ESG+ Newsletter – 10 July 2025
This week, our newsletter kicks off by looking at research on the impact of ESG proposals on corporate behaviour. Outside of markets, regulatory evolution continues apace, with the now weekly updates from the EU indicating further relaxation of CSRD, taxonomy and deforestation requirements, while the judiciary in the US has ruled on the limitations of certain federal environmental agencies. Finally, in a bumper edition, we cover the ISSB’s plans to review SASB reporting standards over the year ahead. |
This week’s poll
Is the EU going too far in rolling back sustainability regulations and reporting requirements? |
- Yes
- No
Last week’s poll results
ESG proposals may drive change in corporate behaviours
New research published in Organization & Environment suggests that shareholder activism through ESG proposals may improve corporate sustainability outcomes. Analysing more than 7,000 ESG-related proposals submitted to US firms between 2006 and 2020, the study finds that companies targeted by these proposals saw an increase in their ESG performance – based on scoring from Refinitiv – by an average of 8% while also cutting their carbon intensity by 11% compared to similar firms not targeted by similar proposals.
Interestingly, the proposal’s final status – whether withdrawn, omitted, or voted on – was not found to influence outcomes significantly, suggesting that the filing of the proposal itself can spur action from companies. The study also reported that firms receiving multiple proposals showed stronger improvements, and that proposals filed by investors without a clear sustainability agenda had a stronger impact.
While the time period reviewed is not aligned with the recent pushback on ESG, the findings are particularly noteworthy in light of the rollback of ESG regulations in the US, which, among other effects, make it more difficult for shareholders to submit ESG proposals (as discussed in ESG+ two weeks ago). The research highlights the risk that, despite criticism of shareholder proposals that lack specificity or thoughtfulness, regulatory changes that stymie the ability to target companies could dampen progress on sustainability and slow the decarbonisation of the economy.
EU nations call for simplifying and delaying of deforestation rules
Bloomberg UK reports that several EU member states are requesting that the European Commission simplify and delay the introduction of rules designed to combat global deforestation, citing excessive red tape for compliant nations. A letter from 18 EU member states criticises the regulations for failing to adequately consider countries that already have effective forest protection laws and low levels of deforestation. The letter also raises concerns about the rules increasing production costs and forcing producers to relocate outside the EU. International criticism has also surfaced from countries such as Brazil about regulatory overreach and the disproportionate red tape on farmers and importers. The implementation of rules was delayed last year until late 2025 due to pressure from producers and importing nations. Although some procedural simplifications have since been introduced, against the backdrop of the bloc looking to roll back on many of the previous commitments it had made on sustainability, it appears that efforts on deforestation are far from finalised. |
U.S. Supreme court ruling impacts environmental oversight
A recent Supreme Court decision has altered the balance of power in environmental oversight, affecting not only the relationship between states and the federal government but also the distribution of authority within the federal government. According to Reuters, the Court unanimously authorised a proposed railway in Utah that will transport crude oil, superseding environmental concerns raised under the National Environmental Policy Act (NEPA) of 1970. NEPA was enacted to ensure that federal agencies conduct thorough environmental reviews of large-scale infrastructure projects.
The decision contributes to a growing trend of federal agencies, such as the Environmental Protection Agency (EPA), experiencing a reduction in their regulatory authority, at times by oversight from the judicial branch. As noted by University of California, Berkeley law professor Daniel Farber, this pattern will continue to represent an erosion of federal environmental protections.
Recent Supreme Court decisions have also limited the EPA’s authority, including the blocking of the “Good Neighbor” rule aimed at reducing ozone emissions across state boundaries and the narrowing of the agency’s authority under the Clean Water Act. These rulings raise questions about the division of power between federal and state governments, as well as the level of discretion retained by federal agencies. While the reduction in regulatory hurdles may benefit businesses and the much sought after “competitiveness”, it also prompts concerns about the enforcement of environmental protections which, in turn, may undermine business performance over the long-term.
ISSB reviews SASB Standards
The International Sustainability Standards Board (ISSB) has released two amendment proposals to the Sustainability Accounting Standards Board (SASB) in an attempt to align the industry-specific guidelines with the global ISSB Standards framework. ESG Today reports on the ISSB’s proposals outlined in their 2024–2026 work plan, intended to support companies using the ISSB Standards, IFRS S1 and IFRS S2. The drafts were developed through collaboration with investors, subject-matter experts, and major standard setters including the Global Reporting Initiative (GRI), the European Financial Reporting Advisory Group (EFRAG), and the Taskforce on Nature-related Financial Disclosures (TNFD). Updates to SASB Standards have been proposed across nine priority industries and also aim to target 41 other industries. Stakeholders globally have been invited to comment on SASB metrics related to climate, nature, and human capital by 30 November 2025 for feedback on the proposals deemed of most relevance. The ISSB plans to publish the finalised SASB enhancements in 2026 following stakeholder feedback.
EU prepares to let ‘first wave’ CSRD reporters omit biodiversity, social disclosures
Since the release of the Omnibus Proposal, the future of sustainability reporting in the EU has been cast into serious doubt. Corporates, sustainability professionals, and regulators alike have been left in limbo, awaiting a resolution. Over the past four months, there have been few concrete updates, with most of the discourse centered around how extensive the changes to the current regulation should be. With the seemingly common goal to reduce the reporting burden on in-scope entities while still ensuring that companies are required to disclose how they adhere to the sustainability standards and objectives set by the EU. Environmental Finance reported that according to a recently leaked draft document, all large companies that had already prepared reports as part of the first wave of CSRD will be allowed to omit disclosures on European Sustainability Reporting Standards E4 (Biodiversity and Ecosystems); S2 (Workers in the value chain); S3 (affected communities) and S4 (Consumers and end users) for FY 2025 and FY 2026. If companies choose not to report on these topics, despite them being deemed material to the business, they will still be required to provide brief descriptions of related policies, actions, targets, and metrics. This allowance was previously only afforded to companies with less than 750 employees, but under this new amendment would extend to companies with more than 750 employees. |
ICYMI
- Despite mounting economic and political challenges, institutional investors remain committed to sustainable investing, according to the BNP Paribas ESG Global Survey 2025.
- More than 880 ESG funds have been renamed within the past year to remove references to ESG topics that do not align with the EU’s new labelling requirements, according to Edie.
- The LEGO Group has launched the Planet Promise Design Guidelines – a new framework designed to help integrate sustainability themes into LEGO play experiences.
| The views expressed in this article are those of the author(s) and not necessarily the views of FTI Consulting, its management, its subsidiaries, its affiliates, or its other professionals.
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