[co-author: Jessica Dhodakia]
This month, we bring you a number of updates on the EU omnibus simplification package, including the ‘Stop-the-Clock’ directive entering into force delaying the application of CSRD and CSDDD and a formal complaint against the European Commission for its handling of the omnibus simplification package. Having been mandated by the Commission to simplify the European Sustainability Reporting Standards (ESRS), EFRAG has also launched a public call for input on simplification of the ESRS and has published its corresponding work plan. In the US, we report that the US Securities and Exchange Commission has exited two ISSB groups and issued two ESG-related executive orders. In the UK, the FCA has released its latest edition of the Regulatory Initiatives Grid, published new technical notes in relation to TCFD and climate change and announced that it will not be expending the Sustainability Disclosure Requirements to portfolio managers for the moment.
1. Chapter 1: EU and International Developments
1.1 Omnibus Simplification Package Updates
a. ‘Stop-the-Clock’ Directive enters into force
On 16 April 2025, the ‘Stop-the-Clock’ directive was published in the Official Journal, entering into force on 17 April 2025.
The directive:
- gives Member States until 31 December 2025 to transpose the directive into national law – the provisions are not effective in a Member State until transposed into national law;
- delays the entry into application of the Corporate Sustainability Reporting Directive (CSRD) requirements for large companies that have not yet started reporting, as well as listed SMEs (waves 2 and 3) by two years; and
- delays the transposition deadline of the Corporate Sustainability Due Diligence Directive (CSDDD) and the application of CSDDD for one year until 2028 for the first wave.
The focus of the Council and the Parliament will now be on negotiating the proposed changes to the CSRD, CSDDD, EU Taxonomy and the Carbon Border Adjustment Mechanism (CBAM).
b. NGOs file formal complaint against European Commission’s process for the Omnibus Simplification Package
A coalition of eight NGOs has lodged a formal complaint against the European Commission in respect of the Omnibus Simplification Package published in February 2025. The NGOs claim that the manner of development of the Omnibus Simplification Package has been undemocratic, untransparent and rushed.
The NGOs complain that:
- there has been a failure to gather evidence properly and assess the environmental and social impacts of amending corporate laws designed to protect citizens in the EU;
- public consultations were skipped, favoring closed-door meetings where the majority of participants were from oil and gas industries; and
- there has been a failure to assess whether its new proposal aligns with the EU’s climate-neutrality target, breaching obligations under the European Climate Law.
The NGOs are calling on the European Parliament and Council to reject the Omnibus proposal.
1.2 European Financial Reporting Advisory Group (EFRAG) Updates
a. EFRAG launches a public call for input on the revision of the European Sustainability Reporting Standards
On 8 April 2025, EFRAG launched a public call for input on revising the European Sustainability Reporting Standards (ESRS) Set 1. Following the publication of the Omnibus proposals in February 2025, EFRAG received a specific mandate to provide technical advice on simplifying the ESRS. EFRAG is now seeking public input from relevant stakeholders on potential revisions, as well as feedback from corporations who have already implemented the standards in their 2024 sustainability reports. The deadline for submitting feedback is 6 May 2025.
b. EFRAG publishes its work plan for revising and simplifying European Sustainability Reporting Standards (ESRS)
On 25 April 2025, EFRAG published its work plan for revising and simplifying the European Sustainability Reporting Standards (ESRS). The plan outlines the steps EFRAG will take to fulfil its mandate received on 27 March 2025 to provide technical advice on the revision and simplification of the ESRS.
The plan is based on the recent Omnibus proposals published on 26 February 2025 and sets out a timeline to meet its deadline. EFRAG will deliver its technical advice by 31 October 2025.
EFRAG’s workplan sets out that priority ‘will be given to establishing the strategic direction for overarching matters (e.g., materiality assessment, report structure, interaction of cross cutting and topical standards, other key levers, interoperability with international standards)’. The levers identified by EFRAG (which will be further specified after the evidence gathering phase) also includes addressing the most challenging provisions, including clarifying the application of the materiality principle ‘to avoid unnecessary reporting and documentation burden, and ensure that only material information is required to be reported’. They will also consider the most problematic datapoints as well as the possibility to leverage other international standards to streamline the language’. At the same time they will address, following feedback from users, the imbalance between reporting effort and relevance of the resulting disclosure.
EFRAG is also considering ‘substantially reducing the number of required datapoints (“shall”)’: deleting some and transferring others to voluntary status or to guidance/guidelines/illustrative examples.
A public consultation on the exposure drafts is expected to be held between the end of July and early September with final advice being delivered in October 2025.
1.3 ESMA Updates
a. Final report on outcome of Common Supervisory Action on ESG disclosures under Benchmark Regulation published
On 9 April 2025, the European Securities and Markets Authority (ESMA) published its final report on the outcome of its Common Supervisory Action (CSA) conducted with national competent authorities on ESG disclosures under the Benchmark Regulation. The CSA found that there was lack of guidance on the definition and calculation of ESG factors, including underlying assumptions and methodologies, which has resulted in divergences and inconsistent calculations and disclosure practices across administrators and benchmarks.
The final report also clarifies transparency expectations for administrators, as well as guidance on the definitions and methodology used for the calculation of the ESG factors and examples of good practices. The report also recommends potential amendments to Level 2 measures in the context of a future review, including streamlining ESG disclosure requirements to reduce burden for administrators while ensuring feasibility and safeguarding the value and meaningfulness of disclosed ESG information.
b. TRV risk analysis on ESG-related changes published
On 10 April 2025, ESMA published a Trends, Risks and Vulnerabilities (TRV) analysis in relation to ESG-related changes and their impact on investment flows. The report provided an analysis on the evolution of ESG names amongst EU-domiciled investment funds since 2009 as well as examining the impact on investor flows of adding ESG-related words to fund names. The analysis found that the proportion of funds with ESG-related names has increased significantly since 2009 and concluded that adding an ESG term significantly boosted fund inflows in the quarter following a name change and had a sustained positive impact in subsequent quarters.
1.4 EU Deforestation Regulation – new guidance, FAQs and draft delegated act published
On 15 April 2025, the Commission published an updated guidance document and FAQs in relation to the EU Deforestation Regulation (EUDR). The documents are not legally binding but are intended to clarify parts of the legislative text.
The Commission also published a draft delegated act for public consultation. It provides clarifications and simplification regarding the scope of EUDR and addresses stakeholder requests for clarification. The consultation closes on 13 May 2025.
1.5 European Energy Committee votes on CBAM
On 24 April 2025, European Industry, Research and Energy Committee (ITRE) voted on amendments to the simplify the Carbon Border Adjustment Mechanism (CBAM).
The Commission proposal to simplify CBAM was released as part of the first Omnibus package on 26 February 2025. The proposal was adopted and the voting results can be found here.
1.6 EBA launches ESG Dashboard
On 25 April 2025, the European Banking Authority (EBA) launched an ESG Dashboard.
The dashboard establishes an ESG risk monitoring framework and provides access to comparable climate risk indicators as well as monitoring both transition and physical risks and provides benchmarks. The ESG Dashboard is based on data disclosed by banks as part of their Pillar 3 ESG disclosures.
The framework aims to support the European Commission’s objective to systematically monitor climate-related financial stability risks.
2. Chapter 2: UK Developments
2.1 UK FCA updates
a. UK regulators give update on timing of ESG regulatory initiatives
On 14 April 2025, the Financial Services Regulatory Initiatives Forum published a new edition of the Regulatory Initiatives Grid, which sets out details of current and planned regulatory initiatives for all the regulators (including the UK Financial Conduct Authority (FCA) and PRA) affecting the financial services sector.
It includes details of the planned ESG regulatory initiatives for the next 24 months, including updates on the timings of existing initiatives. The Grid includes key dates for the ESG Ratings regime, Sustainability Disclosure Requirements, Stewardship Code and the ISSB Disclosures Requirements. See here for a summary of the main ESG regulatory initiatives.
b. FCA publishes two technical notes in relation to TCFD and climate change
On 17 April 2025, the FCA published two technical notes in relation to the Task Force on Climate-related Financial Disclosures (TCFD) and climate change:
The technical notes are designed to help issuers and practitioners interpret the Listing Rules, Prospectus Regulation Rules, Disclosure Guidance and Transparency Rules and related legislation. The guidance notes provide answers to the most common queries the FCA receives and represent FCA guidance as defined in section 139A FSMA.
c. UK FCA announces it is ‘not the right time’ to finalise the rules on extending the Sustainability Disclosure Requirements regime to portfolio managers
On 29 April 2025, the FCA announced it does not think it is the right time to finalise the rules on extending the Sustainability Disclosure Requirements (SDR) regime to portfolio managers. The FCA have decided to prioritise the forthcoming multi-firm review into model portfolio services instead. In their update, the FCA have said they want to take time to consider the challenges and ensure that portfolio managers are positioned to implement the regime effectively before introducing requirements.
2.2 UK ASA publishes guidance on products that are claims to be biodegradable and compostable
On 7 April 2025, the UK’s Advertising Standards Authority (ASA) published guidance on products which claim to be ‘biodegradable’ and ‘compostable’. The ASA guides marketers to:
- ensure claims that products are biodegradable or compostable are genuine;
- don’t exaggerate the biodegradable content of the product;
- don’t omit information material to a product’s ability to biodegrade or compost; and
- ensure absolute environmental claims apply to the product’s full lifecycle.
2.3 UK HM Revenue & Customs opens consultation on CBAM
On 24 April 2025, the UK HM Revenue & Customs opened a consultation on draft primary legislation for the Carbon Border Adjustment Mechanism (CBAM). This draft legislation is accompanied by:
The consultation closes on 3 July 2025 and will be of interest to importers of goods from the aluminium, cement, fertilisers, hydrogen, and iron and steel sectors, and downstream producers that use these goods in their supply chains.
The consultation aims to gather feedback from stakeholders on the drafting of the primary legislation. Following the consultation, legislation will be included in a Finance Bill.
2.4 UK PRA consults on proposals for updated supervisory expectations for banks and insurers in relation to management of climate-related risks
On 30 April 2025, the UK Prudential Regulatory Authority (PRA) published a speech given by David Bailey at the Climate Finance Risk Forum and a consultation paper (CP10/25) setting out the PRA’s proposals on updated supervisory expectations for banks and insurers (it is intended to update SS3/19). The consultation closes on 30 July 2025.
David Bailey confirms in his speech that these are expectations rather than rules. They are intended to consolidate and clarify the feedback that the PRA has provided publicly on climate risk since SS3/19 was published and to align approach with relevant international standards for insurers and banks.
He mentioned that there was a greater emphasis on rigorous use of climate risk scenario analysis, with an expectation on firms to show strong understanding of how they will take the outputs from the scenarios they design to actively inform business decisions. He also mentioned that the PRA estimates the initial costs will be more than offset by the benefits arising from improved identification and management of an important class of emerging risk, which will persist over the medium to long term.
3. Chapter 3: International Developments
3.1 International Financial Reporting Standards (IFRS)
a. IFRS Foundation and the TNFD announce collaboration on nature-related financial disclosures
On 9 April 2025, the IFRS Foundation and the Taskforce on Nature-related Financial Disclosures (TNFD) announced a formalised collaboration to build upon the TNFD recommendations in the ongoing work of the International Sustainability Standards Board (ISSB). The ISSB will consider the relevance of the TNFD recommendations in reaching the needs of global capital markets. The parties have signed a Memorandum of Understanding (MoU) signaling their commitment.
b. ISSB publishes Exposure Draft relating to the disclosure of greenhouse gas (GHG) emissions
On 28 April 2025, the ISSB published an Exposure Draft proposing targeted amendments to IFRS S2 to ease the application of requirements related to the disclosure of greenhouse gas (GHG) emissions, including relief from measuring and disclosing Scope 3 category 15 GHG emissions associated with derivatives and some financial activities.
The Exposure Draft was also accompanied by the Basis for Conclusions on Exposure Draft Amendment to Greenhouse Gas Emissions Disclosures. The Exposure Draft will be open for comment for the next 60 days, closing on 27 June 2025. ISSB will review the feedback from on the Exposure Draft and aims to finalise the amendments by the end of 2025.
3.2 United States
a. The US SEC exits ISSB groups
In April 2025, the United States Securities and Exchange Commission (SEC) exited two groups run by IFRS Foundation. The SEC has withdrawn from both the IFRS Jurisdictional Working Group and the Sustainability Advisory Forum. The members sections of both groups show that the SEC is now no longer a member of either group which can be found here and here.
b. White House Executive Orders
i. White House issues executive order regarding “Protecting American Energy from State Overreach
On 8 April 2025, President Trump issued an executive order regarding “Protecting American Energy from State Overreach.” The order suggests that state laws related to climate change and energy policy may be preempted by federal national security law and directs the Attorney General to “take all appropriate action to stop the enforcement of State laws and…civil actions,” and to prioritise “State laws purporting to address ‘climate change’ or involving ‘environmental, social, and governance’ initiatives, ‘environmental justice,’ carbon or ‘greenhouse gas’ emissions, and funds to collect carbon penalties or carbon taxes.” The executive order specifically references climate laws enacted by New York, Vermont and California.
The order also directs the Attorney General to issue a report summarising the actions taken to effectuate the order and recommend further presidential or legislative actions as necessary.
ii. White House executive order directs environmental and energy agencies to adopt conditional expiration dates for energy production-related regulations
On 9 April 2025, President Trump issued an executive order regarding “Zero-Based Regulatory Budgeting to Unleash American Energy” which requires the Environmental Protection Agency (EPA), the Department of Energy (DoE), the Federal Energy Regulatory Commission (FERC), the Nuclear Regulatory Commission (NRC), and parts of the Department of the Interior (DOI) to incorporate a “sunset provision” into all new and existing covered regulations. The order covers a broad array of regulations relating to energy production or issued for purposes of implementing statutes including the Federal Power Act, Atomic Energy Act, Outer Continental Shelf Act, Mining Act, Energy Policy Act, and Endangered Species Act.
The executive order also directs the EPA Administrator and Secretary of the Army to identify within 30 days a list of statutes vesting EPA and the Army Corps of Engineers with regulatory authority that shall be subject to this order. See our ESG regulatory alerts tool for more information.
3.3 The Canadian Securities Administrators (CSA) pauses work on new mandatory climate-related disclosure rule and amendments to existing diversity-related disclosure requirements
On 23 April 2025, the Canadian Securities Administrators (CSA) announced that it will pause the development of new mandatory climate-related disclosure rules and amendments to existing diversity-related disclosure requirements. The CSA has stated that this is being done to support Canadian markets and issuers as they adapt to the recent developments the US and globally.
