ESG+ Newsletter – 23 July 2026

EFRAG study finds that over two thirds of companies now have climate transition plans

European Financial Reporting Advisory Group (EFRAG) has found that 69% of companies have now released climate transition plans in line with the EU Climate Adaptation Plan, ESG News reports. Within EFRAG’s recently released 2026 State of Play Report, the reports of 905 companies were reviewed for the fiscal year 2025. The report assessed the disclosures of in-scope companies across 18 different areas of disclosure. The proportion of companies with a disclosed transition plan rose to 69% from 55% in the previous reporting cycle. Whilst performance improved, the study also found that only 57% of companies disclosed near and long-term targets compatible with the 1.5°C pathway outlined within the Paris Agreement, indicating that many of the companies that had disclosed a transition plan had not yet explicitly linked their approach to the feasibility of achieving set targets. This discrepancy was also noted in the connection between material topics and targets for each of those topics. On average, assessed companies deemed 6.4 of the 10 ESRS topics as material but had only established targets for 3.3 topics, similarly indicating that while disclosure volume is increasing, the actions and targets underpinning key topics need to be expanded upon in future reporting cycles.

EU formalises plans to soften ETS targets

The EU Commission has formally proposed a plan that will introduce further ETS credits into the market, as reported by Reuters. The decision comes after increased pressure on heavy industry in 2026, with many EU member states advocating for more leeway to be afforded to domestic producers amid broader concerns about the ability of EU producers to compete at an international level with foreign producers. As part of the proposal, the rate at which the ETS emission cap falls would drop to 3.7% in 2031 and 1.7% in 2036, down from the current 4.3%. Additionally, an increased number of free ETS credits would be offered; however, in order to acquire the free permits, companies would need to demonstrate their intention to invest in European decarbonisation, receiving 80% of credits upfront and the remaining 20% once those investments are made. 

The proposal would also extend free permits for emission-intensive industries such as steel and cement to 2038, which had previously been planned for removal in 2034. Reactions to the proposed changes have been mixed, with certain member states believing the changes are too drastic and others believing they do not go far enough. The Czech Republic and Italy, for example, have announced their intention to oppose the new conditions surrounding free permits. What is clear, as noted by Marcus Ferdinand, analyst at carbon market research company Veyt, is that this proposal seeks to keep industry viable in Europe, however, the effect on long term climate impacts within remain to be seen.

Concerns raised over resources required for UK data centre plans

The UK government may face resource constraints in delivering its long-term AI growth ambitions, according to the Guardian. Water UK, the trade body representing UK water companies, has highlighted the lack of water-related considerations included within recently released policies for AI growth. It further noted that the Environment Agency’s recently published national framework for water resources lacked to estimations on the water demand associated with AI data centre growth and subsequent use, highlighting the need for long term resource planning when considering the expansion of national infrastructure. The ongoing tension for governments between increased data centre capacity and ongoing resource constraints is a dynamic that is being observed beyond the UK with energy grid constraints often cited as a key blocker to data centre growth in the EU. As governments and industries worldwide race to capitalise on AI’s economic potential, the question of whether resources can keep pace may ultimately determine the speed and scale at which that ambition can be realised.

US sustainability index outperforms broader US market in Q2

Sustainable investing strategies delivered standout performance in Q2 2026, Morningstar Reports. The US Sustainability Leaders Index comprises 57 large US stocks with the highest scores on ESG Risk Management. The index returned 27.8% outpacing the broader US market by more than 10 percentage points and marking the index’s strongest relative performance since Q1 2023. The gains were driven almost entirely by semiconductor stocks, which accounted for 24 of the index’s 27.95 percentage points of return and currently represent 33% of its weighting. 

This marked a sharp reversal from Q1 2026, when the index fell 6.8% as oil and gas stocks outperformed while tech stocks lagged. Notably, 11 of 19 Morningstar sustainability indexes outperformed their benchmarks during the quarter. The index’s exclusion of high-ESG-risk companies, many of which posted negative returns, also contributed to its outperformance

Europe’s protein plan omits diet shift to plant protein

Writing on the European Commission’s new protein action plan, Christine Delivanis, lead partner for Systemiq’s nature food platform, argues that while it marks a first step in treating protein dependency as a strategic priority, it falls short of the investment needed to build real resilience. The piece comes against a backdrop of shocks to Europe’s food system over the past year, avian flu, African swine fever, extreme heatwaves, and fertiliser price spikes linked to Middle East conflict. 

According to the author, the plan’s only measurable target, raising EU-grown feed protein to 35% by 2035, reinforces feed-intensive livestock production rather than shifting diets toward plant proteins, where the fastest resilience gains lie. They note the plan lacks binding investment figures for scaling plant proteins and fermentation, and does not address price or convenience barriers facing consumers, nor funding to support farmers transitioning away from feed crops. 

Citing analysis from Systemiq and the Good Food Institute, the author estimates a scaled European alternative protein sector could generate €111bn in annual economic value by 2040. They also point to China’s state-backed investment in biomanufacturing as a competitive pressure Europe risks underestimating. 

ISS consultation provides window into guideline changes

ISS STOXX Governance has launched its 2026 Global Benchmark Policy Survey, seeking stakeholder feedback to inform its 2027 proxy voting policies. The survey covers a range of governance and remuneration topics, including director independence and tenure, governance provisions that restrict shareholder rights, re-incorporations, executive pay oversight, long-term incentive disclosure, and discretionary bonus arrangements. Across all markets, ISS is also consulting on board accountability for reduced climate-related disclosures, expectations around nature-related reporting (including TNFD), and the use of slate board elections.

Although the proposed policy changes are not finalised, the consultation provides an early indication of areas where ISS is likely to refine its voting guidelines and recommendations. The consultation signals ISS’s continued focus on strengthening board accountability, shareholder rights and sustainability governance. Any resulting policy changes may influence future voting recommendations and should be factored into governance and proxy season planning for 2027, with particular emphasis on shareholder engagement and reporting.

ICYMI

• The European Commission is seeking to open infringement proceedings against all 27 EU member states over delays in the transposition of the revised Energy Performance of Buildings Directive into national legislation, ESG News reports.
• According to ESG Dive, CO2 emissions from the US power sector rose 4% in 2025, as a consequence of a record year of electricity generation.