Sustainability and ESG Advisory Practice Update, March 2025

United States

The Securities and Exchange Commission (SEC) Votes to End Defense of Climate Disclosure Rules

On March 27, 2025, the SEC voted to end its defense of the final enhanced and standardized climate-related disclosure rules (the Climate Rules). The SEC previously adopted the Climate Rules on March 6, 2024. The Climate Rules faced multiple immediate legal challenges, which were consolidated in the U.S. Court of Appeals for the Eighth Circuit (Eighth Circuit). In April 2024, the SEC stayed the Climate Rules while the litigation remained pending but continued litigating in support of the Climate Rules. On February 11, 2025, Acting Chairman of the SEC Mark Uyeda issued a statement directing the SEC's staff to request that the Eighth Circuit delay scheduling oral arguments in the litigation involving the Climate Rules. Following the SEC vote on March 27, 2025, SEC staff sent a letter to the Eighth Circuit court stating that the SEC wishes to withdraw its defense of the Climate Rules. In addition, it noted that SEC counsel are no longer authorized to advance the arguments in the brief the SEC had filed and so yields its oral argument time back to the court or other parties as the court determines. Shortly following the SEC's announcement, SEC Commissioner Caroline Crenshaw issued a statement criticizing this decision.

Environmental Protection Agency (EPA) Launches Suite of Deregulatory Actions

On March 12, 2025, EPA Administrator Lee Zeldin announced 31 deregulatory actions that the EPA plans to implement. These actions are designed to advance a set of goals outlined in Zeldin's statement, many of which echo President Donald Trump's day-one energy-related executive orders. The actions include, but are not limited to, reconsideration of rules related to oil and gas development, pollution from coal-fired power plants, industrial pollution of mercury and other air toxins, electric vehicles, and climate change. If realized, the EPA initiative would revoke dozens of environmental regulations and possibly upend factual findings that support important climate policies. Implementation of many of the actions in Administrator Zeldin's announcement will require compliance with lengthy formal rulemaking processes. We anticipate further development related to these actions and will continue to provide updates as more information becomes available.

Glass Lewis & Co. (Glass Lewis) Stands by Its Diversity, Equity, and Inclusion (DEI) Voting Guidelines but Will Include Flag for Investors

On March 4, 2025, Glass Lewis emailed its clients explaining that it had completed its recently announced review of diversity-related voting guidelines and had decided to adopt a "bifurcated approach" to guidance on elections and DEI-related shareholder proposals. This decision follows a February 18, 2025, announcement that the proxy advisory service was reviewing its guidelines related to DEI matters "in the face of the U.S. Administration's recent Executive Orders and overall stance on DEI." Glass Lewis reiterated its commitment to its original voting guidelines regarding diversity. However, any AGAINST vote recommendation for a director nominee "related in any way to diversity," will include a "flag pointing clients to a supporting rationale they can leverage if their preference is to vote differently from the recommendation." Glass Lewis's new policy contrasts with the policy of Institutional Shareholder Services Inc. (ISS), which abandoned its diversity-related voting guidelines earlier this year.

For more information, please see Glass Lewis' guidelines for the 2025 proxy season and Wilson Sonsini's Public Company Blog, Known Trends.

Europe

European Union (EU) Proposes Significant Roll-Back of Sustainability Reporting and Due Diligence Obligations

On February 26, 2025, the European Commission (EC) proposed an Omnibus legislative package to amend the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD). The proposed Omnibus package will: 1) remove approximately 80 percent of the companies from the scope of CSRD, including updates to the scope of applicability for non-EU companies; 2) eliminate the possibility of increasing assurance standards from limited to reasonable assurance; 3) reduce the number of data points required under the European Sustainability Reporting Standards; 4) limit CSDDD due diligence obligations only to direct suppliers unless the company has plausible information that adverse impacts may arise further down the value chain; 5) remove the requirement for EU Member States to introduce civil liability and allow for representative actions; 6) increase the period between due diligence assessments from one to five years; and 7) postpone the application of CSDDD due diligence requirements covering the largest companies by one year, until July 26, 2028.

The EC also proposed delaying reporting obligations by two years for companies currently in scope of the CSRD but that have not yet started reporting. This delay aims to prevent companies from being required to report for financial years 2025 or 2026, only to be later relieved of this obligation if the substantive changes are approved by the co-legislators. The proposed delay requires formal approval by the co-legislators.

Finally, the EC proposed updating the Carbon Border Adjustment Mechanism (CBAM), which provides that importers of goods to the EU pay a similar price for the carbon emissions as they would if the products had been produced in the EU, to exempt approximately 90 percent of importers from CBAM obligations. The proposal aims to ease the burden on companies subject to CBAM obligations by modifying deadlines and simplifying reporting requirements.

For more information on the Omnibus package, please see our client alert.

European Council Consults on Proposals to Simplify Taxonomy Delegated Acts

On February 26, 2025, the European Council launched a consultation on proposed amendments to i) the Taxonomy Disclosures Delegated Act; ii) the Taxonomy Climate Delegated Act, and iii) the Taxonomy Environmental Delegated Act. The proposed amendments aim to simplify reporting requirements, especially by introducing a financial materiality threshold and reducing reported data points by around 70 percent. The consultation will remain open until March 26, 2025, and adoption of the proposed amendments is tentatively planned for the second quarter of 2025. If adopted, the amendments would apply beginning on January 1, 2026.

EU Automotive Action Plan Outlines Battery Investment Strategy, Promises Flexibility on CO2 Standards

On March 4, 2025, public reporting provided details on the European Council's "Automotive Action Plan," which resulted from a strategic dialogue between the car industry and European Council President von der Leyen. The leaked draft of the Automotive Action Plan promises increased state aid for battery production within the EU, and states that upcoming legislation will introduce European content requirements for battery cells and components in electric vehicles sold in the European Union.

On March 5, 2025, the European Council announced a plan to provide the car industry with more flexibility in complying with fleet CO2 emission targets. The European Council intends to introduce an amendment to the CO2 Standards Regulation in March 2025, which will allow car manufacturers to meet their compliance targets by averaging their performance over a three-year period (2025-2027), allowing them to offset any shortfalls in one or two years with excess achievements in the other year(s).

The current rules require carmakers to reduce their emissions by 15 percent in 2025 from a 2021 baseline or be fined €95 (approx. US$103) per gram of CO2 per kilometer emitted above the target for each noncompliant vehicle sold in the EU. The European Council's amendment to the CO2 Standards Regulation would have to be formally adopted by the European Parliament and the Council of the EU as co-legislators.

United Kingdom (UK) Financial Conduct Authority (FCA) to Postpone Application of Sustainability Disclosure Requirements (SDR) to Portfolio Managers

On February 14, 2025, the UK's financial regulator, the FCA, announced that it was again postponing its policy statement on applying the SDR and investment labelling regime to portfolio managers, which had originally been planned for the second quarter of 2025. The FCA consulted on the new rules in April 2024 and had already delayed publication from the initial target of the second half of 2024. The FCA acknowledged that it had been told during the consultation that some asset managers needed more time to comply. The FCA did not provide any details on when it may publish its final rules.

UK Financial Regulators Drop Proposed Diversity and Inclusion Rules

On March 12, 2025, the chief executives of the UK's FCA and of the bank regulator Prudential Regulatory Authority (PRA) wrote separate letters to the chair of the UK Parliament's Treasury Committee, stating their shared intention not to go ahead with new rules on diversity and inclusion for the industries they oversee.

The regulators noted that there was an active legislative agenda in this area, stating they had a preference for supporting voluntary action by companies and only acting after the implementation of substantive new legislation. The PRA's letter acknowledged a growing emphasis in its work on reducing regulatory burdens on firms and that the envisioned rules "could be seen as in tension with that approach." In September 2023, FCA and PRA had jointly consulted on proposals aimed at boosting diversity in financial services. These could have included mandatory diversity targets and public reporting, also known as "naming and shaming."

The Science Based Targets initiative (SBTi) Releases Draft Update to Corporate Net-Zero Standards

On March 18, 2025, the SBTi published an initial draft of its revised Corporate Net-Zero Standard for public consultation. The draft aims to accelerate corporate decarbonization by tackling barriers to scope 3 action, exploring incentives to support scaling of climate finance and carbon removals, making it easier for companies in emerging economies to set targets and proposing a new model to validate and recognize progress against targets. The public consultation will run through June 1, 2025. Stakeholders can find more information in the SBTi's Consultation Guide or through the associated webinar.

Farmers Sue United States Department of Agriculture (USDA) over Climate Data

In February 2025, organic farmers and environmental groups filed a complaint against the USDA. The plaintiffs allege that the USDA ordered staff to remove climate-related policies, datasets, resources, and guidance from its website without advance notice, in violation of the Paperwork Reduction Act, Administrative Procedure Act, and Freedom of Information Act. The plaintiffs argue that, by removing these webpages, the USDA hurt farmers and farm advisors who rely on the USDA's resources for financial and technical support. According to the complaint, the plaintiffs are seeking injunctive relief to restore the deleted pages and prevent the USDA from removing any others.

Climate Coalition Launches Lawsuit Against Greenhouse Gas Reduction Fund Freeze

On March 8, 2025, Climate United Fund filed a lawsuit in the United States District Court for the District of Columbia (the District Court) against the EPA, Citibank, N.A. (Citibank), and EPA Administrator Lee Zeldin to regain access to the $7 billion granted under the EPA's Greenhouse Gas Reduction Fund. Climate United Fund alleges that it received no explanation from either Citibank, which manages certain fund grants, or the EPA as to why fund access has been cut off. The plaintiffs contend, among other claims, that defendants Administrator Zeldin and the EPA violated the Administrative Procedure Act by effectively terminating the grants without any reasoned explanation, and that Citibank breached its contract by failing to provide the granted funds. The defendants, the suit argues, have no legal basis to claw back, freeze, or terminate money that was already lawfully granted. The plaintiffs requested that the District Court issue injunctions and an order requiring disbursement of the climate grant money at issue. On March 18, 2025, a federal judge in the United States District Court for the District of Columbia issued a temporary restraining order (TRO) halting the EPA's claw back of the funds granted to Climate United. The TRO also applies to two other entities whose grant funds were frozen.

Jury Finds Climate Advocacy Group Liable for over $660 Million in Dakota Access Pipeline Case

On March 19, 2025, a North Dakota jury ruled against Greenpeace International, Greenpeace USA and Greenpeace Fund (together, Greenpeace) in a case brought by Energy Transfer, Inc. (Energy Transfer) against Greenpeace in 2019, finding the advocacy group liable for over $660 million in damages. The case centered around Greenpeace's role in the 2016 and 2017 demonstrations against Energy Transfer's construction of the Dakota Access Pipeline, and accused Greenpeace of a series of unlawful activities, including trespass, nuisance, and defamation. Members of the Standing Rock Sioux tribe organized early opposition to construction of the Dakota Access Pipeline, alleging that the thousand-mile-long pipeline risked contaminating their water supplies. The number of protestors increased dramatically as opposition to the pipeline gained attention. In the lawsuit, Energy Transfer alleged that Greenpeace hired professional protestors to systemically organize demonstrations, block supply routes and delay construction of the pipeline. Energy Transfer also accused Greenpeace of spreading false accusations about the pipeline project to foster opposition to it and frighten Energy Transfer's lenders. Greenpeace denied these allegations, maintaining that it supported the opposition but had limited direct involvement in the protests and that media outlets reported the alleged defamatory claims prior to any similar Greenpeace comments. Greenpeace indicated that it will appeal the judgement to the North Dakota Supreme Court and has also filed an anti-intimidation lawsuit against Energy Transfer in the District Court of Amsterdam.

Wilson Sonsini Attends 2025 Energy Bar Association's Northeast Chapter Winter Summit in Washington, D.C.

On March 12, 2025, Wilson Sonsini attorney Nic Gladd presented at the 2025 Energy Bar Association's Northeast Chapter Winter Summit in Washington, D.C. Nic joined a panel discussing "Energy Resource and Supply Needs to Fuel the Data Center Boom."

Wilson Sonsini Attends Infocast Solar and Wind Finance & Investment Summit in Phoenix, AZ

On March 16-19, 2025, Wilson Sonsini attorneys attended the Infocast Solar + Wind Finance & Investment Summit in Phoenix, AZ. The three-day summit focused on current challenges and opportunities within renewable energy financing, and brought together leaders and professionals from wind, solar, and energy storage sectors.

Wilson Sonsini Presented at Developer University (Developer U) Climate Technology Workshop in Washington, D.C.

On March 19-20, 2025, Wilson Sonsini attorneys Bob O'Connor, Scott Zimmermann, and Jason Slagle presented at the Developer U Climate Technology Workshop in Washington, D.C. The recurring two-day event brought together investors and senior executives of emerging cleantech and climate hardware companies transitioning towards commercialization. Participants developed strategies to manage project finance and accelerate deployment of their products and services to scale, filing an important gap in the advancement of decarbonization and climate solutions. CREO, Spring Lane Capital, and Wilson Sonsini partnered to host the event.

Wilson Sonsini Advised Terabase Energy in $130 million Series C Financing Round

Terabase Energy, a leader in digital and automation solutions for utility-scale solar power, announced the closing of its $130 million Series C financing round. The round was led by SoftBank Vision Fund 2, with participation from both existing and new strategic investors. The new funding will support Terabase's efforts to transform the renewable energy landscape by accelerating the deployment of its technologies for large solar projects. Wilson Sonsini advised Terabase on the transaction.

Wilson Sonsini Co-Hosts 2025 Winterfest

From February 26-28, 2025, Wilson Sonsini co-hosted Winterfest 2025 in Big Sky, Montana, marking the 20th anniversary of the firm's inaugural event held in 2006. The annual three-day event brought together over 125 energy and climate investors, entrepreneurs, independent power producers, and thought leaders to discuss how to meet the moment given rising energy demand across the country, regulatory and political changes in the energy markets, and how to bring speed to power. This year's edition of Winterfest also included a live recording of the "Political Climate" podcast. Click here to access the episode.

In the wake of the January 21, 2025 executive order challenging DEI practices, the Chairman of the Federal Communications Commission (FCC) continues to pursue inquiries of DEI policies at publicly-traded American companies. We are monitoring the FCC's actions and will provide updates as more information becomes available.

On March 4, 2025, the United States delivered remarks to the United Nations (UN) General Assembly, rejecting the UN's Sustainable Development Goals — a call to action for UN member countries to address global challenges, including clean energy and climate action — and declaring the global governance targets "inconsistent with U.S. sovereignty and adverse to the rights and interests of Americans."

On March 6, 2025, in accordance with Executive Order 14162, the United States announced its withdrawal from the International Partners Group, a bloc of countries financially committed accelerating the transition from coal to clean energy in South Africa, Indonesia, Vietnam, and Senegal through sustainable financing.

On January 13, 2025, Brazil's "Programa Nacional de Produção e Uso do Biodiesel" celebrated its 20-year anniversary, marking 77 billion liters of biodiesel produced and preventing 240 million tons of CO2 emissions as the nation expands its foray into renewable fuels production.

On March 4, 2025, the Supreme Court of the United States issued a ruling in City and County of San Francisco v. Environmental Protection Agency, requiring the agency to set specific and concrete requirements to ensure compliance with water quality standards, while invalidating "generic" standards and those which merely mandate end results.

On March 13, 2025, the California Public Utilities Commission announced its approval of new battery storage safety rules, which includes a mandate that facility owners develop emergency response and action plans.

On February 26, 2025, Brazil and Norway signed a memorandum of understanding establishing a low or zero carbon vessel maritime transport corridor between the two countries, aimed at promoting sustainable shipping practices and significantly reducing greenhouse gas emissions.