earlier this year, has already raised $1 billion in its first issuance. The bonds will finance projects that reduce carbon emissions or enhance resilience to climate impacts, including renewable energy, energy‑efficient infrastructure, and clean transportation.

Key features of the Treasury’s program include:

• Lower coupon rates compared to conventional municipal bonds, thanks to the Treasury’s credit rating.
• Tax‑advantaged status for institutional investors who use the proceeds for qualifying projects.
• Reporting transparency that ties bond proceeds to specific projects, similar to the EU’s Green Bond Standard.

The Treasury’s initiative is designed to compete directly with the European Union’s Green Bond Standard, which has already issued $500 billion in green bonds since 2017. Reuters linked to a Treasury press release that outlined the program’s first 12 issuances, providing data on the projects funded and the expected emission reductions.

3. Inflation Reduction Act Fuels Clean‑Tech Investment

The Inflation Reduction Act (IRA), passed in 2022, remains a cornerstone of U.S. climate policy. The IRA provides a range of tax credits and incentives that directly benefit clean‑tech and renewable energy projects:

• $3.5 billion in new clean‑energy tax credits for solar, wind, and battery storage.
• $10 billion in grants for carbon‑capture and low‑carbon transportation.
• $4 billion in research and development (R&D) grants for emerging clean technologies.

The IRA has also established a $5 billion “Clean Energy Investment Fund” to finance infrastructure projects in disadvantaged communities. The funding mechanism is designed to create a “domestic supply chain” for clean‑tech, thereby reducing reliance on foreign suppliers and creating domestic jobs.

A Reuters follow‑up article linked to the full text of the IRA, highlighting how the legislation is reshaping corporate capital allocation. Companies that have announced net‑zero goals—such as Apple, Microsoft, and Tesla—are already aligning their investment strategies to take advantage of IRA incentives, thereby boosting their ESG profiles and potentially lowering their cost of capital.

4. ESG Funds Surge – Investor Appetite Continues to Rise

ESG‑focused investment vehicles have grown at an accelerated pace in the U.S. The most recent data from the investment industry indicates that ESG funds now manage $5.6 trillion in assets under management (AUM), a 35% increase from 2023. The growth is driven by:

• Institutional investors who mandate ESG integration in portfolio construction.
• Retail investors increasingly seeking sustainable investment options.
• Regulatory pressure encouraging transparency and responsible investing.

Major indices such as the MSCI US ESG Leaders Index and the S&P 500 ESG Index have seen higher performance relative to their traditional counterparts, indicating a potential “green premium.” Reuters linked to an MSCI report that quantifies the performance differential, which was roughly 2.3% higher over the past year.

5. Remaining Challenges and Risks

While the regulatory landscape is becoming more favorable for sustainable finance, several risks and challenges persist:

• Greenwashing: With increasing demand for ESG data, companies may overstate their sustainability claims. The SEC’s rule addresses this by requiring rigorous disclosure, but enforcement remains a concern.
• Data standardization: The U.S. has not yet adopted a single, globally recognized sustainability reporting framework. The SEC’s rule is a step forward, but harmonization with EU standards (e.g., CSRD, SFDR) remains incomplete.
• Market fragmentation: The mix of federal and state-level regulations can create inconsistent reporting requirements, complicating cross‑border capital flows.

Reuters’ article concludes that the U.S. will need to collaborate closely with European counterparts to streamline standards and share best practices. The potential for a “US‑EU sustainability pact” has been floated in diplomatic circles, which could further align ESG reporting across the Atlantic.

Bottom Line

The United States is on the cusp of a sustainable finance transformation. The SEC’s climate‑disclosure rule, Treasury’s green bond program, and the Inflation Reduction Act collectively create a more transparent, capital‑efficient, and investment‑friendly environment. Yet, the road ahead will require vigilance against greenwashing, careful harmonization of reporting standards, and ongoing collaboration with international partners.

For investors, the upshot is clear: companies that proactively disclose climate data and align with emerging regulatory frameworks are likely to reap the rewards of a growing ESG premium. For policymakers, the challenge is to maintain momentum while ensuring that the regulatory architecture remains robust, credible, and inclusive.

This article is based on Reuters’ “Global Markets View – USA” published on 22 September 2025 and linked resources within the original piece.