Climate and Energy: EU Policy and Regulation Update for 3 September 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

• EBA publishes updated EBA ESG risk dashboard and no-action letter on the application of ESG disclosure requirements
• ECB publishes letter on the need for balance in the amending of the CSRD and CSDDD frameworks
• Joint statement on the Franco-German Economic Agenda calls for further simplification initiatives

European Union

• EFRAG launches cost-benefit analysis of simplified ESRS
• EEA and ESMA sign Memorandum of Understanding on strengthening cooperation in sustainable finance
• European Commission commits to easing CSDDD and CSRD requirements in Joint US-EU Framework Agreement

Italy

• Consob’s 2024 report on non-financial reporting shows CSRD transition progress

Sustainability Omnibus Package

5 August 2025 [EU] – EBA publishes updated EBA ESG risk dashboard and no-action letter on the application of ESG disclosure requirements

disclosure requirements under the EBA disclosure Implementing Technical Standards (ITS) [letter available here]. The EBA also updated its ESG risk dashboard with December 2024 data.

The no-action letter formalizes the guidance already provided in the EBA Consultation Paper on the amending ITS of the EBA Pillar 3 disclosure framework. The Consultation Paper was published on 22 May 2025 and aimed at updating the disclosure framework in line with the requirements of CRR3 (notably the proportionate extension of the requirements to all institutions) and in light of the Omnibus Package [for more information on this Consultation Paper, please refer to our previous edition here].

Until the amending ITS enter into force, and in light of the Omnibus Package, the EBA recommends that, for the period starting from the reference date of 30 June 2025 until the amendments to the EBA disclosure ITS are adopted and enter into force, competent authorities do not prioritise the enforcement of:

• The disclosure of certain ESG disclosure templates of the Commission’s Implementing Regulation (EU) 2024/3172, for large institutions with listed securities;
• The collection of templates EU 6 to 10, and specific columns in Templates 1 and 4 of the EBA Decision EBA/DC/498 of 6 July 2023, for large institutions with listed securities; and
• The enforcement of the disclosure of the corresponding ESG templates under the Commission’s Implementing Regulation (EU) 2024/3172 for all other institutions recently brought under the scope of Article 449a of CRR3. 

The EBA also noted that the content of the newly updated ESG risk dashboard will be adjusted in line with the recommendations made in the no-action letter.

15 August 2025 [EU] – ECB publishes letter on the need for balance in the amending of the CSRD and CSDDD frameworks

The European Central Bank (ECB) published a letter from Chair Lagarde, addressed to Members of the European Parliament, and outlining the ECB’s position on the risks presented by the Omnibus Proposal [letter available here].

Highlighting the ECB Governing Council’s stance toward ensuring that the implications of climate change be fully taken into account within the Eurosystem, Lagarde warned of the “significant implications” that the Omnibus Proposal poses in that regard. The letter notes that the ECB’s planned climate-related measures may be affected by the proposed amendments to the CSRD and CSDDD.

The proposed scope reduction in CSRD sustainability reporting requirements would particularly limit access to firm-level data. This limitation would weaken the Eurosystem’s capacity to conduct granular assessments of climate-related financial risks and impede its ability to implement appropriate measures.

The letter specifies that, in 2024, the ECB Governing Council decided not to implement climate change collateral pool concentration limits – aimed at limiting the share of assets issued by high carbon-emitting companies that Eurosystem counterparties can mobilize as collateral. The decision is said to be mainly owing to the lack of granular climate data available for the collateral-eligible universe of corporate bonds. The ECB further specified that it had since explored alternative measures and decided to introduce a “climate factor” within its collateral framework from the second half of 2026, aimed at addressing financial risks arising from climate change uncertainties [see below for more information on this measure].

Lagarde concluded that it is therefore important that the Omnibus amendments strike the right balance between retaining the benefits of sustainability reporting for the European economy and the financial system, while also ensuring that the requirements are proportionate.

29 August 2025 [EU] – Joint statement on the Franco-German Economic Agenda calls for further simplification initiatives

The French President and German Chancellor have published a Joint statement following the 25^th Franco-German Council of Ministers on 29 August 2025 [available here]. The statement includes several “flagship projects”, among which the development of common perspectives on the role of different energy technologies contributing to European climate goals, as well as on how to reduce administrative and regulatory burden.

Germany and France are committed to deepening the Single Market, through simplification measures allowing for companies of all size to develop their business beyond national borders. The statement emphasizes the urgent need to reduce complexity and simplify the European Union’s regulatory environment. Both countries have committed to avoiding the creation of new administrative burdens at EU level by promoting a “new legislative mindset”.

Regarding simplification, Germany and France urge the European Commission to come up with further simplification initiatives of existing legislation, and “support speedy progress of the negotiations on the Omnibus Simplification Packages”. To ensure streamlined procedures and simplified regulations for small-mid-cap enterprises, Germany and France propose creating an “ambitious European small-mid-caps category” for companies with 250 to 1,000 employees, and emphasize using digitalization to enhance efficiency for compliance.

The statement also calls for accelerated permitting and approval procedures, progress on CBAM reform, and measures to prevent over-regulation. This includes introducing a “1 for 1” rule on information transmission obligations, whereby any new European-level reporting requirement must be accompanied by equivalent cost reductions elsewhere.

European Union

29 July 2025 [EU] – ECB announces it will adapt collateral framework to address climate-related transition risks

The Governing Council of the European Central Bank (ECB) announced that it will be introducing a “climate factor” within the collateral framework to better manage financial risks related to the climate crisis [press release available here].

The so-called climate factor – which is due to be implemented in the second half of 2026 – would reduce the value assigned to eligible assets pledged as collateral, depending on the extent to which an asset can be impacted by climate change-related uncertainties.

The press release specifies that this climate factor would focus on marketable assets issued by non-financial corporations as well as their affiliated entities, and adverse events specifically associated with the green transition. It will apply to individual assets and its calibration will take into account (i) sector-level data of non-financial corporation bonds in the 2024 climate stress test of the Eurosystem’s balance sheet, (ii) the issuer’s Corporate Sector Purchase Program (CSPP) climate score and (iii) the asset’s residual maturity.

4 August 2025 [EU] – ESMA publishes updated consolidated Q&As on the SFDR and SFDR Delegated Regulation

The European Securities and Markets Authority (ESMA) has published an updated version of its consolidated Q&As on the SFDR (Regulation 2019/2088) and SFDR Delegated Regulation (Commission Delegated Regulation 2022/1288) [full consolidated Q&As available here].

Regarding financial product disclosures, ESMA reminded that Article 8 SFDR financial products must disclose a minimum percentage above zero of total sustainable investments (SI) if they intend to partially make sustainable investments, while Article 9 SFDR products must disclose two minimum percentages for environmental and social sustainable investments respectively. ESMA clarified that these percentages represent minimum commitments, meaning that the combined subsets of environmental and social sustainable investments may not necessarily equal the total minimum proportion of sustainable investments as disclosed in the asset allocation section of Annexes II and III of the SFDR Delegated Regulation. In such a case, the Q&A recommends that financial market participants be transparent about this discrepancy and provide an explanation in the asset allocation section of the templates.

ESMA also clarified that the ESAs may not impose of specific way of calculating investments in the periodic reports, and specified certain notions (i.e., “water usage” and “square meter”) in the context of PAI 6 and 19 of Annex I, Table 2 of the SFDR Delegated Regulation.

8 August 2025 [EU] – EFRAG launches cost-benefit analysis of simplified ESRS

The European Financial Reporting Advisory Group (EFRAG) has launched a cost-benefit analysis (CBA) aimed at assessing the potential costs and benefits of the proposed simplifications to the ESRS [available here], in parallel to the public consultation on ESRS simplification – which will run until 29 September 2025 [for more information on this consultation, please refer to our previous edition here].

The CBA study is being carried out between July 2025 and December 2025 and follows the request from the Commission to simplify and streamline the ESRS in line with the objectives of making sustainability reporting more manageable for reporting companies.

The CBA involves a survey on costs and benefits to gather input from a wide range of stakeholders at the European and national levels, including entities in the scope of the CSRD as revised by the Omnibus proposals. The deadline to submit the survey is 12 September 2025.

20 August 2025 [EU] – EEA and ESMA sign Memorandum of Understanding on strengthening cooperation in sustainable finance

The European Environment Agency (EEA) and European Securities and Markets Authority (ESMA) have signed a Memorandum of Understanding (MoU) aimed at strengthening cooperation in sustainable finance [available here].

The MoU focuses on environmental factors and their integration in the EU sustainable finance framework, including the supervision of the framework. It outlines how both authorities will:

• Exchange expertise, information and data to support, where appropriate, the application and supervision of EU sustainable finance legislation;
• Support mutual capacity building activities, via the exchange of relevant expertise and provision of trainings;
• Facilitate the collaboration between national competent authorities responsible for supervision in the areas falling within ESMA’s remit and national authorities in charge of environmental protection and/or environmental data production; and
• Enhance policy dialogue, cooperation and coordination in relation to the work carried out at EU level, on various areas of the sustainable finance agenda.

The MoU entered into force on 18 August 2025, following its signature by both ESMA Chair Venera Ross and EEA Executive Director Leena Ylä Mononen.

21 August 2025 [International] – European Commission commits to easing CSDDD and CSRD requirements in Joint US-EU Framework Agreement

The European Commission has published a Joint Statement on a United States-European Union framework on an agreement on reciprocal, fair and balanced trade [available here], including undertakings on the CSDDD and CSRD frameworks.

Key terms of the agreed-upon Framework on an Agreement on Reciprocal, Fair, and Balanced Trade include tariffs-related and defense-related undertakings. The Commission also committed to work to provide “additional flexibilities in the CBAM implementation” in light of concerns on the treatment of US’ SMEs under the Carbon Border Adjustment Mechanism.

Additionally, the Commission committed to ensuring that the CSDDD and CSRD do not impose undue restrictions on transatlantic trade. Specific measures include reducing administrative burdens on businesses and proposing changes to requirements for harmonized civil liability regimes covering due diligence failures and climate-transition-related obligations. The application of CSDDD requirements on companies of non-EU countries with relevant “high-quality regulations” will also be a focus point.

Italy

July 2025 [Italy] – Consob’s 2024 report on non-financial reporting shows CSRD transition progress

(NFR) by listed companies for 2024 [available here, in Italian and English]. The report provides an in-depth analysis of the non-financial disclosures of 2024 made by Italian companies listed on Euronext Milan (EXM) for the 2023 financial year, delivering a snapshot of the current landscape of sustainability reporting during the transition from the Non-Financial Reporting Directive (NFRD) to the new Corporate Sustainability Reporting Directive (CSRD).

The report reveals that 150 listed companies out of 208 (representing 97.2% of the market capitalization of EXM-listed companies) published an NFR, of which 144 were required to do so by law and 6 did it on a voluntary basis. Key findings include:

• 75.3% of NFRs are presented as a separate document from the management report;
• all disclosing companies use GRI (Global Reporting Initiative) standards, with increasing use of materiality analysis (updated in 81.3% of cases);
• 79% of companies indicated sustainability plans or objectives in their NFR;
• only 27% of the companies has already set climate transition targets, while an additional 10% has announced them; and
• 82% of the companies has a sustainability committee within the board.

As to regulatory developments, approximately 49% of these companies has already referred to the principle of double materiality in view of the entry into force of the CSRD and 30% has carried out a double materiality exercise (compared to 21.5% in the previous year). Finally, the report highlights that 151 companies link ESG objectives to CEO compensation policies (resulting in an increase from the 137 of 2023) and 18.8% of short-term variable remuneration and 20.6% of long-term variable remuneration are linked to ESG factors.