Climate and Energy: EU Policy and Regulation Update for 9 July 2025

As policy and regulatory landscapes evolve, this publication will provide insights to navigating emerging risks and opportunities in the energy transition. Read previous issues here.

Sustainability Omnibus Package

• MEPs’ proposed amendments to Omnibus Directive proposal circulated ahead of formal negotiations
• Commission extends deadline for EFRAG’s technical advice on the revision and simplification of the ESRS
• French Climate Council issues Annual Report, warning against the Sustainability Omnibus Package
• Financial institutions and organizations issue joint statement on the Omnibus Directive proposal
• EU Ombudswoman flags concerns over the use of urgency procedures in the Omnibus Directive process
• European Commission adopts new Taxonomy Delegated Act cutting back on Taxonomy Reporting
• Draft Commission Delegated Act amending CSRD extends phase-in provisions to Wave 1 companies reporting for 2025 and 2026

European Union/International

• EFRAG issues Final Comment Letter on ISSB’s greenhouse gas disclosure proposals
• ESAs launch consultation draft Joint Guidelines on ESG stress testing
• ESMA publishes Final Report on Common Supervisory Action on the integration of sustainability risks and disclosures in the investment fund sector
• EIOPA publishes report on biodiversity risk management by insurers
• Danish Presidency of the Council publishes Programme, including climate-related ambitions
• ESMA publishes thematic note on clear, fair and not misleading sustainability-related claims
• Commission Regulation amending IFRS 9 and IFRS 7 is published in the Official Journal
• European Commission proposes amendments to the EU Climate Law, preserving the 90% emissions cut by 2040
• ISSB publishes exposure drafts proposing amendments to the SASB Standards and Industry-based Guidance on Implementing IFRS 2

Germany

• Former judge of the German Federal Constitutional Court publishes criticism of EU sustainability rules

Italy

• Mandate to the Italian Government to transpose CRD VI’s requirements on ESG risks and implement the Green Bond Regulation

Sustainability Omnibus Package

27 June 2025 [EU] – MEPs’ proposed amendments to Omnibus Directive proposal circulated ahead of formal negotiations

A draft version of MEP amendments has been circulated by specialized media outlets ahead of the opening round of negotiations – scheduled for 15 July 2025 [informal document available here].

The amendments emanate from members of the Progressive Alliance of Socialists and Democrats (S&D), the European Green Party and Renew Europe. Proposed deviations to the Rapporteur (Jörgen Warborn)’s proposals include in particular:

• The adoption of limited assurance standards by the Commission, before October 2026, instead of targeted assurance guidelines – and the adoption of delegated acts for reasonable assurance standards after October 2030;
• The introduction of a three-tier approach framework establishing a medium-large undertaking category (500-1000 employees), which shall report using simplified sustainability reporting standards;
• The removal of least important datapoints under ESRS, while prioritizing quantitative indicators, complying with the double materiality principle and maintaining minimum requirements at current international standards levels.
• The replacement of the “best efforts” standard with “all reasonable efforts” to put into effect the transition plan aligned with Paris Agreement obligations – to focus on the means deployed to combat climate change, rather than focusing on results.

The amendments are included in a broader informal work document [available here], containing the overall 874 amendments tabled by MEPs, reflecting the basis for upcoming negotiations in the European Parliament.

1 July 2025 [EU] – Commission extends deadline for EFRAG’s technical advice on the revision and simplification of the ESRS

The European Commission granted the European Financial Reporting Advisory Group (EFRAG) a one-month extension to deliver its technical advice on the simplification of the European Sustainability Reporting Standards (ESRS) [press release available here].

This development follows the delivery of EFRAG’s 20 June Progress Report outlining its proposed simplification levers [for more details on the Progress Report, please refer to our previous issue here].

The extension shifts the timeline for the upcoming public consultation, which will now run for 60 days from the end of July to the end of September 2025. EFRAG is now expected to submit its final advice to the Commission by the end of November 2025.

3 July 2025 [France] – French Climate Council issues Annual Report, warning against the Sustainability Omnibus Package

The Haut Conseil pour le Climat (HCC), an independent government advisory body, published its annual report, under the title “Reviving Climate Action in Response to Worsening Impacts and Weakening Governance” [full report available here, in French only].

The Sustainability Omnibus Package is targeted as having weakened the legal framework aimed at enhancing corporate accountability – in particular as concern sustainability reporting and due diligence rules. The report also notes that the so-called ‘Stop-the-Clock’ Directive prevented the legal framework from contributing to the achievement of EU’s 2030 climate goals.

The HCC notes that these revisions appear politically motivated, citing the lack of full implementation and impact assessment, and concluded that it was not in France’s best interest to weaken non-financial reporting, and social or environmental due diligence requirements.

4 July 2025 [EU] – Financial institutions and organizations issue joint statement on the Omnibus Directive proposal

The European Sustainable Investment Forum (Eurosif) published a joint statement on the Omnibus Directive proposal, endorsed by 266 investors, financial institutions, companies, service providers and supporting organizations [full statement available here].

The statement calls on the financial sector to preserve the core elements of the CSRD and CSDDD, described as essential for achieving the European Union’s wider sustainability, growth and competitiveness ambitions.

Noting that “regulatory simplification can be achieved without compromising on the substance of sustainability rules or their significant benefits for businesses across the EU” the signatories put forward the following recommendations:

• Maintaining the principle of double materiality reporting and alignment with international reporting standards (including ISSB, GRI and TNFD);
• Including companies with more than 500 employees in the scope of the CSRD, to ensure regulatory continuity for companies reporting under NFRD and for companies that have already reported or prepared to report under the CSRD;
• Ensuring the value chain cap allows for constructive exchange of sustainability information;
• Safeguarding core elements of the CSDDD, such as risk-based corporate due diligence and the adoption and implementation of transition plans;
• Clarify the requirement to “through best efforts, put into effect” these transition plans, which should explicitly reference an obligation of means, not an obligation of results.

4 July 2025 [EU] – EU Ombudswoman flags concerns over the use of urgency procedures in the Omnibus Directive process

EU Ombudswoman Teresa Anjinho has raised concerns about the European Commission’s use of urgency procedures for regulatory simplification, warning against bypassing proper consultation processes in an interview with the Financial Times [press article available here].

Anjinho observed that the Commission risks undermining public trust by advancing its simplification agenda without adequate engagement with civil society organizations. Anjinho’s concerns include the use of expedited procedures to fast-track changes to climate legislation. In particular, she noted that exemptions from impact assessment requirements should remain the exception rather than the rule.

This interview follows the Ombudswoman’s office launching a formal inquiry into the Commission’s preparation of the Sustainability Omnibus Package. [further information in our previous issue, available here].

4 July 2025 [EU] – European Commission adopts new Taxonomy Delegated Act cutting back on Taxonomy Reporting

The European Commission adopted a new Delegated Act amending Commission Delegated Regulation (EU) 2021/2178 and (EU) 2021/2139 and (EU) 2023/2486 (the Taxonomy Disclosures, Climate and Environmental Delegated Acts), aimed at reducing administrative burden for companies [full act available here]. In particular, the Commission proposes the following changes:

• Financial and non-financial companies are exempt from assessing Taxonomy-eligibility and alignment for economic activities that are not financially material for their business (i.e., activities accounting for less than 10% of a non-financial company’s total revenue, capital expenditure or operational expenditure);
• Non-financial companies are exempt from assessing Taxonomy alignment for their entire operational expenditure when it is considered non-material for their business model.
• For financial companies, key performance indicators like the green asset ratio (GAR) for banks are simplified, and they are granted an option not to report detailed Taxonomy KPIs for two years.
• Taxonomy reporting templates are streamlined by cutting the number of reported data points by 64% for non-financial companies and by 89% for financial companies.
• The criteria for ‘do no significant harm’ to pollution prevention and control related to the use and presence of chemicals are simplified.

The Delegated Act will now be submitted to the European Parliament and the Council for review. The changes will apply once the scrutiny period of 4 months – which can be prolonged by 2 months – is over. The Delegated Act will apply as of 1 January 2026 for the 2025 financial year – although undertakings may choose to apply the measures starting with the 2026 financial year.

9 July 2025 [EU] – Draft Commission Delegated Act amending CSRD extends phase-in provisions to Wave 1 companies reporting for 2025 and 2026

The European Commission is expected to adopt a Delegated Regulation on 14 July 2025 amending CSRD as regards the postponement of the date of application of the disclosure requirements for certain undertakings. A draft version of the Delegated Regulation was circulated by specialized media outlets ahead of the Commission’s meeting [informal draft available here].

The Delegated Regulation, in its draft form, extends to all Wave 1 undertakings the phase-in provisions regarding ESRS E4 (biodiversity and ecosystems), ESRS S2 (workers in the value chain), ESRS S3 (affected communities) and ESRS S4 (consumers and end-users) that currently apply only to Wave 1 undertakings with fewer than 750 employees.

The Delegated Regulation also extends to all Wave 1 undertakings the safeguard provision of Delegated Regulation (EU) 2023/2772, which provides that, where an undertaking uses these temporary exemptions, it must nevertheless report certain summarized information on the topic concerned if the undertaking has concluded that the topic in question is material.

Finally, the draft provisions freeze the phase-ins in ESRS 1 Appendix C for two years. This means Wave 1 undertakings would be permitted to omit reporting on certain information, including – but not limited to – that required under ESRS 2 SBM-3, E1-9, E2-6, E3-5, E4-6 and E5-6 (anticipated financial effects).

European Union/International

26 June 2025 [EU] – EFRAG publishes Final Comment Letter on ISSB’s greenhouse gas disclosure proposals

EFRAG published its Final Comment Letter on the International Sustainability Standards Board’s (ISSB) proposed amendments to IFRS S2 regarding greenhouse gas emissions disclosures [press release available here; for more on the ISSB’s proposals, please refer to our previous issue here].

The letter supports the ISSB’s overall direction but raises key recommendations, particularly around Scope 3 facilitated and insured emissions.

EFRAG agrees with allowing preparers to omit emissions from derivatives, but only as a temporary measure subject to future review. It also supports the proposed relief for insured emissions, while noting industry concerns over methodology maturity, data availability, and relevance. A formal review within five years is recommended to reflect evolving practices.

EFRAG accepts the proposed relief from mandatory use of GICS as industry classification, but highlights comparability concerns and urges the ISSB to better align sector classification with reporting objectives. It also raises concerns about the cost and accessibility of GICS.

27 June 2025 [EU] – ESAs launch consultation draft Joint Guidelines on ESG stress testing

The ESMA, EBA and EIOPA (the “ESAs”) published a consultation paper on their draft Joint Guidelines on ESG stress testing [press release available here]. The draft aims to establish a harmonised framework for financial institutions to assess and manage ESG-related risks under adverse conditions.

The Joint Guidelines build on existing supervisory expectations and seek to promote consistency in the design, implementation, and disclosure of ESG stress tests across the EU financial sector. They set out principles covering methodology, data use, scenario design, and governance to better capture the impact of ESG risks on the resilience of banks, insurers, and investment firms.

Stakeholders are invited to provide feedback during the consultation period, which runs until 30 September 2025. The ESAs then plan to finalise the Joint Guidelines by 10 January 2026.

30 June 2025 [EU] – ESMA publishes Final Report on Common Supervisory Action on the integration of sustainability risks and disclosures in the investment fund sector

ESMA published its Final Report on the Common Supervisory Action (CSA) conducted with National Competent Authorities (NCAs) during 2023-2024, which assessed the integration of sustainability risks and disclosures in the investment fund sector [press release available here]. Throughout the CSA, NCAs shared knowledge to promote supervisory convergence and identified multiple breaches, which were addressed by the firms involved.

ESMA found that, while overall compliance with the regulatory framework (including SFDR, the Taxonomy Regulation, and relevant UCITS and AIFMD measures) is satisfactory, significant improvements are needed in how sustainability risks are integrated and disclosed both at the entity and product levels.

Building on these findings, ESMA will maintain cooperation with NCAs to monitor progress and support further supervisory actions on sustainability risks and disclosures.

30 June 2025 [EU] – EIOPA publishes report on biodiversity risk management by insurers

EIOPA published a report examining how European (re)insurers identify, measure, and manage biodiversity risks within the Solvency II risk management framework [press release available here]. The report highlights emerging market practices and sets out challenges and areas for further engagement to support a more robust approach to biodiversity risk management.

EIOPA found that, while biodiversity risk integration remains at an early stage, several undertakings are beginning to assess these risks, often viewing them through the lens of investment impact or reputational risk. The report points to promising practices, including scenario development, strategic awareness at board level, and the use of emerging tools and metrics to assess dependencies on ecosystem services. However, key barriers exist, notably around data availability, modelling complexity, and the entanglement of biodiversity risks with climate-related factors.

EIOPA stresses the need for closer collaboration among supervisors, industry, and stakeholders to address these challenges, develop integrated risk approaches, and build capacity.

1 July 2025 [EU] – Danish Presidency of the Council publishes Programme, including climate-related ambitions

Denmark, which has assumed the Presidency of the Council of the European Union for the eighth time, and will hold said Presidency until 31 December 2025, has published its formal Programme for the mandate [available here].

The Programme notably contains a focus on sustainability aspects, with the Presidency undertaking to work to ensure that the green transition contributes to a stronger, resilient, and competitive Europe. Priorities include reducing environmental consumption footprints and better protecting natural resources, while securing continued greenhouse gas reductions across all sectors.

Climate finance is said to be prioritised through Council conclusions ahead of COP30, focusing on coherent global approaches incorporating all private and public sources. Moreover, particular emphasis will be placed on negotiations for an EU 2040 climate target, supporting the EU to reach climate neutrality by 2050.

1 July 2025 [EU] – ESMA publishes thematic note on clear, fair and not misleading sustainability-related claims

ESMA published a thematic note on the use of sustainability-related claims in non-regulatory communications [press release available here]. The note sets out four guiding principles to help market participants ensure such claims are clear, fair, and not misleading. Claims should be:

• Accurate, representing the entity or financial product’s sustainability profile without exaggeration, cherry-picking, or vague references, while ensuring consistency across communications;
• Accessible, based on information that is easy to access, navigate, and comprehend, with layered disclosures encouraged to provide appropriate detail without overwhelming readers;
• Substantiated, supported by clear reasoning, credible data, and fair methodologies, including disclosure of any limitations and transparent comparisons; and
• Up to date, reflecting the latest information with timely updates on material changes, clearly indicating the date and scope of the underlying analysis.

The four principles should not be read as creating new disclosure requirements, but are instead a practical tool for market participants to ensure that sustainability claims are made only to the extent that they are clear, fair, and not misleading.

1 July 2025 [EU] – Commission Regulation amending IFRS 9 and IFRS 7 published in Official Journal

Commission Regulation (EU) 2025/1047 was published in the Official Journal of the European Union [available here]. It amends Regulation (EU) 2023/1803 to incorporate updates to IFRS 9 Financial Instruments and IFRS 7 Financial Instruments: Disclosures issued by the International Accounting Standards Board (IASB) on 18 December 2024 [press release available here].

The amendments, also endorsed by EFRAG on 30 June [press release available here], are intended to help companies better report the financial effects of nature-dependent electricity contracts, often structured as power purchase agreements.

The Regulation requires application of the amendments for annual reporting periods beginning on or after 1 January 2026, with early application permitted.

2 July 2025 [EU] – European Commission proposes amendments to the EU Climate Law, preserving the 90% emissions cut by 2040

The European Commission announced it would try to preserve the objective announced last year of cutting emissions by 90% by 2040, compared to 1990 levels, in its proposed amendments to the EU Climate Law (Regulation (EU) 2021/1119) [available here].

The proposal follows recommendations from the European Climate Advisory Board [covered in our previous issue available here] and was announced shortly after press reports suggested French President Emmanuel Macron was seeking to delay agreement on the new climate target.

In addition to defining the new EU climate target, the proposal also contains new requirements for the implementing legislation. One central element of these requirements is the safeguarding of sufficient flexibility for the relevant sectors to fulfill the target in a cost-effective and socially equitable way.

The Commission’s proposal setting a 2040 climate target will now be submitted to the European Parliament and the Council for discussion and adoption under the ordinary legislative procedure.

3 July 2025 [International] – ISSB publishes exposure drafts proposing amendments to the SASB Standards and Industry-based Guidance on Implementing IFRS 2

The ISSB published two exposure drafts proposing amendments to the Sustainability Accounting Standards Board (SASB) Standards and related updates to the Industry-based Guidance on Implementing IFRS S2 [press release available here]. The proposals aim to enhance alignment between SASB and ISSB Standards, improve interoperability, and support implementation of IFRS S1 and IFRS S2.

The exposure drafts include a comprehensive review of nine priority industries – eight in the extractive and minerals processing sector and one in the food and beverage industry – as well as metric-level amendments across an additional 41 industries. Updates reflect topics such as water management, energy use, labour practices, and workforce health and safety, and seek to improve the decision-usefulness and cost-effectiveness of disclosures.

The ISSB is inviting global stakeholders to provide input during a 150-day consultation period, open until 30 November 2025. Feedback will inform final amendments, expected in 2026. The ISSB also plans to release further exposure drafts later this year for the electric utilities and power generators sectors and additional food and beverage standards.

Germany

4 July 2025 [Germany] – Former judge of the German Federal Constitutional Court publishes criticism of EU sustainability rules

German professor and former judge of the German Federal Constitutional Court Udo di Fabio issued an expert opinion [see further here, German only] questioning the constitutionality of the EU provisions on sustainability as well as their national implementations – referring in particular to the CSDDD.

The opinion considers that the combination of vague sustainability-obligations for businesses and the provision of penalties and sanctions for violations of these obligations leads to such an impingement on the freedom to conduct a business, that it could constitute a violation of Article 16 of the Charter of the Fundamental Rights of the EU.

The opinion also targets certain obligations, such as the duty to monitor the human rights situation in other countries, as an inappropriate burden for businesses.

Italy

25 June 2025 [Italy] – Mandate to the Italian Government to transpose CRD VI’s requirements on ESG risks and implement the Green Bond Regulation

On June 25, 2025, the European Delegation Law for 2024 (i.e., Law no. 91/2025) was published in the Italian Official Journal [available here, in Italian]. This Law sets out principles and guiding criteria to be followed by the Italian Government in the adoption of legislative decrees for the implementation and transposition of some European Union acts, including in the fields of ESG. In particular, the Italian Government has a mandate to:

• transpose the Sixth Capital Requirements Directive (i.e., 2024/1619/EU, CRD VI), which includes, among others, rules aimed to ensure that institutions established in the EU need to be able to systematically identify, measure and manage ESG risks; and
• adapt the national framework to the EU Green Bond Regulation (i.e., Regulation 2023/2631/EU) concerning rules on disclosures of green bonds, as well as bonds marketed as environmentally sustainable and sustainability-linked bonds.