
Judgment in the Cloud: The future of risk and regulation with James Lord, Google Cloud
This month negotiations on the EU omnibus simplification package continue, including the Council reaching a negotiating position on the omnibus on corporate sustainability reporting and due diligence and the European Parliament and Council reaching an agreement on the amendments to simplify the Carbon Border Adjustment Mechanism Regulation (CBAM). EFRAG also published its first exposure draft simplifying the European Sustainability Reporting Standards (ESRS) and reported its progress on omnibus-related work to the Commission.
In the UK, London Climate Action Week took place from 21 to 29 June 2024 and the UK Government took the opportunity to publish three consultations in relation to climate change: (i) climate-related transition plan requirements, (ii) assurance of sustainability reporting and (iii) UK Sustainability Reporting Standards.
In addition, the IFRS Foundation published guidance on disclosure of climate-related transition information and the Basel Committee published framework for voluntary disclosure of climate-related financial risks. Read on for this and much more.
EU Omnibus updates and dates for your diary: With negotiations continuing at both European Parliament and Council of the European Union level, final agreement on the omnibus proposals for sustainability reporting and due diligence (the “omnibus package”) still seems far away.
But on 23 June 2025, we did see the Council agree its negotiating position on the omnibus package. In addition to the simplifications proposed by the Commission, the Council added a net turnover threshold of more than €450 million, if agreed, which would remove further entities from the scope of the Corporate Sustainability Reporting Directive (“CSRD”). The Council's mandate also introduces a review clause concerning a possible extension of the scope to ensure adequate availability of corporate sustainability information.
On 12 June 2025, rapporteur for the omnibus package published his position on proposed amendments to the CSRD, the Corporate Sustainability Due Diligence Directive (“CSDDD”) and the EU Taxonomy. We can expect to see an agreed text from the European Parliament sometime in autumn 2025. Once the three bodies have agreed their positions, the trilogue agreements between the three legislative bodies can begin – read more on the expected timeline here.
Also as part of the omnibus simplification package, EFRAG was mandated by the Commission to simplify the European Sustainability Reporting Standards (“ESRS”). Read more below on their progress towards this goal.
Separately, on 13 June 2025, the European Parliament’s Policy Department for Justice, Civil Liberties and Institutional Affairs published a study on Reporting Obligations at the request of the JURI committee. It provides an overview of the regulatory reporting and disclosure overlaps between the CSRD, the CSDDD and the EU Taxonomy, as well as recommendations on how to mitigate the burdens for companies caused by such overlaps.
EU: EFRAG delivers progress report on ESRS simplification to the Commission giving clues to ESRS changes: On 20 June 2025, EFRAG published its progress report to the Commission on its progress on its work plan. It sets out the work it has done so far on the simplification and burden reduction levers that were identified to reduce the reporting burden under the ESRS whilst still maintaining the integrity of the goals of CSRD. EFRAG expects to achieve “50+ per cent” reduction in the number of mandatory datapoints whilst implementing these changes. Read more here about the levers EFRAG is considering and how EFRAG is considering changing the ESRS in response to these levers. EFRAG emphasized that current drafts are based on the Commission’s proposal dated 26 February 2025 and that revisions will be based and rely on input from companies and stakeholders who have been confronted with implementing ESRS already. The Exposure Draft is likely to be approved in mid-July.
As an update, on 1 July 2025, the Commission sent a letter to EFRAG informing them that the deadline for delivering technical advice on the revision and simplification of the ESRS had been moved from 31 October 2025 to 30 November 2025. Therefore, EFRAG now expects to run the consultation on the Exposure Draft for 60 days, starting at the end of July until the end of September.
European Parliament and Council reach agreement on amendments to simplify CBAM: On 18 June 2025, the European Parliament and Council reached an agreement on the amendments to simplify the Carbon Border Adjustment Mechanism (“CBAM”) to reduce the regulatory burden for EU companies that are in scope. The Council and the European Parliament must endorse the provisional agreement before formal adoption which is expected to take place in September 2025.
On 25 June 2025, as part of London Climate Action Week, the UK government launched three climate-related consultations on transition plan requirements, assurance of sustainability reporting and UK Sustainability Reporting Standards.
Transition planning is crucial to supporting the UK economy through its clean energy transition and for improving corporate transparency and supporting global efforts to tackle to climate and nature crisis. DESNZ is consulting to explore the design of future requirements, including taking forward recommendations from last year’s Transition Finance Market Review to mandate UK-regulated financial institutions (including banks, asset managers, pension funds and insurers) and FTSE 100 companies to develop and implement 1.5°C Paris Agreement-aligned transition plans. The consultation also considers how climate resilience and nature could be incorporated over time in transition plans. The consultation closes on 17 September 2025.
Separately, on 23 June 2025, the IFRS Foundation published a guidance document on disclosure of climate-related transition information in accordance with IFRS S2 and which builds on the materials created by the Transition Plan Taskforce in 2024.
And on 24 June 2025, an English law legal opinion was published on climate transition plans. The legal opinion highlights, amongst other things, that a “regulatory requirement for companies to disclose a transition plan is not likely to result in materially heightened liability risk” and there are “likely to be legal advantages for directors and companies from disclosing a well-prepared transition plan”.
There have been a couple of publications related to sustainability-related risk and ESG stress-testing this month.
International: Basel Committee published a framework for voluntary disclosure of climate-related financial risks: On 13 June 2025, the Basel Committee on Banking Supervision (“BCBS”), the primary global standard setter for the prudential regulation of banks, published a framework for voluntary disclosure of climate-related financial risks. The framework includes both qualitative and quantitative information on climate risks and jurisdictions may choose whether to implement it.
The Committee has acknowledged that the accuracy and consistency of climate-related data are continuously evolving and therefore has stated that it is necessary to incorporate a reasonable level of flexibility into the voluntary framework.
The Basel Committee will continue to monitor relevant developments and will consider whether any revisions to the framework would be required in the future. We note that decisions of the BCBS do not have legal force and the BCBS relies on its members’ commitments set out in its Charter to achieve its mandate.
EU: ESAs published a joint consultation paper on joint guidelines: The Joint Committee of the European Supervisory Authorities (comprising the EBA, EIOPA and ESMA) have published a consultation paper setting out joint guidelines which aim to ensure that European competent authorities consistently integrate ESG risk in to supervisory stress testing under the Capital Requirements Directive and Solvency II Directive.
On Hold: EU Green Claims Directive: What happened? The European Commission announced on 20 June 2025 that it is considering scrapping its proposed directive to introduce substantiation and certification requirements for environmental claims and labels. On 30 June 2025, the Commission clarified that it had not withdrawn the directive but it did intend to withdraw it if the 30 million micro-enterprises within the directive's scope were not removed from scope. The Polish Presidency, which is conducting the negotiations on behalf of the EU countries, reacted to this announcement by suspending the negotiations due to uncertainty. Read more here.
EU: ESMA publishes thematic notes on clear, fair and not misleading sustainability-related claims for market participants: On 1 July 2025, the European Securities and Markets Authority (ESMA) published thematic notes on clear, fair and not misleading sustainability-related claims for market participants addressing greenwashing risks in support of sustainable investments.
The principles do not create new disclosure requirements but aim to remind market participants about their responsibility to make claims only to the extent that they are clear, fair and not misleading.
The note aims to explain and clarify ESMA’s expectations towards market participants when making sustainability claims. ESMA have said that market participants should acquaint themselves with its four principles (accurate, accessible, substantiated and up to date) when making sustainability claims in order to ensure that all claims are clear, fair and not misleading. The note also offers examples of good and poor practices.
EU: ESMA publishes its final report on the integration of sustainability risks and disclosures: On 30 June 2025, the European Securities and Markets Authority (“ESMA”) published its final report on Common Supervisory Action (“CSA”) carried out in 2023 and 2024 with National Competent Authorities (“NCAs”) on the integration of sustainability risks and disclosures.
The report follows ESMA’s engagement with NCAs to ascertain whether authorised managers were (i) complying with organizational requirements set out in the UCITS Directive and AIFMD framework with respect to the integration of sustainability risks, (ii) complying with disclosure requirements at entity and product level include in the Sustainable Finance Disclosure Regulation framework and (iii) adhering to the principles of the Supervisory Briefing on sustainability risks and disclosure for investment management.
It found that the majority of NCAs considered that there was an overall satisfactory level of compliance from managers. However, the report found that there is room for improvement in relation to managers’ compliance with the integration of sustainability risks and disclosures. ESMA will continue discussions among NCAs to ensure a common supervisory culture continues across the EU and will continue to promote effective and consistent supervision with regard to the integration of sustainability risks and disclosures.
Authored by Rita Hunter, Emily Julier, and Jessica Dhodakia.
Our global Sustainable Finance & Investment group brings together a multidisciplinary global team that provides clients with best-in-market support. We are following developments relating to the ESG regulation, so please get in touch if you would like to discuss.
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This note is intended to be a general guide to the latest ESG developments. It does not constitute legal advice.