July 2025: ICJ rules on climate change, EU publishes voluntary SMEs, White House unveils AI Action plan and More

Key highlights from July 2025 in the sustainability space.

1- International Court of Justice rules on countries’ climate change obligations

On July 23, the International Court of Justice (ICJ) issued a landmark advisory opinion on the obligations of states regarding climate change, following a 2023 request by the UN General Assembly.

According to the opinion, all states have binding obligations under climate treaties, customary international law, other environmental conventions, and human rights law to prevent significant harm to the climate system. This includes duties to reduce greenhouse gas emissions, cooperate internationally, regulate private sector activities, and provide adaptation support. Even subsidising fossil fuel production could be considered in breach of these obligations, which are considered owed to the international community as a whole.

As such, countries can be held legally accountable for climate harms, potentially including historic emissions and fossil fuel subsidies. While this decision is purely advisory, it is expected to strengthen the legal foundation for climate accountability claims, leading to more climate-vulnerable nations pursuing compensation for climate-related damages from high emitting countries. 

2- EU Commission publishes voluntary sustainability reporting standard for SMEs

On July 30, the European Commission unveiled a voluntary sustainability reporting standard for small and medium-sized enterprises (SMEs), designed to ease their compliance burdens and improve their access to sustainable finance. The Voluntary SME Standard (VSME) is an interim measure that has been introduced ahead of a formal delegated act that will form part of the Omnibus I simplification package. 

Developed by EFRAG, the VSME is intended to help smaller companies respond to growing sustainability information requests from large corporates and financial institutions, while also supporting their own monitoring of sustainability performance and competitiveness. The Commission is encouraging larger entities to base their data requests on this framework wherever possible.

3- White House unveils AI Action Plan 

On July 23, the White House unveiled Winning the AI Race: America’s AI Action Plan in line with President Trump’s January 2025 executive order on Removing Barriers to American Leadership in AI.

The plan sets out more than 90 federal policy actions across three pillars: accelerating AI innovation, building American AI infrastructure, and leading in international AI diplomacy and security. The plan underscores an urgency to scale infrastructure, expand skilled AI-related trades, and set global standards that keep American technology at the forefront of the AI race.

In addition to its structural pillars, the AI Action Plan is said to be guided by the principles of “empowering American workers, ensuring ideological neutrality and protection against misuse.” Ensuring ideological neutrality in this context is intended to guarantee that only "unbiased" large language models considered free from "ideological dogmas such as DEI" and other "partisan or ideological judgments" are eligible for government use.

4- EFRAG launches live portal tracking ESRS implementation 

On July 23, EFRAG launched its “State of Play 2025” portal, providing the first comprehensive snapshot of early compliance with the European Sustainability Reporting Standards (ESRS) under the Corporate Sustainability Reporting Directive (CSRD). 

Drawing on 656 sustainability statements issued between 1 January and 20 April 2025, the platform offers an interactive statistics dashboard, a full repository of reports, and an accompanying analysis of key trends. It finds that only 10% of companies identified all ten topical ESRS standards as material, with climate change, workforce, and governance being most frequently reported. 

5- PRI publishes framework on Sustainability Value Creation in private markets

On July 23, the Principles for Responsible Investment (PRI) published a guide aimed at helping investors use sustainability to drive financial outcomes in private markets. The guide is the result of a collaboration with Bain & Company and NYU Stern Center for Sustainable Business, which will continue beyond this initial publication through its second phase aimed at quantifying financial impact from sustainability initiatives for specific industries. 

The guide, which was developed with input from more than 400 investment organisations globally, underscores the opportunities for financial value creation through sustainability both at the investment firm and portfolio company levels. It provides practical approaches to sustainability integration, from key activities in strategy and fundraising to organisational enablers. This approach is instructive as it positions sustainability not just as a compliance exercise but as a course of competitive advantage in private markets. 

- Content prepared with the help of Defne Fresko Tasci.

June 2025: EU Green Claims Directive not withdrawn, UK Sustainability Reporting Standards, UN Oceans Conference highlights and More

Key highlights from June 2025 in the sustainability space.

1- The European Commission clarifies the Green Claims Directive is not withdrawn  

On June 20, reports emerged that the European Commission intended to withdraw the Green Claims Directive proposal following opposition from the European People’s Party (EPP). The EPP criticized the proposal for being overly complex and misaligned with the Commission’s broader agenda of regulatory simplification. This news broke just ahead of the scheduled trilogue discussions on June 23, which the Council subsequently cancelled. 

The announcement drew criticism from MEPs on the basis that the directive had already taken simplicity into account, especially as the Parliament had already agreed to a full exclusion of microenterprises from the Directive’s scope. Several political groups went as far as to threaten withdrawal of support for the Commission, warning that the move could jeopardize the institution’s legislative credibility.

In response to mounting criticism, the Commission clarified on June 30 that the proposal had not been formally withdrawn, but reiterated that its future hinges on the continued exclusion of microenterprises from its scope. Critics warned that the Commission’s handling of the matter sets a troubling precedent and could derail two years of progress toward greater  consumer protection and recognition for truly sustainable businesses.  

2- UK releases draft Sustainability Reporting Standards

On June 25, the UK government released exposure drafts for the upcoming UK Sustainability Reporting Standards. The proposed standards (UK SRS) are modelled on the IFRS Sustainability Disclosure Standards. Published alongside consultations for mandatory transition plans and assurance of sustainability reporting, the drafts include UK-specific amendments such as a two-year “climate-first” relief period and a requirement for sustainability disclosures to be published in tandem with financial statements. The goal is to shape a reporting regime that is transparent, proportionate, and connected to existing financial reporting.

The consultations will remain open until September 17, 2025. The Government is seeking feedback not only on the proposed amendments in the UK SRS but also on the anticipated costs and benefits of adopting the UK SRS instead of current reporting practices. 

3- Progress made towards international ocean protection at UN Oceans Conference

The UN Oceans Conference in Nice, France, concluded on June 13 with a major breakthrough: enough nations pledged to ratify the High Seas Treaty for it to enter into force by September. The successful push was led by contributions from nations including French Polynesia, Colombia, and Samoa, while the US was notably absent from the conference. 

Earlier in the conference, on June 11, the European Commission announced the adoption of the European Ocean Pact. First agreed on June 5, the Pact commits the EU to restore 20% of marine ecosystems by 2030, including ambitious targets to halve both plastic and nutrient pollution. 

While civil society groups expressed concern over a potential disconnect between commitments and concrete implementation, the conference marked a clear step forward in global efforts to safeguard ocean health and biodiversity. 

4- German prosecutors drop greenwashing probe

On June 17, German prosecutors closed their criminal investigation into former DWS CEO Asoka Wöhrmann concerning greenwashing allegations around his time at Deutche Bank’s asset management arm. The allegations stemmed from a whistleblower complaint by the asset manager’s ex-sustainability chief, who accused DWS of overstating its ESG investments. The firm was fined €25 million by German authorities in April 2025. Regulators found that assertions such as being a “leader” in ESG investing and positioning ESG as an integral part of the firm’s “DNA” did not reflect actual practices. This follows a similar case in the United States, where the firm settled with the SEC in September 2023 for $25 million over comparable allegations.

Despite the broader enforcement actions, prosecutors opted not to pursue charges against former executive Asoka Wöhrmann. Citing his departure from the firm in 2022, lack of prior convictions, and current absence from financial sector roles, authorities closed the case without imposing penalties.

The decision highlights the ongoing challenge of establishing individual accountability in cases involving ESG misrepresentation.

5- Actors urge SAG-Producers Pension Plan to stop investing in fossil fuel companies

In a letter published on June 24, over 200 SAG-AFTRA members urged the SAG - Producers Pension Plan to divest over $100 million from fossil fuels. The pension fund manages over $5 billion and supports more than 65,000 participants.

The campaign, led by Stand.earth under the Retire Big Oil banner, calls for full divestment from fossil fuel companies and reinvestment of at least 10% of the pension into climate-safe, socially responsible funds within five years. The letter argues fossil fuels are financially underperforming and socially harmful, especially to communities of color, and that the fund should reflect the union’s values of justice, sustainability, and long-term security.

- Content prepared with the help of Defne Fresko Tasci.

May 2025: EU enforces Digital Services Act, ECB cautions on sustainability rules, US Government backs ESG antitrust case, and More

Key highlights from May 2025 in the sustainability space.

1- European Commission escalates enforcement of the Digital Services Act

On May 7, the European Commission referred Czechia, Spain, Cyprus, Poland, and Portugal to the Court of Justice of the European Union for failing to properly implement the Digital Services Act (DSA). While all Member States were required to appoint and empower a national Digital Services Coordinator (DSC) by February 17, 2024, Poland has yet to appoint one, and the other four countries designated DSCs without granting them the necessary authority. None of the five have established penalty regimes for DSA violations, prompting the Commission’s legal action to ensure consistent enforcement across the EU.

The Commission also issued a reasoned opinion to Bulgaria for similar shortcomings—failing to empower a DSC and set penalties. Bulgaria now has two months to comply or risk being referred to the Court as well.

2- European Central Bank cautions on diluting sustainability rules

In a formal opinion published on May 8, the European Central Bank (ECB) commented on the European Commission’s proposed amendments to the CSRD and CSDDD under the Omnibus proposals. While backing the overall goal of boosting Europe’s long-term competitiveness, the ECB stressed that “it is important to strike the right balance to ensure that the benefits of sustainability reporting for the European economy and for the financial system are retained.” 

The ECB cautioned against narrowing the scope of the CSRD, particularly in relation to mid-sized and third-country companies, and emphasised the importance of retaining robust climate (ESRS E1) and biodiversity (E4) disclosures. It also called for clear value chain reporting and enforceable transition planning under the CSDDD, voicing concern that the proposed amendments to the CSDDD may introduce legal uncertainty. 

At a time when EU institutions appear to be retreating from parts of their sustainability agenda, the ECB’s opinion serves as a timely reminder of the role these disclosure rules play in safeguarding financial stability. 

3- European Commission unveils Single Market Strategy

On May 21, the European Commission released a comprehensive policy package, the Single Market Strategy, aimed at modernising regulations to strengthen the EU market’s attractiveness for companies, workers and consumers. Key proposals include a harmonised definition for small mid-cap companies (SMCs), streamlined GDPR rules for companies with under 750 employees, and digitalisation of product compliance procedures. 

The strategy also aims to dismantle barriers to the free movement of goods and services. Among the most harmful obstacles identified by businesses are fragmented rules on packaging, inconsistent product standards, limited recognition of professional qualifications, and unjustified territorial supply constraints that inflate consumer prices. 

While the package aims to simplify the  regulatory environment, it may introduce short-term uncertainty, especially when paired with other reforms like the EU’s Omnibus proposals in sustainability regulation. 

4- Trump administration backs antitrust case targeting ESG-driven investor actions

On May 22, the US Department of Justice and Federal Trade Commission filed a legal brief supporting a Texas-led lawsuit (launched in November 2024) alleging institutional investors like BlackRock, State Street, and Vanguard conspired to manipulate energy markets by pushing to slash coal production as part of their “green energy” policies.    

This is the first time a federal court has weighed in on antitrust risks tied to common ownership, where investors hold significant stakes in competing companies and allegedly influence their conduct. Citing President Trump’s executive orders declaring a national energy emergency and calling for increased coal production, the agencies argue that the alleged conduct undermines energy security and market competition. The statement clarifies that while passive investment and typical shareholder activity are generally protected, using commonly held shares to influence competing firms' output violates antitrust laws and cannot be justified under environmental or ESG-related goals.

The investors deny wrongdoing and argue their actions reflect long-term investor interests. Still, the case underscores intensifying scrutiny of ESG investing in the U.S., particularly under the current administration.

- Content prepared with the help of Defne Fresko Tasci.

April 2025: EU Stop-the-Clock Mechanism, Canadian Climate Disclosure Rule on Hold, Global Carbon Tax on Shipping Vessels, and More

Key highlights from April 2025 in the sustainability space.

1- EU adopts “stop-the-clock” mechanism 

On April 14, the EU adopted part of the Omnibus I proposals, the “stop-the-clock” mechanism, which postpones the CSRD and CR3D application dates. The directive delays the entry into application of the CSRD for large companies not yet reporting, as well as for listed SMEs, by two years. Consequently, the next wave of CSRD reports is now expected for the 2027 financial year. The CS3D transposition deadline and first application phase have also been deferred by one year, setting the new transposition deadline at 26 July 2027 and the first wave of application for 26 July 2028.

For more information on the significance of the Omnibus proposals for sustainability, see our LinkedIn article here. 

2- ESG funds experience record outflows in Q1 2025 

According to Morningstar, sustainable investment funds saw outflows reach $8.6 billion in Q1 2025, marking their worst quarter since Morningstar began data collection on such funds in 2018. European investors became net sellers of these funds for the first time this quarter, and declining inflows in the US continued for their tenth quarter. 

This decline is attributed to the political pushback against ESG that has emerged in early 2025, particularly in the US, where ESG funds are facing growing criticism for prioritising ideological agendas over financial returns. This sentiment influences global asset managers, leading to more cautious ESG marketing strategies. In Europe, the controversy has intensified with debates over including defence stocks in ESG portfolios amid rearmament efforts, which has unsettled long-time sustainability advocates.

Despite the outflows, the sustainable fund sector remains substantial, with over $3 trillion in assets. It will take more than current challenges for it to lose its position as a well-established asset class in the financial landscape. 

3- NYC pension funds to require solid net-zero plans from asset managers

​On Earth Day (April 22) 2025, New York City Comptroller Brad Lander reaffirmed the city's commitment to its Net Zero by 2040 goal for public pension funds, despite federal rollbacks on climate initiatives. The city's pension systems will now require asset managers overseeing the New York City Employees Retirement System, Teachers Retirement System, and Board of Education Retirement System to submit comprehensive net-zero plans by June 30, 2025. These plans must include strategies for real economy decarbonisation, integration of climate risks into investment decisions, and robust stewardship practices. Asset managers failing to meet these standards risk having their investment mandates put out to bid.

The city comptroller is also asking firms like BlackRock— which manages around $16.8 billion on behalf of NYCERS — to ask portfolio companies to “at minimum” measure and report scope 1, 2, and 3 emissions; establish a comprehensive net-zero and decarbonisation plan; consider the transition to a low-carbon business model; and “align future capital expenditures and lobbying with climate goals and targets.” This move not only offers a positive counterbalance to the current challenges facing sustainable initiatives in the US, but it also underscores that, in the short term at least, sustainability may increasingly become a matter for state and local governments to champion.

4- Canadian climate disclosure rule put on hold 

On April 23, 2025, the Canadian Securities Administrators (CSA) announced that it has paused its efforts to develop a new mandatory climate-related disclosure rule for Canadian issuers. This decision aims to support Canadian markets and issuers as they navigate recent global economic and geopolitical changes, especially uncertainty caused by US tariffs. Issuers must still disclose material climate-related risks under existing securities legislation. Additionally, non-venture issuers must continue to provide disclosure regarding the representation of women on their boards and in executive officer positions. 

It remains to be seen whether recent elections and the newly appointed prime minister will impact this change in direction. 

5- Major nations reach a first-ever international agreement on a global carbon tax on shipping vessels

​In April 2025, the International Maritime Organisation (IMO) reached a landmark agreement to impose a minimum fee of $100 per ton of greenhouse gas emissions from ships exceeding certain thresholds, marking the first global tax on such emissions. This initiative aims to generate $11–13 billion annually, allocated to the IMO’s Net Zero Fund to invest in green shipping technologies, reward low-emission vessels, and support developing countries in transitioning to cleaner fuels. The fee structure will become more stringent over time, aligning with the IMO’s goal of achieving net-zero emissions in the shipping industry by 2050. 

The consensus emerged from a compromise between over 60 countries advocating for a straightforward emissions tax, led by climate-vulnerable Pacific island nations, and others, including China, Brazil, Saudi Arabia, and South Africa, who favoured a credit trading system. Environmental groups have offered mixed reactions; some praise the agreement as a significant step forward, while others criticise it for lacking sufficient ambition and potentially allowing companies to pay the fee rather than invest in cleaner technologies.  Nonetheless, the agreement is notable, particularly given that it was reached despite strong opposition from the US.

- Content prepared with the help of Defne Fresko Tasci.

March 2025: Japan Sustainability Disclosure Standards, U.S. EEOC DEI Guidance, New SBTi Net-Zero Standard, and More

Key highlights from March 2025 in the sustainability space.

1- Japan publishes IFRS-aligned Sustainability Disclosure Standards

On March 5, the Sustainability Standards Board of Japan announced the issuance of its inaugural sustainability disclosure standards. The standards are aligned with the International Sustainability Standards Board’s IFRS Sustainability Disclosure Standards and have been published in three parts: 

(1) Universal Sustainability Disclosure Standard “Application of the Sustainability Disclosure Standards” 

(2) Theme-based Sustainability Disclosure Standard No. 1 “General Disclosures”

(3) Theme-based Sustainability Disclosure Standard No. 2 “Climate-related Disclosures”

The first two correspond to IFRS S1, while the “Climate-related Disclosures” standard corresponds to IFRS S2. As all three are expected to be applied together, this difference in form should not lead to substantive discrepancies in the disclosures. 

Overall, the standards, which are expected to form the basis of mandatory reporting of sustainability and climate-related information for Prime Market-listed companies on the Tokyo Stock Exchange, represent an important step towards internationally aligned sustainability reporting requirements. 

2- US EEOC publishes new guidance on DEI at work 
On March 19, the U.S. Equal Employment Opportunity Commission and the U.S. Department of Justice (DOJ) released two documents focused on “educating the public about unlawful discrimination related to “diversity, equity, and inclusion” (DEI) in the workplace.”

In the new guidance, the EEOC recognises that DEI initiatives have become more prevalent in the “past five years” since the end of President Trump’s last term and states that the widespread adoption of such initiatives “does not change longstanding legal prohibitions against the use of race, sex, and other protected characteristics in employment.” 

Accordingly, the published technical assistance documents state that DEI-related discrimination can appear by “limiting, segregating and classifying” workers or engaging in harassment or retaliation based on sex or race. The guidance specifically mentions “unlawfully using quotas or otherwise ‘balancing’ a workforce by race, sex, or other protected traits,” and notes that disparate treatment is illegal in relation to hiring, firing, promotion, demotion, compensation, benefits, exclusion from training, fellowships or mentorship/sponsorship programs and selection for interviews. The stated illegality of “exclusion from training or mentorship programs” based on DEI considerations indicates that the agency may look beyond substantive employment procedures and target support programs not directly bearing on employment decisions. 

3- SBTi launches consultation on initial draft of new Corporate Net-Zero Standard

On March 18, the Science Based Targets Initiative published the initial draft of the second version of its Corporate Net-Zero Standard, and launched a consultation on this that will stay open until the 1st of June. The draft is proposed to update the organisation’s key standard to assess, certify and track companies’ decarbonisation commitments to achieve net zero emissions and to support science-based climate target setting.

Key updates in the draft include a distinction between scope 1 and scope 2 decarbonisation, the introduction of new options for tackling scope 3 emissions such as setting targets for green procurement and revenue generation instead of emissions reduction targets, opportunities to scale carbon removals, and simplified requirements for medium-sized companies in developing markets and SMEs. 

The SBTi has confirmed that a “comprehensive transition pathway” will be developed to ensure a smooth transition from the existing standards to the new ones once the second version is finalized. 

4- Canada’s Prime Minister eliminates consumer carbon tax 

On March 14, Canada’s new prime Minister Mark Carney signed an order eliminating a consumer carbon tax, effective from April 1. Introduced in 2019, the tax, also called the “fuel charge”, introduced a price on carbon for businesses and consumers in order to incentivise emission reductions. While the consumer carbon tax has been scrapped, effective April 1, the business tax remains. 

The Prime Minister, with a strong track record in both finance and sustainability, had originally supported the carbon pricing scheme but now believes that the policy has become "too divisive." The controversy surrounding the tax is primarily due to the high inflation experienced by Canadians in the years since its implementation. 

5- World Nuclear Association publishes coalition pledge to triple global nuclear energy by 2050

On March 12, a coalition of fifteen major corporations including Google, Amazon and Meta signed a pledge supporting the goal of at least tripling nuclear capacity around the world by 2050. Other signatories include global banks, financial institutions, energy companies and heavy industry conglomerates. The initiative, led by the World Nuclear Association, is said to mark the first time businesses outside the nuclear sector have publicly backed such a large-scale expansion of atomic power to meet their energy needs. 
The pledge calls on governments to mobilise investment in nuclear power and support the development and construction of nuclear reactors including small modular reactors and advanced reactors. It is motivated by corporations’ expectation that their energy needs will increase in the next 25 years due to rising demand from AI data centers, electric vehicles, and industrial electrification. 

- Content prepared with the help of Defne Fresko Tasci.