ESG+ Newsletter – 26 June 2025

Commission to abandon EU anti-greenwashing rules 

The European Commission has announced it will withdraw its proposed Green Claims Directive, a law designed to combat corporate greenwashing by requiring companies to provide verifiable evidence for their environmental claims. This move comes amid strong opposition from conservative and right-wing members of the European Parliament, particularly the European People’s Party (EPP), who argued that the rules were overly burdensome for businesses, according to Politico.  Last week, the EPP sent a letter to the environment Commissioner Jessika Roswall, asking the EU executive to withdraw its proposal, threatening not to support any deal coming out of the negotiations. It is very rare for the Commission to withdraw a legislative proposal and still needs to be approved by the College of Commissioners. 

Emerging at a very late stage in the legislative process, the news immediately sparked confusion. The Commission’s decision has caused surprise and disappointment among environmental advocates and some lawmakers who had supported the directive as a tool to ensure transparency and credibility in green marketing. The Green Claims Directive, introduced in March 2023, was intended to prevent misleading environmental claims and promote genuine sustainability efforts by companies across the EU. Its demise is viewed as a setback for the EU’s broader climate and sustainability agenda, raising concerns about the ability to hold companies accountable for false or exaggerated green claims. The Green Claims Directive is complementary to the previous iteration of the Green Claims Directive which protects consumers from greenwashing by preventing companies from making general claims like “eco-friendly” or “pro-planet” on their products. The fate of the directive now depends on ongoing political negotiations, but for now, the EU will not move forward with this anti-greenwashing initiative. 

Standardising global sustainability reporting 

Environmental Finance reports that the International Sustainability Standards Board (ISSB) has made significant progress in reducing the risk of fragmentation in sustainability reporting, according to its Chair, Emmanuel Faber. With 36 jurisdictions adopting or intending to adopt the ISSB standards, a “global baseline” of sustainability disclosures is taking shape. This development is expected to enhance investor comparability of data and reduce reporting burdens for companies. The ISSB has also released a transition plan guide, which provides voluntary guidance on reporting transition plans. While challenges remain, including the potential impact of changes to US climate disclosure rules, the ISSB’s efforts mark an important step towards standardising sustainability reporting globally. 

UK releases draft Sustainability Reporting Standards 

Further support of ISSB’s claims that it is driving standardisation of sustainability reporting is evident in the the UK Government’s new UK Sustainability Reporting Standards. As reported in ESG Today, the UK has released two sustainability reporting standards aligning to the ISSB’s S1 (sustainability-related) and S2 (climate-related) standards. The proposals include several amendments based on recommendations from the UK Sustainability Disclosure Technical Advisory Committee. Key amendments include an extension of a “climate-first” relief to up to two years, allowing companies extra time to disclose on some sustainability-related risks, and a mandate enforcing companies to publish sustainability-related disclosures alongside their financial statements to encourage connectivity. 

Beyond sustainability reporting standards, the UK Government is also launching consultations on transition plans and the potential development of a voluntary registration regime for the providers of assurance of sustainability reporting, both open until 17 September 2025. The UK Government notes that it is committed to mandating large companies and financial institutions to develop and implement credible transition plans that align with the 1.5°C goal of the Paris Agreement. 

Rolling Back of ESG Regulations in the US

The US SEC has withdrawn two key proposed rules from the Biden era. The rules, proposed in 2022, aimed to enhance ESG disclosures from investment advisers and investment companies and revise the shareholder proposal and resubmission process. The first aimed to standardise disclosures related to ESG factors for funds, with the goal of preventing greenwashing. The second sought to reverse a previous rule introduced during the first Trump presidency, which had increased the thresholds for submitting shareholder proposals to corporate boards. The SEC’s decision to withdraw these rules is consistent with its previous stance in March, where it chose to cease defending its climate risk disclosure rule in court. This move follows intensifying legal and political opposition to climate-related financial regulations in the US. 

Supreme Court opens door to legal challenge of California emissions rules   

The balance between state and federal authority over environmental policy in the US was once again put to the test during a Supreme Court ruling last Friday. According to  Reuters, in a 7-2 ruling, a lower court’s decision to dismiss a lawsuit by fuel industry groups was overturned, challenging California standards for vehicle emissions and electric cars. Writing for the majority, Justice, Brett Kavanaugh, wrote that the government cannot “target a business or industry through stringent and allegedly unlawful regulation, and then evade the resulting lawsuits by claiming that the targets of its regulation should be locked out of court as unaffected bystanders”. 

This decision marks another swing of the political pendulum, reversing a 2022 Biden-era EPA action that had reinstated California’s waiver for its zero-emission vehicle mandate, an action originally taken to undo a 2019 rollback by the Trump administration. While the Supreme Court has not yet ruled on the legality of Californian standards themselves, it has opened the door for industry lawsuits that may limit future environmental actions both within California and nationally. 

EU offers climate policy advice to US states  

Following US lawmakers’ recent visit to Brussels to meet with European Commission climate officials, Californian delegates are also travelling to Brussels to seek advice on climate policy, specifically on carbon-pricing schemes. Whilst the US states visiting the EU are predominantly Democrat, the Financial Times notes that the visiting lawmakers have been bipartisan. John Podesta, the top US climate official in the Biden administration who championed a carbon price on imports, has suggested that many states were becoming more vocal about the need for continued climate action in the face of Trump’s green policy pushback. Climate-focused governors and mayors have collaborated to form an ‘America Is All In’ coalition aimed at cutting emissions in half by 2030, operating under the tagline, “America is all in to achieve the goals of the Paris Agreement”.  

US outreach presents an opportunity for the EU to promote its carbon-pricing mechanisms worldwide, with the EU carbon border tax – introducing levies on carbon-intensive imports – to be enforced from next year. Interest in carbon pricing is growing across the globe, with China, Brazil and Japan all announcing plans to introduce and expand respective emissions-trading schemes.  

European Sustainability Reporting Standards to be revised and simplified  

The European Commission’s Sustainability Reporting Board (SRB) has approved a first phase of work to simplify and revise the European Sustainability Reporting Standards (ESRS), reports Responsible Investor. The approval of the first draft, submitted to board members this month, is planned for mid-July and will be proceeded by a public consultation. EFRAG has stated that it aims to cut the number of data points required for reporting by more than 50%, while “preserving the integrity” of the regulation.

In May, several investors called for the number of mandatory datapoints to be cut, a request echoed by the European Parliament Committee, in response to EFRAG’s initial consultation on the standards. In addition to cuts to the number of data points, the revision of the standards will also look to improve interoperability with other frameworks, notably the ISSB. 

ICYMI 

• A new study has found that record-high greenhouse gas emissions could deplete the planet’s remaining “carbon budget” within just three years—bringing the goal of limiting global warming to 1.5°C increasingly out of reach, according to the Financial Times.
• A growing number of companies are nearing deadlines for sustainability promises tied to ESG debt, testing a key corner of the market. Over 250 bonds face targets this year or risk higher interest payments—up from just 24 last year, Bloomberg reports.
• Warehouses are among the most effective assets for delivering rapid and meaningful sustainability upgrades, says to Rob West, Managing Partner at Clearbell Capital, in a Green Street News