Gibson Dunn ESG: Risk, Litigation, and Reporting Update (April 2025)

Client Alert  |  May 20, 2025

We are pleased to provide you with Gibson Dunn’s ESG update covering the following key developments during April 2025. Please click on the links below for further details.

I. GLOBAL

  1. International Maritime Organization (IMO) announces deal to decarbonize global shipping

On April 11, 2025, the IMO, the United Nations agency responsible for developing global shipping standards, announced its approval of draft regulations setting a global fuel standard to reduce annual greenhouse gas (GHG) emissions and establishing a pricing system for above-threshold emitters. Sixty-three nations approved the framework, including EU member states, China, and the United Kingdom, while 16 nations opposed, 25 nations abstained, and the United States leaving negotiations prior to the vote. The United States subsequently warned of “reciprocal measures” to compensate for fees charged to U.S. ships and “other economic harm” resulting from the new regulations. The regulations are expected to be formally adopted in October 2025 and effective in 2027 and will apply to large ocean-going ships over 5,000 gross tonnage.

  1. Institutional Shareholders Services (ISS) launches new sustainability bond rating

On April 3, 2025, ISS ESG launched a new sustainability bond rating to provide investors with a sustainability impact and risk assessment for bonds issued labeled as green, social, sustainability, or sustainability-linked. These new ratings will assess bonds in three categories: how they align with international standards and guidelines, an environmental and social impact assessment, and the issuer’s sustainable strategy.

Other highlights:

  • On April 28, 2025, the International Sustainability Standards Board (ISSB) published draft amendments to the IFRS S2 Climate-related Disclosures standard that would ease certain requirements related to the reporting of GHG emissions.
  • The Net Zero Banking Alliance provided new guidance to align all sector financing with a goal to limit global warming to well below 2°C above pre-industrial levels, up from the prior target of 1.5°C.
  • T. Rowe Price and T. Rowe Price Investment Management have both issued updated proxy voting guidelines for 2025 that soften their approach to director votes, disclosure of GHG emissions, dual-class stock, and shareholder proposals on political spending and lobbying.

II. UNITED KINGDOM

  1. Prudential Regulatory Authority (PRA) publishes consultation on managing climate-related risk

On April 30, 2025, the PRA issued Consultation Paper CP10/25, proposing to replace Supervisory Statement 3/19 with an updated and more granular statement on managing climate-related financial risk. The draft statement would apply to UK banks, building societies, PRA-designated investment firms and insurers (but not branches). The draft statement sets outcome-focused expectations structured around five themes: (i) governance – boards will be expected to set firm-wide risk appetite for each material climate exposure, translating it into quantitative limits for every business line, and periodically reassessing it in light of evolving regulatory, technological, or scientific standards; (ii) risk management – firms should conduct periodic materiality assessments, develop quantitative metrics and integrate climate considerations into operational resilience frameworks; (iii) climate scenario analysis – models must cover all material risks, inform capital planning and be refreshed; (iv) data – firms should have strategic plans to close data gaps, deploy conservative proxies where needed and oversee external providers while building in-house capability; and (v) disclosure – alignment will shift from Taskforce for Climate-related Financial Disclosures to forthcoming UK Sustainability Reporting Standards. The expectations remain guidance, not rules, but supervisors will test implementation six months after finalisation. The consultation closes on July 30, 2025.

  1. UK Government launches consultation into voluntary carbon and nature markets (VCNMs)

On April 17, 2025, the Department for Energy Security and Net Zero published a consultation paper seeking views on the implementation of its principles to ensure integrity within VCNMs, launched at COP 29 in November 2024. VCNMs allow entities and/or individuals to acquire credits that represent avoided or removed greenhouse gas emissions or measurable environmental improvement. The acquiring entity/individual can then utilize the credits to offset unavoidable emissions and/or reach its environmental targets. The six principles announced at COP 29 include: (i) the use of credits in addition to ambitious actions within value chains; (ii) the use of high integrity credits; (iii) the disclosure of credits in ESG-related reporting; (iv) the role of credits in the transition plan; (v) the accuracy of green claims; and (vi) domestic and international co-operation. The consultation closes on July 10, 2025.

  1. UK Advertising Standards Authority (ASA) publishes guidance on biodegradable and compostable products

On April 30, 2025, the ASA issued guidance on products that claim to be biodegradable and/or compostable to reflect relevant changes introduced by the Digital Markets, Competition and Consumers Act 2024 and included the following: (i) ensure claims are genuine; (ii) do not exaggerate the biodegradable content of the product; (iii) do not omit information material to a product’s ability to biodegrade or compost; and (iv) ensure absolute environmental claims apply to the product’s full lifecycle. In the event of an investigation, marketers should ensure that they hold sufficient evidence to substantiate claims about the extent to which their products are biodegradable and/or compostable.

Other highlights:

  • On April 24, 2025, His Majesty’s Revenue and Customs published the draft primary legislation for the carbon border adjustment mechanism for technical consultation.
  • On April 2, 2025, the Financial Conduct Authority shared feedback it received on its discussion paper on sustainability-related governance, incentives, and competence for regulated firms (DP23/1), confirming that it is not currently considering introducing new rules on the themes discussed in the discussion paper.
  • On April 11, 2025, the Lending Standards Board (LSB) announced its forthcoming Access to Financial Services for Ethnic Minority-led Businesses Code, committing participating firms to reduce barriers, enhance cultural understanding, apply evidence-based improvements, and share best practice, while the LSB monitors and reports progress.
  • On April 16, 2025, the International Association of Insurance Supervisors issued its final application paper on the supervision of climate-related risk, explaining how existing Insurance Core Principles should be applied to ensure insurers and supervisors adequately address the mounting consumer and commercial impacts of climate-driven events.

III. EUROPE

  1. Discussions about Omnibus Simplifications in substance ongoing

On April 25, 2025, the rapporteur for the EU’s Omnibus Simplification Package in the European Parliament, Swedish MEP Jörgen Warborn, outlined his initial suggestions for amendments to the Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD) during discussions in the European Parliament. Among other things, Warborn proposes to further raise the employee threshold for CSRD reporting requirements uniformly above the currently proposed 1,000 employees and backed the Commission’s proposal to remove the CSDDD’s civil liability (we have previously reported on the Commission’s proposal here). The proposal has sparked strong political divisions in the European Parliament, with some factions pushing to eliminate or delay reporting and due diligence obligations, while others seek to preserve the core objectives of the regulations. The rapporteur is expected to present his final proposal in early June of 2025.

In parallel, the EU’s Sustainability Reporting Board (SRB) has approved a work plan to simplify the European Sustainability Reporting Standards (ESRS). Among the currently envisaged revisions are the removal of less relevant data points for general purpose sustainability reporting (such as detailed biodiversity transition plans and certain non-employee-related disclosures), the downgrading of currently mandatory data points to voluntary reporting and of voluntary data points to guidance, prioritizing quantitative over narrative disclosures, and further alignment with global standards like ISSB. According to the work plan, the process will be continued with a shortened public consultation period this summer and is set to be finalized by October 31, 2025.

  1. Updates and proposed amendments on European Deforestation Regulation (EUDR) published

On April 15, 2025, the European Commission published updates regarding the EUDR, including proposed amendments to Annex I of the EUDR as well as updated guidance and FAQs. The proposed amendments to Annex I include clarifications on in-scope commodities, such as cattle, cocoa, coffee, oil palm, rubber, soya, and wood. According to the proposal, the following products shall be excluded: products made from bamboo, rattan and waste materials. The updated guidelines and FAQs clarify certain topics, including regarding re-imported products, local law requirements in Art. 2 (40), trading and packaging of pallets, and qualifications as trader or operator.

  1. CSRD / Omnibus “Stop-the-clock” directive transposition update

The focus currently is on postponing entry into force of the CSRD reporting requirements by transposing the EU’s Stop-the-clock Directive in member states that already completed the transposition process. While France already published its national “Stop-the-clock” law in the Journal officiel on May 2, 2025, Lithuania has published a proposal for a respective bill to delay reporting by two years. Bulgaria passed a law to delay implementation by one year, which came into effect two days after the Omnibus Simplification Package was officially disclosed.

An overview of the current transposition status of CSRD into national laws and the “Stop-the-clock” process under the Omnibus Simplification Package can be found here.

Other highlights:  

  • The European Securities and Market Authority published a consultation paper on its new Regulatory Technical Standards under the EU’S ESG Rating Regulation.

IV. NORTH AMERICA

  1. Business Roundtable (BRT) and U.S. Congress address proxy process reforms

On April 23, 2025, BRT published a report recommending reforms to the proxy process. The report argues that the lack of proxy process regulation has “allowed a small but vocal group of activist investors to exploit the proxy system for political purposes,” and includes recommendations aimed at depoliticizing the proxy process and refocusing it “on supporting shareholder interests and long-term value creation.”  The report includes recommendations to (i) reform the Rule 14a-8 shareholder proposal process and (ii) create accountability for proxy advisory firms.

With regard to the Rule 14a-8 shareholder proposal process, BRT recommends Congress enact legislation that would preclude the inclusion of environmental, social and political shareholder proposals in companies’ proxy statements. If legislation is not enacted, BRT recommends the Securities and Exchange Commission (SEC) amend Rule 14a-8 to exclude environmental, social and political shareholder proposals, (ii) raise submission and resubmission thresholds, (iii) prevent Rule 14a-8 workarounds, including the use of voluntary exempt solicitation filings and universal proxy rules, (iv) restrict co-filers and representatives from being directly or indirectly involved in more than one proposal per company, and (v) amend the SEC review process to include an appeals process for no-action letter decisions and changing the timeline for no-action request responses.

Regarding proxy advisory firms, BRT recommends that Congress and the SEC (i) confirm the SEC’s authority to regulate proxy advisory firms and deem the activities of proxy advisory firms “solicitations” subject to SEC oversight, (ii) prohibit robovoting, (iii) require an economic analysis for proxy advisor recommendations that are contrary to a majority-independent board’s decision, (iv) prohibit conflicts of interests, and (v) limit the ability of proxy advisory firms to impose subjective preferences, including related to executive compensation decisions and prior shareholder support levels.

On May 6, 2025, the Interfaith Center on Corporate Responsibility (ICCR) and the Shareholder Rights Group (SRG) sent a letter to BRT, copying the Chairman of the SEC. The letter offered ICCR’s and SRG’s view that BRT’s recommendations would “insulate corporate management and boards, exposing companies and investors to increased risk during a highly volatile economic moment” and requested a dialogue with BRT to discuss the proxy process.

On April 29, 2025, the House Subcommittee on Capital Markets held a hearing to “examine the role and influence of proxy advisory firms . . . in shaping corporate governance and shareholder voting outcomes.” The memorandum related to the hearing included draft legislation proposing, among other things, required proxy advisory firm registration, prohibitions on robovoting for certain votes, and a requirement that the SEC study certain issues related to the shareholder proposal and proxy process.

  1. Canadian regulator halts mandatory climate reporting requirements

On April 23, 2025, the Canadian Securities Administrators (CSA) announced a pause of its work developing new mandatory climate-related disclosure requirements and diversity-related disclosure rule amendments. The CSA explained the pauses were driven by the desire to support Canadian markets as they adapt to recent U.S. and global developments and resulting uncertainty and competitiveness concerns. The CSA emphasized, though, that Canadian securities laws already require disclosure of any material climate-related risks under existing regulations and that companies are encouraged to voluntarily report under the Canadian Sustainability Standards Board standards that were issued in December 2024.

  1. Eighth Circuit issues abeyance in SEC climate litigation

After the SEC withdrew from its defense of the climate disclosure rules, 18 states filed a motion to hold the case in abeyance until the SEC takes action to amend or rescind the rules, as discussed in our March 2025 alert. On April 24, 2025, the Eighth Circuit granted the states’ motion and directed the SEC to file a report within 90 days advising whether the SEC intends to review or reconsider the rules.

  1. President Trump issues executive order focused on state laws and regulations addressing climate and ESG

On April 8, 2025, President Donald Trump issued an executive order, “Protecting American Energy from State Overreach,” directing the U.S. Attorney General (AG) to investigate and identify all state and local laws and regulations that burden the “identification, development, siting, production, or use of domestic energy resources” that may be unconstitutional or preempted by federal law and to take “all appropriate action” to stop the enforcement of such laws. Under the order, the AG is required to prioritize laws that address climate change, environmental justice, carbon or GHG emissions, carbon penalties or taxes, and ESG initiatives. Within 60 days of the order, the AG is required to submit a report to the President detailing the actions taken and recommending additional presidential or legislative actions as necessary. The executive order highlights laws in New York and Vermont seeking retroactive payments for GHG emissions and California’s cap and trade framework as examples of laws that may be beyond states’ constitutional or statutory authorities.

  1. Class-action plaintiffs attack sustainability claims by paper-goods companies

Two class-action lawsuits were filed recently in federal court against Amazon and Proctor & Gamble, alleging “greenwashing” claims based on each company’s statements about their paper products such as toilet paper. See Ramos et al. v. Amazon.com, Inc. (W.D. Wash. Case No. 2:25-cv-00465); Melissa Lowry, et al. v. Proctor & Gamble Company (W.D. Wash. 2:25-cv-00108). The complaints allege that, notwithstanding these companies’ advertised partnerships with groups like Forest Stewardship Council, production of their products leads to deforestation, and thus violates the FTC’s Green Guides and various state consumer-protection laws.

Both cases remain in their early stages. But they represent a new front in the ongoing trend of false-advertising litigation based on sustainability advertising claims, in which class action plaintiffs have already targeted multiple companies based on sustainability claims relating to plastics, emissions reductions, and supply-chain initiatives.

Other highlights:

  • On April 21, 2025, the Chamber of Commerce sent a letter asking the Trump Administration to urge the EU to exempt U.S. companies from the Corporate Sustainability Due Diligence Directive, which the letter asserts is overly prescriptive and in conflict with U.S. federal and state law.
  • As discussed in our recent client alert, on April 21, 2025, Paul Atkins was sworn into office as the 34th Chairman of the SEC.
  • On April 11, 2025, the SEC approved the launch of the Green Impact Exchange (GIX), a sustainability-focused stock market in the United States.
  • On April 4, 2025, the U.S. Department of Justice (DOJ) announced that it had terminated a settlement between the DOJ, the U.S. Department of Health and Human Services, and the Alabama Department of Public Health regarding sanitation risks in an Alabama county arising from inadequate water infrastructure, citing the termination as “another step . . . to eradicate illegal DEI preferences and environmental justice across the government and in the private sector.” 

In case you missed it…

The Gibson Dunn DEI Task Force has published its updates for April summarizing the latest key developments, media coverage, case updates, and legislation related to diversity, equity, and inclusion.

A collection of our analyses of the legal and industry impacts from the presidential transition is available here.

V. APAC

  1.  South Korea Financial Services Commission (FSC) delays ESG mandatory reporting

On April 23, 2025, the FSC announced after the fifth meeting of the ESG Finance Promotion Task Force that its original plan to begin disclosures in 2025 for large companies listed on the Korea Composite Stock Price Index will be postponed to post-2026, with possible further delays. The FSC explained that the delay to the ESG disclosure roadmap is in response to the evolving global regulatory landscape and increasing pressure for harmonization and highlighted recent moves by global regulators to ease ESG requirements. The Task Force also reviewed other key aspects of the reporting framework, including disclosures on consolidated financial statements, excluding non-material subsidiaries and a proposal to defer Scope 3 emissions reporting due to its complexity and costs involved in tracking the emissions.

  1. Securities and Exchange Board of India (SEBI) issues new guidelines for ESG ratings

On April 22, 2025, the SEBI issued new guidelines that provided flexibility in ESG rating withdrawals, streamlined disclosure requirements, and offered relief to newer ESG ratings providers. Under these new guidelines, ESG ratings providers may withdraw a rating on a company if their business responsibility or sustainability reports are not available. Additionally, a ratings provider may also withdraw the rating if there are no subscribers for the rating. These new guidelines follow a statement made earlier this month by SEBI’s new chief, Tuhin Kanta Pandey, arguing that the ESG disclosures were too onerous.

  1. China issues its first sovereign green bond

On April 2, 2025, China’s Ministry of Finance (MOF) issued a sovereign green bond on the London Stock Exchange, making this China’s first green bond and the first bond to be listed on an international market. The MOF originally announced its intention to enter the green bond market in January 2025. The bond has raised $824 million USD ($6 billion RMB). Proceeds from the bonds will be used to support projects and initiatives aimed at achieving environmental objectives. These include climate change mitigation, adapting to utilizing natural resources, and biodiversity conservation.

Other highlights:

  • The Taipei Exchange will launch a green securities certification system in 2026 to encourage enterprises to engage in green and sustainable economic activities.
  • The Philippine Department of Finance announced its intention to expand the role of the Inter-Agency Technical Working Group on Sustainable Finance.

The following Gibson Dunn lawyers prepared this update: Lauren Assaf-Holmes, Carla Baum, Susy Bullock, Mitasha Chandok, Martin Coombes, Mellissa Duru, Sam Fernandez*, Ferdinand Fromholzer, Saad Khan*, Michelle Kirschner, Julia Lapitskaya, Vanessa Ludwig, Babette Milz, Johannes Reul, Annie Saunders, and Meghan Sherley.

Gibson Dunn lawyers are available to assist in addressing any questions you may have regarding these developments. Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any leader or member of the firm’s ESG: Risk, Litigation, and Reporting practice group:

ESG: Risk, Litigation, and Reporting Leaders and Members:
Susy Bullock – London (+44 20 7071 4283, sbullock@gibsondunn.com)
Perlette M. Jura – Los Angeles (+1 213.229.7121, pjura@gibsondunn.com)
Ronald Kirk – Dallas (+1 214.698.3295, rkirk@gibsondunn.com)
Julia Lapitskaya – New York (+1 212.351.2354, jlapitskaya@gibsondunn.com)
Michael K. Murphy – Washington, D.C. (+1 202.955.8238, mmurphy@gibsondunn.com)
Robert Spano – London/Paris (+33 1 56 43 13 00, rspano@gibsondunn.com)

*Sam Fernandez and Saad Khan are trainee solicitors in London and not admitted to practice law.

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