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.

February 2025: EU's Omnibus Package, France Bans PFAs, UK Pension Fund Reaffirms Sustainability Focus, and More

Key highlights from February 2025 in the sustainability space.

1- EU Commission adopts “Omnibus” package

On February 26, the European Commission adopted the Omnibus package, a set of proposals aimed at simplifying EU rules on sustainability reporting, due diligence, the EU Taxonomy, the Carbon Border Adjustment Mechanism and European investment programs. The package is now under review by the Council of the European Union and the European Parliament, with adoption expected later this year.

Among the most significant changes, the proposal would shrink the scope of the Corporate Sustainability Reporting Directive (CSRD) by limiting its application to companies with more than 1,000 employees and €50 million turnover, effectively removing many businesses from its reach. Additionally, reporting requirements would be pushed back by two years for companies set to begin reporting in 2026 or 2027. The proposal also weakens supply chain transparency, as companies would no longer be required to collect sustainability data from their entire supply chain. Similarly, under the Corporate Sustainability Due Diligence Directive (CS3D), due diligence requirements would be limited to direct suppliers only, and companies would not face civil liability for non-compliance. 

While the EU positions these changes as a necessary simplification, there is growing concern that weakened reporting and due diligence obligations will limit investors’ access to useful and reliable sustainability data and create legal uncertainty for companies navigating ESG regulations.

2- France bans “forever chemicals” in textiles and cosmetics 

On February 27, the French Parliament passed legislation banning the production, import, export, and sale of certain products containing per- and polyfluoroalkyl substances (PFAS), commonly known as "forever chemicals." Effective January 1, 2026, the ban will apply to cosmetics, ski waxes, and a range of consumer textiles, including clothing, footwear, and waterproofing agents for these products. However, exceptions will be made for protective and safety gear designed for national defense and civil security, with a detailed list to be established by decree.

The final version of the law is more limited in scope than earlier drafts, excluding food packaging and kitchen utensils from the initial restrictions. Still, it represents a major regulatory step in addressing PFAS pollution, given the chemicals' persistence in the environment and potential health risks. By enacting this legislation, France becomes only the second country after Denmark to implement such a ban, reinforcing its position as a leader in chemical safety regulations.

3- Île-de-France Mobilités issues first public sector EU Green Bond 

On February 3, Île-de-France Mobilités became the first public sector issuer of a European Green Bond under the EU Green Bond Standard. The €1 billion bond, now listed on Euronext Paris, will finance sustainable transport projects aimed at making the region’s public transport system fully carbon-free by 2030.

Under the EuGB Regulation, proceeds must be allocated to economic activities aligned with the EU Taxonomy, with up to 15% permitted for sectors still awaiting established taxonomy criteria. 

Île-de-France Mobilités’ issuance signals growing early adoption of the EU Green Bond label, a positive indicator for the development of the EU sustainable finance market. As more public and private sector issuers turn to this standard, its impact on funding the green transition across Europe will be closely watched.

4- UK pension fund reallocates £28 billion citing sustainability concerns 

On February 27, the People’s Pension (TPP), one of the UK’s top pension funds, pulled £28bn from US asset manager State Street following its decision to scale back ESG investment strategies. TPP reallocated the funds to asset managers Amundi and Invesco, stating that the companies would run the funds focusing on responsible investment. 

This exemplifies how European asset owners are pushing back against the ongoing American retreat from ESG. By reallocating the funds, TPP demonstrated the value they place on prioritising sustainability in conjunction with financial growth, and restated the potential for long-term growth offered by responsible investment strategies. TPP’s reallocation also signals continued demand for asset managers that integrate sustainability into their investment approach.

5- US Department of Justice pauses enforcement of the Foreign Corrupt Practices Act

Following a February 10 order from President Trump, the US Department of Justice has “paused” the enforcement of the 1977 Foreign Corrupt Practices Act (“FCPA”) a cornerstone of anti-corruption enforcement. A key tool the Department of Justice uses to prevent individual and corporate misconduct in international operations, the FCPA as applied, has been accused of being excessive, unpredictable and anti-competitive. 

While the decision raises concerns, its practical impact remains uncertain. Many companies already view bribery as an unproductive cost and have integrated anti-corruption safeguards into their governance frameworks. Compliance programs, shareholder expectations, and international regulations may still deter corrupt practices even without DOJ enforcement.

The move, however, signals a shift in U.S. regulatory priorities and could weaken global anti-corruption efforts. Whether this policy change alters corporate behavior or triggers broader legal and diplomatic consequences will be closely watched.

- Content prepared with the help of Defne Fresko Tasci.

January 2025: EU's Competitiveness Compass, Net-Zero Alliance Exits, Davos, and More

Key highlights from January 2025 in the sustainability space.

1- EU presents “Compass” to regain competitiveness

On January 29, the European Commission published a “Competitiveness Compass”, a plan aiming to increase the European economy’s competitiveness by bridging the gap in productivity growth with other major economies. 

Accordingly, the European Commission’s 2025 Work Programme will focus on innovation, decarbonisation and security to boost competitiveness. Proposed initiatives include promoting industrial leadership in sectors such as AI, advanced materials and biotech, launching an EU Start-up and Scale-up Strategy, a Clean Industrial Deal, an Affordable Energy Action Plan and increased clean trade and investment partnerships. 

Five horizontal enablers will support these efforts: simplifying regulations, lowering barriers to the Single Market, financing competitiveness, promoting skills and quality jobs and better coordinating policies at both the EU and national level. 

2-US corporations exit Net-Zero Banking Alliance and Net-Zero Asset Managers Initiative

Amid heightened ESG backlash from conservative lawmakers and the looming second term of President Donald Trump, major US banks and investment managers have exited the Net-Zero Banking Alliance (NZBA) and the Net-Zero Asset Managers Initiative. (NZAM) The departures include those of JPMorgan, Goldman Sachs, Morgan Stanley, Wells Fargo, and BlackRock, and they have left the alliances without participation from major US players. While the departees have all stated that they remain committed to their climate-related goals, how these claims will be reflected in practice remains to be seen. 

The future of the UN-backed coalitions, which were established to align bank lending and investment activities with global efforts to fight climate change, is also uncertain. On January 13, NZAM announced that it is suspending its primary activities in the face of this changing political and regulatory environment. 

3- France supports deregulation with Omnibus Package

On January 21, at the European Economic and Financial Affairs Council, French Minister of Economics and Finance Eric Lombard expressed support for significant deregulation at the EU level with the upcoming Omnibus Simplification Package, which aims to streamline the EU Taxonomy, CSRD, and CSDDD.

According to this position, which is shared by Germany, the package would entertain a significant reduction of obligations and a modification of applicability thresholds, effectively undermining the Green Deal. This marks a significant shift of policy on the part of the French Government, which has historically acted as a leader in favour of the European Green Deal and has been a pioneer in terms of non-financial disclosures. The new regulation is set to be unveiled on the 26th of February. 

4- AASB and IESBA launch ethical sustainability reporting and assurance standards 

On January 27, The International Auditing and Assurance Standards Board (IAASB) and the International Ethics Standards Board for Accountants (IESBA) launched integrated standards aimed at strengthening sustainability reporting and assurance practices. IAASB and IESBA will offer resources such as webinars, guidance documents, and feedback mechanisms to ensure smooth implementation.

While the IAASB’s sustainability assurance standard ISSA 5000 provides requirements to support the consistent performance of quality limited or reasonable assurance engagements, the IESBA’s IESSA provides a framework for ethics and independence requirements for sustainability assurance engagements. 

The standards are expected to become effective from December 15, 2026, in the jurisdictions adopting the standards, while earlier adoption is encouraged. They are intended to apply to all sustainability assurance practitioners conducting sustainability assurance engagements, including those who use the work of an external expert in these.

5- Davos 2025: Key Developments

The 2025 World Economic Forum meeting in Davos, Switzerland, from January 20-24 saw significant discussions on accelerating climate and nature goals, emphasising safeguarding the planet as a critical priority. 

The session saw the announcement of the creation of the world’s largest protected tropical forest reserve, the Kivu-Kinshasa Green Corridor, but was also marked by the wildfires that were ravaging Los Angeles as the conference was ongoing. A key point of discussion in this regard was the risk of insurance deserts created by the withdrawal of coverage in the event of natural catastrophes in specific geographies, such as the situation in LA. This was addressed in a white paper on the topic of insuring against extreme heat. 

Another key focus was the interconnection of carbon, biodiversity, and water markets, encouraging integrated environmental strategies. For example, Singapore’s President Tharman Shanmugaratnam proposed linking biodiversity credits with carbon markets to promote more comprehensive environmental conservation efforts.

- Content prepared with the help of Defne Fresko Tasci.