Sustainability and ESG Advisory Practice Update, April 2025

United States

House Members Focus Their Attention on Federal Tax Credits for Pending Budget Reconciliation Process

As the U.S. Congress gears up for the budget reconciliation process, several Republican and Democratic members of the House of Representatives have urged House leadership to maintain certain key federal energy tax credits authorized by the Inflation Reduction Act of 2022 (IRA).
 
On March 9, 2025, in a letter to Representative Jason Smith (R-MO), chair of the House Ways and Means Committee, 21 Republican House members requested a "targeted and pragmatic" approach to repeal or reform of current energy tax credits to ensure private sector investments in clean energy and manufacturing projects remain covered by the upcoming budget reconciliation bill. The Republican letter notes that countless American companies are utilizing energy tax credits to make major investments in domestic energy production and infrastructure and that the credits have been enacted over the course of a 10-year period, which allowed energy developers to plan with these tax incentives in mind. The letter further acknowledged that these timelines have been relied upon when it comes to capital allocation, planning, and project commitments, all of which would be jeopardized by premature credit phase outs or additional restrictive mechanisms such as limiting transferability. According to the Republican letter, maintaining current energy tax credits should be consistent with energy affordability for American families and energy dominance for America.
 
Likewise, 37 Democratic House members sent a letter to House Speaker Mike Johnson (R-LA) on March 10, 2025, urging him to retain IRA federal tax credits supporting production of electric vehicles (EV), including credits for EV battery manufacturing and mining and production of critical minerals and components for EV batteries. Appealing to the Republican majority in the House, the letter admonishes them to do everything they can to keep such tax credits intact, noting that roughly 84 percent of the private investments in EV and battery manufacturing announced since the IRA became law were made in congressional districts currently represented by a Republican. “Indeed, of the 25 districts that have seen the greatest private investment in these areas since the IRA became law, 21 are currently represented by a Republican. Additionally, 68,467 jobs connected to these new projects are in Republican-held House districts.” Similar to the tenor of the Republican March 9th letter, the Democratic members called out the degree to which American businesses have relied on the IRA tax credits for long term investment, quoting Ford Motor Company CEO, Jim Farley, “we’ve already sunk capital—even though we’ve rationalized it—in battery production and assembly plants all through Ohio, Michigan, Kentucky, and Tennessee. And many of those jobs will be at risk if the IRA is repealed.” In summary, the Democratic members note that the ability of the U.S. to remain competitive with China in the EV market and all sectors of the economy depends on critical IRA investments in industries that will define the 21st century.
 
We are continuing to monitor these critical legislative developments during the budget reconciliation process and will provide further updates, as applicable.

U.S. Executive Branch Cuts Funding for U.S. Global Change Research Program
 
On April 8, 2025, the U.S. Executive Branch issued a stop work order canceling funding and staffing for the U.S. Global Change Research Program, the federal body responsible for coordinating the National Climate Assessment, a comprehensive report mandated by Congress to evaluate the impacts of climate change. This decision includes the termination of the National Aeronautics and Space Administration’s contract with ICF International, Inc., the consulting firm that facilitated interagency collaboration during the assessment’s production. With the next assessment scheduled for 2027 publication, scientists have expressed concerns that the funding cuts may undermine the credibility of the report, which relies on federal collaboration and public review to assess global climate risks. The Executive Branch has not yet issued an official statement on the matter.

Multiple Executive Orders over Two Days Look to Bolster U.S. Coal

On April 8 and April 9, 2025, President Donald Trump signed several executive orders that aim to invigorate the American coal industry. An order titled, “Protecting American Energy from State Overreach,” seeks to curtail state-level regulations which may burden domestic energy production by directing the Attorney General to identify such laws and challenge their enforcement. Another order requires, among other things, that certain federal agency leaders assess the potential for coal mining on federal lands and identify the availability of coal production for powering artificial intelligence servers, while a third order spurs agencies to expedite the development of coal power in fortifying electric grid reserve margins. A fourth order instructs certain federal agencies to set conditional expiration dates for energy-related regulations issued pursuant to a list of enumerated statutes. We anticipate further regulatory developments and will continue to provide updates as federal and state agencies respond to these executive orders.

U.S. Department of Agriculture Declares Emergency Aimed at Increasing Timber Production on Federal Land

On April 3, 2025, the U.S. Secretary of Agriculture, Brooke Rollins, announced in a Secretarial Memorandum (the “memorandum”) an initiative to designate over approximately 112 million acres of National Forestry System (NFS) land for urgent management. This move follows an Executive Order aimed at increasing domestic timber production by enabling the U.S. Forest Service to take swift actions to mitigate wildfire risks. Secretary Rollins emphasized the need for proactive forest management to combat threats from fire, disease, and pests. An implementation letter (the letter) issued on April 3, 2025, directs the Deputy Chief for the NFS to develop a national strategy for streamlining permitting processes and collaboration with state and local entities to ensure a steady timber supply. The memorandum and letter follow Secretary Rollins’s prior announcement in March 2025 that the U.S. Department of Agriculture will make funding available under the Rural Energy for America Program, Empowering Rural America, and Powering Affordable Clean Energy programs.

California's Extended Producer Responsibility Law Implementation Process Slows

In 2022, California enacted Senate Bill 54 (SB 54), the Extended Producer Responsibility Law, which aimed to phase out single-use plastics. SB 54 mirrors legislation passed by other states such as Oregon and Colorado, requiring producers of packaging materials to implement and finance a system to collect and recycle their products. Pursuant to SB 54, CalRecycle, the implementing regulator, was due to submit the final rulemaking requirements to the California Office of Administrative Law by March 2025. CalRecycle did not finalize the rulemaking by the deadline and in the past few weeks, California Governor Gavin Newsom has since directed state regulators to restart the process for developing rules needed to implement SB 54, citing concerns over costs associated with the law and a desire to ensure fair implementation. While additional information will be forthcoming, barring any further changes, covered companies will be expected to report data on the volume of their covered material used in California to the Circular Action Alliance by August 2025.

Europe

European Commission (EC) and the United Kingdom (UK) Competition and Markets Authority (CMA) Fine Car Manufacturers over Vehicle Recycling Cartel

On April 1, 2025, the EC announced that it had fined 15 car manufacturers and an industry association nearly €458 million (approx. US$505 million) for participating in a cartel regarding the recycling of end-of-life vehicles (ELVs) from May 2002 to September 2017. The EC found that the parties colluded on two points: 1) the parties agreed not to pay car dismantlers for processing ELVs; and 2) the parties agreed not to promote how much of an ELV can be recycled, recovered, and reused and how much recycled material is used in new cars. The cartel’s goal was to prevent consumers from considering recycling information when choosing a car, which could lower the pressure on companies to go beyond legal requirements.

The investigation found that the industry association was the facilitator of the cartel, having organized numerous meetings and contacts between car manufacturers involved in the cartel. The 15 car manufacturers agreed to the fine as part of a settlement agreement. A 16th car manufacturer received full immunity from fines due to having revealed the cartel to the competition authorities.

On April 1, 2025, the UK CMA announced a settlement of its investigation into the same conduct involving fines totaling over £77 million (approx. US$99 million) for 10 car manufacturers and two industry associations.

EC Proposes More Flexibility on CO2 Emission Performance Standards for Car Manufacturers
 
On April 1, 2025, the EC proposed an amendment to the EU regulation setting CO2 emission performance standards for passenger cars and light commercial vehicles, which would allow manufacturers to assess their compliance with the CO2 targets for 2025, 2026, and 2027 on an average over the entire three-year period, instead of annually. The current regulation requires manufacturers to lower their emissions by 15 percent in 2025 compared to a base year of 2021, or face penalties. The proposed amendment has to be formally adopted by the European Parliament and the Council of the European Union before it becomes effective.

Germany Fines Asset Manager €25 Million over Greenwashing Claims
 
On April 2, 2025, following a three-year investigation, German prosecutors fined asset manager DWS Group GmbH & Co KgaA (DWS) €25 million (approx. US$ 27.5 million) for breaches of German financial investment laws by making misleading statements about its environmental and social investing credentials from mid-2020 to January 2023. While DWS advertised itself as a “leader” in environmental, social and governance (ESG) investing during the relevant period and suggested that ESG was an “integral part of its DNA,” the Frankfurt Public Prosecutor’s office found that such descriptions were overblown did not accurately reflect DWS practices. This fine comes on the heels of a 2023 investigation by the U.S. Securities and Exchange Commission (SEC) in which the SEC determined that DWS misled investors with respect to its ESG investment process. In a German statement, DWS said it accepted the fine against it.

European Corporate Sustainability Reporting Rules on Track to Be Postponed
 
On April 3, 2025, the European Parliament formally voted to approve the EC’s “Stop the Clock” proposal, which would postpone the application of the Corporate Sustainability Due Diligence Directive (CSDDD) by one year until July 2028. Additionally, the proposal would postpone the phase-in of reporting requirements under the Corporate Sustainability Reporting Directive (CSRD) for companies of the second and third wave until 2028. The Council of the European Union is expected to approve the proposal shortly as well, having informally approved it on March 26, 2025. The changes will only become effective once they are published in the Official Journal.
 
Separately, the European institutions are continuing to negotiate the substantive changes to the CSRD and CSDDD which the EC proposed in its Omnibus legislative package on February 26, 2025. Some of the proposals to simplify the laws have proven to be controversial in the European Parliament, and a political agreement might not be reached until late 2025.
 
For more information on the Omnibus package, please see our March newsletter.

International Maritime Organization (IMO) Approves a Global Net-Zero Framework

On April 11, 2025, the IMO’s Marine Environment Protection Committee (the MEP Committee) approved measures that aim to achieve net-zero greenhouse gas (GHG) emissions in the global shipping sector by 2050. Under the approved measures, starting in 2027 ocean-going ships over 5,000 gross tons (which account for 85 percent of total CO2 emissions from international shipping) will be required to: 1) reduce, over time, their GHG fuel intensity (i.e., reduce the amount of GHGs emitted per unit of energy) to specified thresholds (the GFI thresholds); and 2) acquire offsets if their GHG fuel intensity is above the required GFI threshold. Ships that are below their applicable GFI thresholds will be eligible for financial rewards, such as generating emissions offsets that can be transferred to ships that are over the applicable GFI thresholds.

Eighth Circuit Temporarily Pauses Climate Rules Litigation and Seeks Response from SEC

Following the SEC’s action in March 2025 to end its defense of the final climate-related disclosure rules (Climate Rules), the Attorneys General of Massachusetts and other states (intervenor States) filed a motion to hold the case in abeyance “to maintain the status quo and preserve judicial resources while SEC evaluates its course of action” with respect to the Climate Rules. The Attorneys General of the State of Iowa and other states opposed the motion and requested the court proceed to a final decision.

On April 24, 2025, the U.S. Court of Appeals for the Eighth Circuit issued an order granting the intervenor States’ motion to hold the case in abeyance and directed the SEC “to file within 90 days a status report advising whether the Commission intends to review or reconsider the rules at issue in this case.” Further, the court order states that if the Commission determines not to take action with respect to the Climate Rules, “then the status report should address whether the Commission will adhere to the rules if the petitions for review are denied and, if not, why the Commission will not review or reconsider the rules at this time.”

For more on this and other news impacting public companies, please see Known Trends, Wilson Sonsini’s public company blog.

Environmental Groups File Lawsuit Against New York State over Climate Regulation Delays

On March 31, 2025, a coalition of environmental and public interest groups filed a lawsuit in the Supreme Court of the State of New York, County of Albany, against the state’s Department of Environmental Conservation (DEC) alleging that the DEC unlawfully abandoned its obligation to implement regulations necessary to achieve the greenhouse gas reduction targets required by the 2019 Climate Leadership and Community Protection Act (CLCPA). The CLCPA mandates that New York cut emissions by 40 percent by 2030 and by 85 percent by 2050. The lawsuit claims that the DEC has failed to finalize these regulations despite previously indicating that drafts would be available by January 2024. The plaintiffs argue that the DEC’s inaction violates the CLCPA and the New York State Constitution by undermining the state’s ability to meet its emissions targets identified by legislators. The plaintiffs seek a court order compelling the DEC to release draft regulations immediately and finalize them on a reasonable timeline.

California Air Resources Board (CARB) Resists Challenge to Enforcement of Corporate Climate Reporting Laws
 
On April 7, 2025, CARB filed an opposition brief in the U.S. District Court for the Central District of California to a motion for preliminary injunction. The motion for preliminary injunction was filed by business groups aiming to delay enforcement of Senate Bill 253, California’s Climate Corporate Data Accountability Act (SB 253) and Senate Bill 261: Greenhouse Gases: Climate-Related Financial Risks (SB 261). The plaintiffs claim that SB 253 and SB 261 violate corporate speech rights under the First Amendment and seek an injunction to block the laws from being enforced while the issue is pending in court. In its filing opposing the injunction, CARB argued that the plaintiffs are unlikely to prevail on the merits of the First Amendment claim—specifically that the plaintiffs fail to demonstrate that the challenged laws implicate the First Amendment. The opposition brief argues further that the plaintiffs cannot establish an immediate threatened harm absent the injunction, and that the challenge to SB 253 is unripe as CARB has yet to adopt the prerequisite regulations for any obligation to act under the law.

Florida Attorney General Initiates Antitrust Probe into Proxy Advisors
 
On March 20, 2025, Florida Attorney General James Uthmeier has launched an antitrust investigation into proxy advisors Glass Lewis & Co. and Institutional Shareholder Services Inc. for potential misrepresentations related to their ESG and Diversity Equity and Inclusion investing policies. The Attorney General’s office alleged the two firms violated the Florida Deceptive and Unfair Trade Practices Act and also engaged in possible unlawful collusion in adopting and enforcing these policies in violation of the Florida Antitrust Act of 1980. A statement from the Attorney General’s office stated that Civil Investigative Demands will be forthcoming. 
 
Defendants File Motion to Dismiss Antitrust Lawsuit Against Large Institutional Investors
 
On March 17, 2025, in response to the joint lawsuit initiated by Texas and other state AGs alleging that BlackRock, Inc., Vanguard Group, Inc., and State Street Corporation conspired to discourage coal companies to lower coal output, the defendants filed their motion to dismiss, stating that the claims rest on “half-baked and untested” legal theories. The defendants’ joint motion focused on highlighting i) lack of plausibility, arguing that the complaint does not directly allege any agreement or anticompetitive information exchange in violation of Section 1 of the Sherman Act, and ii) failure to state a claim under Section 7 of the Clayton Act, as purchase of shares solely for the purpose of investment is protected under the statute’s safe harbor. The defendants also added that the states’ claims under state antitrust laws fail alongside their federal antitrust claims.
 
Following the motions to dismiss, the Securities Industry and Financial Markets Association (SIFMA) and Investment Company Institute (ICI) filed amici curiae in support of the defendants. Both SIFMA and ICI sided with the defendants in attacking the plaintiffs’ theory that an investor owning and voting its noncontrolling shares in rival firms can, “alone and in isolation,” violate Section 7 of the Clayton Act, arguing that the theory is unprecedented and contrary to the statutory language. The plaintiffs must file their response to the defendant’s motion by May 1, 2025.

Dutch Environmental Group Sues Large Netherlands Bank over Greenwashing Allegations

On March 28, 2025, Milieudefensie (Friends of the Earth Netherlands) filed a lawsuit against major bank ING in a Dutch court. As part of the lawsuit, Milieudefensie demanded i) that ING set its climate policy to be in accordance with the 1.5°C target of the Paris Agreement, ii) that ING should reduce its emissions by at least 48 percent CO2 and at least 43 percent CO2e in 2030 compared to 2019, and iii) that ING should cease all financing and support for fossil fuel clients who continue fossil fuel expansion or who do not have a good phase-out plan. ING defended its climate approach, calling the demands “unrealistic and unreasonable.”

U.S. District Court Orders Environmental Protection Agency (EPA) to Halt Greenhouse Gas Reduction Fund Freeze

On April 15, 2025, United States District Court for the District of Columbia (the District Court) enjoined the EPA from terminating awards or suspending payment made under the Greenhouse Gas Reduction Fund’s (GGRF) $20 billion grant program. The District Court also ordered Citibank, N.A. (Citibank), the designated financial agent for the grants, to disburse any funds incurred before the accounts were suspended without notice in mid-February. This order follows from a March 8, 2025, lawsuit filed by Climate United Fund in District Court against the EPA, Citibank, and EPA Administrator Lee Zeldin to regain access to the grants awarded under the EPA’s Greenhouse Gas Reduction Fund. In the original complaint, the plaintiffs contended 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.

Wilson Sonsini Attends San Francisco Climate Week

From April 19-27, 2025, in connection with San Francisco Climate Week, Wilson Sonsini sponsored a focused panel discussion exploring how blended finance mechanisms can mobilize private capital for urgent climate initiatives in emerging markets, which was led by Climate Policy Initiative and Energy Peace Partners. Wilson Sonsini also co-sponsored for several events in connection with SF Climate Week, including the UC Climate Tech Showcase for Investors and Innovators which highlighted cutting-edge climate innovations from the University of California’s top entrepreneurial programs, the SF Climate Week Breakfast Ride, a networking, group bike ride which brought together founders, investors, and friends in the climate and deep tech spaces, and the FOAK Tales: Insights From Organizations Leading The Way on First-of-a-Kind Climate Projects, a series of rapid fire talks from organizations implementing novel structures and FOAK (first-of-a-kind) transactions to bridge the funding gap for new, emerging climate technologies.

Wilson Sonsini Attends Wood Mackenzie Solar & Energy Storage Summit 2025

On April 23, 2025, Wilson Sonsini attorney Nic Gladd presented at Wood Mackenzie Solar & Energy Storage Summit 2025 in Denver, Colorado. Nic joined a panel discussing “The Secrets of Market Trading: Battery Performance and Monetization."

Wilson Sonsini Attorney Moderates Panel on Renewable Energy Demand

On April 29, 2025, Wilson Sonsini attorney Todd Glass presented at NPM US Development & Finance Forum 2025 in New York. Todd served as moderator on a panel discussing “Data Centers: Powering the Next Generation of Renewable Load Demand.”

Wilson Sonsini Advised Trove on Acquisition of reverse.supply

Trove, the leader in branded resale and customer trade-in, announced that it is advancing its European and global expansion by acquiring reverse.supply, a German-based leader in the European branded resale market. By combining Trove's established technology platform with reverse.supply's deep European expertise, Trove now offers the most comprehensive and scalable set of technology components for brands seeking to implement circular solutions in North America, Europe, and the UK. Wilson Sonsini advised Trove on the transaction, in collaboration with Noerr Partnerschaftsgesellschaft mbB.

Wilson Sonsini Advised Crux on $50 Million Series B

Crux, a capital markets technology company for the clean economy, announced that it has raised $50 million in Series B funding led by Lowercarbon Capital. The company plans to use the new capital to meet its mission of supporting developers, manufacturers, investors, and lenders through all stages of capital formation. This funding round comes on the heels of Crux's latest platform innovation: its debt capital marketplace which opens access to a range of debt products alongside Crux's powerful transferable tax credit marketplace. Wilson Sonsini advised Crux on the transaction.

Wilson Sonsini Advises Base Power on $200 Million Series B

Base Power, a Texas-based battery-powered home energy company, announced the completion of a $200 million Series B round co-led by Addition, Andreessen Horowitz, Lightspeed Venture Partners, and Valor Equity Partners, with participation from existing investors. Base Power will use its new funding to expand its affordable and reliable energy services in Texas and prepare for national growth with its battery-powered home energy solutions. The investment will help build the company's first factory in Texas to address increasing demand and enhance resilience, cost efficiency, and operational control as it scales. Wilson Sonsini advised Base Power on the transaction.

On November 29, 2024, Nebraska Attorney General filed an antitrust lawsuit against heavy-duty truck manufacturers for conspiring to limit the availability of diesel-powered semi-trucks. The defendants’ responsive pleading deadline has been extended to June 26, 2025.

On March 12, 2025, a U.S. Senator introduced legislation which would shield states from compliance with the EU Corporate Sustainability Due Diligence Directive and similar regulations.
 
On March 14, 2025, the SEC announced a six-month extension of the compliance dates for the Investment Company Act “Names Rule,” which ensures fund names match their alignment on ESG investments and sustainability strategies.